HOW THE FOOD AND BEVERAGE INDUSTRY HAS RESPONDED TO THE UKRAINE CRISIS

Food and beverage companies face increasing pressure from consumers and investors to cut back or pause operations in Russia as the war in Ukraine continues.

More than 750 companies have publicly announced that they have voluntarily curtailed business in Russia while some remain, according to Yale School of Management. At least 253 companies are making a clean break, essentially leaving behind no operational footprint.

Nestlé, Coca-Cola, Mars and Unilever are just some of the large firms to stop activities such as sales, advertising and investments in Russia. Some like Carlsberg and Diageo took action just days after the invasion suspended exports while others reacted weeks later.

PepsiCo, Nestlé and Danone are among firms to announce they are stopping all sales except for essential items such as baby formula and milk. While Mars Wrigley, which produces Milky Way and M&Ms, confirmed it has suspended imports and exports in Russia as well as new investments.

The war could take a significant toll on revenues and brand perception within the food and beverage industry, depending on how companies react to the crisis.

Buying habits increasingly are being influenced by the position a company takes on issues, such as Black Lives Matter or sustainability, and whether these stances mirror those of the shopper.

This can include whether or not they match the sentiment among shoppers which, with regards to Ukraine, continues to oppose the conflict.

Reports suggest that firms that have not reacted in line with consumer attitudes to the conflict, could be hit in terms of sales and revenue.

Food and Beverage Industry Russia
McDonald’s has closed hundreds of restaurants in Russia. Credit: Max Titov / Unsplash

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Other companies to take action so far include Cargill, Carlsberg Group, Ferrero, Heineken, Kellog, Kraft Heinz and McDonald’s.

Cargill, which reportedly has around $1.1 billion of investments and 2,500 employees in Russia, is “scaling back” its business activities and hit pause on investments while continuing essential food and feed facilities, according to a statement.

Carlsberg Group is pausing new investments and exports to its Baltika Breweries subsidiary in Russia, which it will continue to run as a separate business.

Ferrero is suspending non-essential activities and development projects, such as advertising and promotions, in Russia.

Heineken first announced a halt on exports and all new investments in Russia. It has since confirmed that it will leave Russia and is working on plans to transfer the business to a new owner without profiting from the process.

Kellogg, which has three plants in Russia accounting for around 1% of the company’s business, is suspending investments and shipments while continuing to produce “essential staple foods locally for local people,” it said.

While Kraft Heinz is temporarily stopping imports, exports and new investments.

McDonald’s closed a total 847 restaurants in Russia, leaving the country from a business perspective. The fast food giant said it is continuing to pay the wages of its 62,000 workers in Russia and that the closures will cost $50 million a month.

Food and beverage industry responds to Russia
Kellogg is also among companies to respond. Credit: Haithem Ferdi / Unsplash

The war is hitting the food supply chain and is set to affect consumer behaviour far from the conflict zone and shape food and beverage manufacturers’ longer term strategies.

The distribution of food has been severely affected, with the closure or reduced capacity of factories and retail stores.

MHP, which produces around half of Ukraine’s commercial poultry and is the country’s largest exporter, had more than 26,000 employees before the conflict. Executive chairman Dr John Rich said: “The safety and security of our workers and their families are of utmost concern to us.

“Where necessary and possible, we are ensuring their relocation to safe areas and will provide financial support as necessary.”


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