Just as the omicron variant of the coronavirus was starting to ease — and supply chain woes with it — Russia invaded Ukraine, triggering new fears of a different kind of retail disruption extending into 2022.
There are essentially two parts to the story. On one hand are companies that rely on Russia as a trading partner for raw materials. That’s the supply chain aspect. Then there are the global brands now shuttering stores in Russia — or unable to get or sell Russian products across borders.
The New York Post reported Tuesday (March 1) that “UPS and FedEx are halting delivery services to Russia and Ukraine. Shipping group Maersk will temporarily halt all container shipping to and from Russia [and] Deutsche Post has stopped DHL deliveries to Russia.”
Along with the closing of Ukrainian ports, getting products in or out of the embattled region is already a logistical nightmare. As Russian carriers find themselves shut out of foreign airspace and vice versa, cargo planes are rerouting around the world’s largest country, raising fuel costs on air freight.
Reuters reported Thursday (March 3) on a long list of Asian and European companies that either have facilities inside Russia or depend on the nation for manufacturing and goods.
A sampling of companies listed include Hitachi, which has “five engineering bases in Ukraine of GlobalLogic, which it acquired last year, and roughly 7,200 staff working in places including Kyiv and northeastern Kharkiv,” and finance app Rakuten, which owns the Viber messaging app used by 97% of Ukranian smartphones and has an office in Odessa.
Consumer Brands in the Conflict
Among the biggest consumer brands making business headlines during the Russian invasion of Ukraine is Coca-Cola HBC, the beverage giant’s major manufacturer for Europe and adjacent markets. The bottler closed its Ukraine facility Feb. 24.
“Coca-Cola HBC generated roughly 20% of its sales volumes and profits in 2021 from Russia and Ukraine,” The Independent reported Thursday.
Food group Nestlé closed its factories in Ukraine and Russia last week, then announced Wednesday that it is reopening those facilities. A Nestlé spokesperson told Reuters, “We are trying to reopen parts of the supply chain and distribute to retailers where it is safe to do so. The latest information is this was partially possible.”
Swedish home-goods giant IKEA posted a statement on its website Thursday saying it is pausing imports out of Russia and Belarus, halting production in Russia and closing its stores there, as well. It will, however, continue to operate its Mega shopping centers in Russia to “ensure that the many people in Russia have access to their daily needs and essentials such as food, groceries and pharmacies.”
Some 15,000 workers are impacted by the decision, according to the statement.
Apparel brand H&M suspended sales in Russia, and Burberry has paused shipments to its store in Moscow’s Red Square. BBC News reported Thursday that “Russia was the fifth largest European retail market in 2021, valued at £337.2 billion,” or roughly $450 billion.
Energy Sector Readies for Shortages, Price Hikes
With energy prices soaring and Russia a major supplier of oil and natural gas to most of Europe, concerns of even higher gas prices to come are another bottom-line impact of the invasion.
“Russia could choose to cut off or limit oil and gas exports to Europe as retaliation for sanctions,” NPR reported. “Nearly 40% of the natural gas used by the European Union comes from Russia — and no European country imports more than Germany, a key ally of the United States.”
See also: Apple Suspends Sales in Russia