Russian strikes force Ukrainian food retailers to rebuild logistics

According to Agriculture Minister Taras Vysotskyi, Russian attacks have destroyed, “roughly speaking, 90%” of the logistics infrastructure used by food retail chains to supply goods. This primarily refers to large distribution centers and modern retail warehousing facilities, rather than 90% of all warehouses in Ukraine.

Over the past month alone, warehouses and distribution centers operated by Fora, VARUS, Silpo and NOVUS have been hit by Russian strikes. Logistics facilities belonging to companies in other retail and delivery segments have also been targeted. As a result, significant damage has been inflicted on the centralized supply model in which goods move from producers to large distribution centers and then to stores.

According to Vysotskyi, retailers are switching to direct deliveries from producers, “on-the-go” deliveries and other alternative supply schemes. This allows basic food supplies to remain available, meaning there is currently no threat of a systemic food shortage. However, product ranges in some stores may shrink.

The new supply schemes are significantly more complex and expensive. Companies have to spend more on transportation, use additional storage facilities, decentralize inventories and invest in rebuilding destroyed infrastructure.

Further destruction of distribution capacity could increase pressure on food retailers even without a physical shortage of food. Higher transportation, storage and inventory costs could ultimately be partially passed on to consumers.

Tags: Ukraine, logistics, food, war, retail