Over the last few weeks, the world has been buzzing over Russia’s invasion of the Ukraine. The United Nations have estimated that over 516 civilians have been killed, with over 908 injuries recorded since the conflict began. According to the UN Refugee Agency’s (UNHCR) operational data portal, over 2.5 million people have fled the Ukraine.
The effects of this conflict has had a ripple effect across the world. In South Africa alone, the cost of fuel has increased to R21 per litre. In addition, global commodity prices have soared, with coffee being impacted differently for each coffee producing country. Vietnam and India have experienced a drop in the cost of coffee due to a lower demand, disruptions in the supply chain and issues with payment methods, as an effect of the Russian and Ukrainian conflict. Even with the decreasing costs of coffee, there are still issues of exporting coffee due to high costs of shipping and restrictions which may have a bottle-neck effect on shipping ports.
On the other hand, instant coffee may see incremental increases if the cost of metal keeps increasing, leading to higher packaging costs. While Ukraine and Russia are not massive consumers of coffee, they are fast-growing markets for the sector with combined revenue of approximately 5 billion dollars.
While the market is small, the coffee value chain is a significant area being disrupted, with Europe seeing massive disruptions with both Nestlé and Coca-Cola temporarily shutting down operations in Ukraine. More Western beverage companies will have to stop supplies to Russia and operating in the country as sanctions mount. Germany’s Hapag-Lloyd and Copenhagen-based Maersk and MSC suspended booking to and from Russia. Singapore-based ONE also suspended some shipments. Bloomberg, quoting Alphaliner, reports that combined, those four carriers control about 47% of global container shipping. This will affect lives and livelihoods of thousands of staff which will have a direct impact on the coffee market.
The global coffee community has taken a stand with Russian-born coffee company, Dazbog taking a stand by raising funds for the people of Ukraine. The owner of Dazbog’s family fled Russia in 1979 and relocated to Denver. Dazbog will donate 5% of all in-store beverage sales as well as $3 per bag of their Svoboda “Freedom” Blend. The money raised will go toward the Ukrainian relief efforts led by the International Committee of the Red Cross
As the conflict between Russia and the Ukraine continues, we can expect many more knocks to the economy, of which the coffee industry is not immune to. We applaud companies like Dazbog, as well as the rest of the coffee community who continue to find solutions to issues of coffee supply shortages, rising costs of coffee and ensuring that the cost of coffee to customers are not severely impacted.
