What Does The Russia-Ukraine Conflict Mean For UK Beverage Exports?

In 2019, UK exports to the Ukraine totalled £7.35million, and were estimated to be in excess of £7.5million in 2021. Though not a significant trade partner for the UK (accounting for only 0.1% of total trade), Ukraine plays a vital part in many UK export agreements.

Both Russia and Ukraine are a key export market for alcoholic beverages, in particular beer and cider. Sovereign Beverage Company Ltd, www.sovbev.com the UK’s leading exporter of premium beverages, counted the Ukraine as their largest export market last year, exporting premium British brands such as Robinsons Brewery, Westons Cider and Saltaire Brewery.

Due to the Russian invasion, Ukraine has been placed under restrictions, one of which includes banning the sale of all alcohol in order to prioritise essential items. This has resulted in an immediate cancellation of all pending orders, as well as a complete review of forecasted sales for 2022.

A further difficulty for all businesses exporting to Ukraine is that martial law was imposed from 24th February 2022 for a 30-day period. Under martial law, the National Bank of Ukraine has imposed a ban on transferring payments abroad for all but critical imports. The decision will be reviewed at the end of March, and it is anticipated that the limitation will be continued.

This restriction means that suppliers with outstanding invoices can’t be paid. For companies like Sovereign Beverage Company who have extended credit to their Ukrainian customers, this will result in a potential default in payment, leaving them liable with their insurers for a % of the total invoice.

David Davies, Founder and MD of Sovereign Beverage Company has said “The use of force majeure means that UK export businesses and their suppliers will have to seriously consider whether they want to take the risk of exporting allowed goods into Ukraine, knowing that payments cannot be made for the foreseeable future.

“While there are economic and logistical restrictions preventing UK export to Ukraine, there are moral and ethical limitations affecting trade. Businesses like Sovereign Beverage Company and their suppliers are choosing not to trade with Russia as a moral stand against Putin’s actions, and while admirable – global brands including McDonalds, Zara, Netflix and Disney have all stopped service – smaller companies will feel the impact heavily on their bottom line.

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

“Businesses have to consider if they still want to trade with Russia and Belarus in order to maintain relationships with businesses within the Ukraine.

“There is an impact for Sovereign and many other companies in this territory and we are aware that is nothing compared to the enormous losses that the Ukrainian people are suffering. We are also conscious of how trade restrictions will impact 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.”