Europe’s hospitality industry faces uncertainty following Russia’s invasion of Ukraine

A Nestlé Dolce Gusto production line | Photo credit: Nestlé

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Food & beverage and hospitality brands in Europe and beyond are facing further uncertainty following Russia’s invasion of Ukraine – the first war between two major European powers for 77 years.
 
More than one million Ukrainians have fled their country since the Russian invasion on February 24, with a humanitarian crisis brewing in Poland and neighbouring countries.
 
The conflict will also prove disastrous for Ukraine’s coffee shop and hospitality industry, where the 220-strong branded chain segment was one of Europe’s fastest growing by outlets in 2019.
 
The Ukrainian branded café market is led by domestic chains, Coffeelat, Merry Berry and Itis Café, but is also home to international brands, such as US-based McCafé, Russia’s Shokoladnitsa, Italy’s illy Caffè and Turkey’s Simit Sarayi.
 
International coffee and beverages manufacturers, Coca Cola HBC and Nestlé, have already temporarily shut down factories and distribution in Ukraine due to the ongoing conflict
 
Nestlé, which employs around 5,000 staff in Ukraine, said it had temporarily suspended its entire supply chain in the country due to the deteriorating security situation.
 
“At this time, all our colleagues are safe and we remain in constant contact with them and are doing everything we can to prioritise their safety, adapting our plans in line with the changing environment. We remain committed to continuing to serve the local people and have contingency plans in place to ensure we can restart the supply of our products as soon as safe conditions allow,” the Swiss company said in a press statement.
 
The conflict is already having consequences for foodservice companies further afield, with The Mail On Sunday reporting Burger King has put a £600m floatation on the London stock exchange on hold because of investor jitters over the war in Ukraine.
 
Meanwhile, disruption to European gas supplies, including Germany’s cancellation of the $11bn Nord Stream 2 gas pipeline from Russia, looks set to exacerbate spiralling energy costs across the continent and further erode consumer purchasing power across Europe.
 
Western sanctions could also hit international companies with operations in Russia, including the significant number of international branded coffee chains with a presence in the country.
 
World Coffee Portal data shows Russia’s branded coffee chain market exceeded 4,400 outlets in 2021, with Starbucks, McCafé and Costa Coffee operating hundreds of stores across the country.
 
Russia has faced increasing political and economic isolation since its invasion of Ukraine on 24 February, with the country’s banks now largely cut off from the international Swift payment system and several European countries closing their airspace to Russian aircraft.
 
The value of the ruble has entered freefall as nations around the world have side-lined Russian interests from banking to energy and industry.

The war in Ukraine presents a fresh set of problems for European hospitality and foodservice businesses still tentatively emerging from the pandemic, with World Coffee Portal noting the potential for significant and prolonged business disruption if the situation in Ukraine continues to deteriorate.

Read Allegra Group's statement on the Ukraine war here.