The Impact of the War in Ukraine on Drinks in Russia

June 2022

This report examines the early impact of the war in Ukraine on the drinks sector in Russia in the drinks sector. Product availability, prices and company presence are seeing shifts due to sanctions and decisions by international players to leave Russia. Drinks of international origin are expected to face negative impact the most, while local products will be eager take their share. Companies will increase their prices and experience difficulties with logistics, packaging or ingredients.

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This report comes in PPT.

Key Findings

Economy and consumers

The Russian economic outlook has worsened since the start of the war in Ukraine and the imposition of significant economic sanctions at the end of February and March 2022. Russia’s consumer expenditure - corresponding to 47% of the country’s GDP - is expected to decline severely in 2022. Decreased incomes are pushing consumers to change their purchasing habits and switch to cheaper options. Restrictions on freedoms, strict sanctions, rising inflation, falling disposable incomes and rising unemployment are leading to increasing emigration. 

International players

Pre-war, Russia was seen as a target market for further expansion by leading international companies, which are now limiting or ending their presence in the country. Besides assortment limitations due to import and production suspensions by major international players, spillover effects are having a severe impact on Russian industries. International drinks faced significant price hikes along with mushrooming local analogues stepping on the heels. The practice of constant price promotions is put on hold. This situation has also hampered those international market players that decided to stay in Russia and that depend on imported resources. 

Local production

Difficulties in logistics and international payments have led to delays and out-of-stocks, resulting in price increases. Shortages of imported ingredients, packaging materials and equipment are also affecting local production and distribution. Packaging for juice brands “lost” previous colours and designs due to lack of specific dyes. Wines are expected to turn to metal screw closures, rather than corks. The government, companies and retailers have sought to establish new schemes for import possibilities, but increasingly complicated logistics have led to further rises in commodity prices. State price controls for necessities place a burden on retailers and producers, which have sought to maintain margins by reducing packaging size or quality. 

Key findings
Impact of the invasion’s consequences on the Russian industries
War in Ukraine causes significant downgrade in Russia’s economic outlook
Russian household consumer expenditure to remain below pre-war levels in 2026
High- and middle-income consumers increasingly flee the country
Strong run: painful fall. Market changing
Categories with highest international exposure set to suffer
How international alcoholics drinks companies have reacted
Local companies rush to make substitute products
How international soft drinks companies have reacted
Local soft drinks companies respond
Fragmented availability in short term
Prices increase and set to rise further by the end of the year
All leading non-alcoholic drinks companies see large decline in SKU count
All alcoholic drinks players see huge decline in SKU counts online
Goods from outside the EU are expected to increase shares
Horeca - still recovering post-COVID-19 - looking for substitute products
Key takeaways

Soft Drinks

This is the aggregation of the following categories; Carbonates, Fruit/vegetable juice, Bottled water, Functional drinks, Concentrates, RTD tea, RTD coffee and Asian speciality drinks.

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