What does the Russia-Ukraine conflict mean for British beverage exports?

In 2019, UK exports to Ukraine totaled £7.35 million, and is estimated at exceed £7.5 million by 2021. Although not an important trading partner of the UK (only 0.1% of total trade), Ukraine plays an important role in many of the UK’s export agreements.

Both Russia and Ukraine are major export markets for alcoholic beverages, especially beer and cider. Sovereign Beverage Company Ltd,, the UK’s leading exporter of premium beverages, made Ukraine its biggest export market last year, exporting British luxury brands such as Robinsons Brewery, Westons Cider and Saltaire Brewery.

Due to Russia’s aggression, Ukraine has been placed under restrictions, one of which includes a ban on the sale of all alcohol in favor of essential items. This has resulted in the immediate cancellation of all pending orders, as well as a complete review of the sales forecast for 2022.

Another difficulty for all businesses exporting to Ukraine is Martial law is in effect from February 24, 2022 within a period of 30 days. Under martial law, the National Bank of Ukraine has imposed a ban on remittances of payments abroad for all but important imports. The decision will be reviewed at the end of March, and it is anticipated that the limit will be continued.

This restriction means that suppliers with outstanding invoices cannot be paid. For companies like Sovereign Beverage Company that have extended credit to their Ukrainian customers, this will result in default, leaving them liable to their insurance companies. for a % of the total bill.

“Using force majeure means that UK exporters and their suppliers will have to consider seriously whether they want to risk exporting permitted goods to Ukraine, knowing that it is not possible to make payments for the foreseeable future.

“While there are economic and logistical constraints that prevent UK exports to Ukraine, there are ethical and moral constraints affecting trade. Businesses like Sovereign Beverage and their suppliers are choosing not to do business with Russia as a moral stand against Putin’s actions, and while admirable – global brands include including McDonalds, Zara, Netflix and Disney have all discontinued service – smaller companies will feel the impact on their bottom line.

“Where brands are choosing to maintain their trade deals with Russia, Ukrainian businesses are taking a stand. One such example is the recent announcement of SILPO. The second largest supermarket chain in Ukraine shared on Instagram that it will pull all Coca-Cola products from its shelves while the beverage giant chooses to continue its business in Russia. It remains to be seen whether this decision will be reversed in light of Coca Cola’s announcement (March 8, 2022) that it is ‘suspending business in Russia’.

“Businesses have to consider if they still want to do business with Russia and Belarus in order to maintain relationships with businesses inside Ukraine.

“There is an impact on Sovereign and many other companies in this territory and we realize that is nothing compared to the enormous loss that the Ukrainian people are suffering. We are also aware of how trade restrictions will affect our customers in Ukraine and are currently exploring ways we can support them through our network. Our thoughts are with our Ukrainian colleagues and friends”. What does the Russia-Ukraine conflict mean for British beverage exports?

Fry Electronics Team

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