Both Russia and Ukraine are significant stakeholders of the global tea market. The aim of this article is to provide a basic multi-faceted analysis of the current situation in Eastern Europe and its impact on the tea market..
● Tourism in Europe
It is clear that the usual tourist movement in Europe is expected to decline as a result of the conflict between the European neighbors. Similar to COVID, a reduction in tourism would mean that there would be low tea bag sales in the market. However, in comparison to 2020 and 2021, we can expect the market to grow as the markets will not be completely closed out as in COVID years
● Challenges in transportation
Many tea factories and companies would experience a challenge in transportation mainly due to the restriction in movement and increased costs. This will result in many tea companies relying less on outsourcing parts of production such as tea bagging, tea packing etc to suppliers from other countries. Instead, tea companies would attempt to get tea packaging done locally either by outsourcing to suppliers within the country or else by gearing themselves with required machinery to do the packaging.
● Tea stocking
Europe is a big tea consuming market. Within the outburst in Ukraine, consumers may fear that there may be a shortage in tea in the market which will result in them stocking up for the future. This is a similar pattern that was seen during the COVID breakout as well.
● Opportunity for other markets
Ukraine is a key supplier to the global tea market. However, with the current situation, Ukraine is unable to supply and this gives the opportunity for other local EU tea companies to fill the void.
● Exchange rates
Exchange rate plays a key role in international business. The economical impact on the foreign buying currency can impact the business as its cost and revenue depend on them. For businesses that are engaged in importing, the weakening dollar will have a negative impact. Having a weakened Euro against the dollar will impact brands that are imported to Europe as they will be high in price, which in turn will reduce consumption or initiate consumers to substitute them with locally produced tea. While this will be an advantage to the local European tea brands produced within, the international market for tea as a whole deplete.
● Overall rise in living expenses
The imposition of sanctions on Russia will eventually result in Russia supplying lower gas to the world market specially to US and EU. This will in-turn increase the living expenses of people due to increase in transportation and inflation. This may have a negative impact for tea consumption as people will prioritize essential needs which will cause tea to be in the lower end of the spectrum. However, in the EU tea can be considered somewhat of an essential product, therefore the consumption of it may not decline by huge volumes.
● Exclusion of Russia from the swift banking system
The exclusion of Russia from the swift banking systems would come as a negative impact for tea businesses supplying to Russia. This is because the financial behind businesses would be impacted adversely and transactions cannot be done smoothly as done previously.
The above are some of the areas we need to monitor closely with the developments of the Russia - Ukraine war.
In conclusion, we hope that this war will cease and there would be peace and harmony soon. People need peace and the world needs people to make and do wonders for our Mother Earth.