At first glance, it sounds unbelievable to continue doing business in the country at war. That is why the GB4U is launching the series “Ukraine Business Outlook” to show the real situation, and here is the spoiler: it is far from hopeless as it could possibly be. Regardless of the hurdles, businesses in Ukraine are staying strong, and that can be confirmed by the stories of five CEOs told on October 27, at the first meeting on business outlook in Ukraine.
Olena Vdovychenko, CEO Metro Cash and Carry:
“With its 40 million population, Ukraine is a country with huge consumption. But at the same time, the country is underpenetrated in terms of consumption per capita almost in each category compared to peer countries and there we see high potential in added value products and services.”
In Ukraine, Metro Cash and Carry has 26 stores, but currently, we are operating with 22. Due to security reasons, the chain stopped the operations of two stores in Kharkiv, one in Mykolaiv, and one in Mariupol. The company ended its financial year this September with cash-positive results and zero overdue, as it pays all its partners fully and in-time. The forecast is that Metro Ukraine to resume its pre-war volume of sales in 2024 – 2025 provided six million Ukrainians return back to the country and the GDP grows at 4,5 – 5%. Supply chain disruptions pose a great challenge to the company as the ports are blocked and the trucks have to spend up to 10 days at the border in queues. This leads to a lack of availability and a loss of sales. There are also local suppliers whose production is on the occupied territories or even destroyed. Another challenge is the constant air raids, when they are happening, the stores must stop operations and accompany all the people inside to the shelter. According to Olena’s estimates, each month they lose 30 – 70 mil UAH due to these emergencies. The blackouts are the most recent odd Metro needs to deal with, but it has enough diesel generators. As the customers of Metro Ukraine are people of medium+ income, the retail chain does not feel that the purchasing power is reduced. Metro suffers more from traffic decline due to ca 5 mio Ukrainians are still staying abroad. What can be felt is the decline in the consumption by HoReCa but Olena believes it will restore fast when the war ends. In general, the availability of products is now at the level of 85%, while at the beginning of the war it was at 50%. The company does not put the inflation cost on customers in full, so they are still attracted to the low prices at Metro. Since May, the chain has resumed all its plans and projects, including those related to digitalization sustainability, waste management, and inclusiveness.
Oleksandr Pysaruk, Chairman of the Board of Raiffeisen Bank Ukraine
“We want to play an important role in the reconstruction of Ukraine in the next 5-10 years. In the longer term, there will be an inflow of international capital to Ukraine. So, our bank is not only holding up, maintaining operational integrity, but it also positions itself for the future.”
Ukrainian banking system is holding up so well during the war for three reasons. First, many banks had contingency plans in case of invasion. Raiffeisen Bank Ukraine maintained continuous service for all its customers in spite of the fact that our main operational centre with more than 500 staff is located in the temporarily occupied Kherson. The bank arranged necessary backups for all critical functions, implemented robust serious cybersecurity measures, and migrated all transactional processing to the cloud without any negative impact on clients. Second, today’s viability of the banking system is the result of reforms made by the National Bank of Ukraine since 2014. The banks entered this crisis with sufficient capital and liquidity while client’s payment discipline is much better than in 2008 and 2014. Third, banking sector digitalized many services and processes during the pandemic that helped them becoming more agile during the war. While we expect certain reduction of the overall client base and revenue pools in Ukraine in the short term banking business will remain profitable and continue growing in the medium and long term. Heavy industry, infrastructure, energy, tourism are among the sectors most affected by the war. At the same time, Raiffeisen Bank sees incredible resilience and adaptability of Ukrainian businesses across all sectors of economy and remarkable partnership of banks and their clients during these difficult times.
Alessandro Zanelli, CEO Nestle Ukraine
“Our company is committed to stay as we take responsibility of our role in ensuring supply of quality food and we believe that “business is a force for good!”
When the war began, Nestlé Ukraine activated the Business Continuity Plan which in early stages meant entering the hibernation mode – everyone stays put in the safer places and planned shutdown of the factories and DCs. But the hibernation lasted only 4 days because Nestlé resumed its operations in Western Ukraine. And we clearly planned future actions according to identified business priorities in times of war: 1) protection of the safety of our people (mental and physical health and safety), 2) protection of the business continuity as tool to sustain the people in the war, 3) protection of Ukrainians offering "helping hand" with donations and support to individuals and communities. to ensure safety we develop a set of security tools, for example the "Safety Call Tree" that allow us on daily basis to track where our employees are and their condition. we also realized how business continuity is essential to sustain people and families with safe jobs and salaries. Additionally we are main producer of food and beverages and supply them, with intact quality and continuity, has proven to be critical to sustain the people in the tragedy of the war. But supply food in this moment of need is not enough. Our donation plans has been uninterrupted and as of today we have already donated to people in need the equivalent of 3700 tons or 120 mio servings (11.5 mio Swiss Francs). All of this has been possible only thanks to the outstanding attitude of our people! I am always amazed by the incredible resilience demonstrated by my teams, each of them contributing greatly to our business and supporting each with immense solidarity. And this has impressed also our headquarter, that is fully supportive of our actions and our people. This is the reason why there is no doubt about our future commitment to Nestlé in Ukraine. We want to do it for our people, we want to do it for Ukrainians and Ukrainian society, we want to do it because we believe in Nestlé as a “Force for good”.
Adrian-Valentin Pascu, General Manager, Danone Ukraine
“Ukraine is a place to be and to stay, it has huge potential marketwise, population-wise. Why someone needs to search for a new market in Asia, or Latin America if in the middle of Europe you have Ukraine with many opportunities.”
All the worst has happened to Danone in the first two weeks – the occupation of the plant in Kherson and the bombardment of the warehouse in the Kyiv region. The company also had contingency plans, but it was impossible to prepare for everything. The first objective for Danone was to pay salaries and keep its commitments. The company evacuated its 300 employees from Kherson to Kremenchuk where they were reskilled and upskilled to work in the local facility. The Ukrainian team was eager to work, to produce; they cracked all the barriers and showed amazing results. Also, Danone continues to work with all its 24 Ukrainian milk suppliers. Although Danone Ukraine lost its 50% capacity immediately as the war began, it could recover fast and not depend on the headquarters. For the last 5 months, Danone’s market share in dairy has been growing, very close to what it had before. The forecast is that if the company managed to hold up and maintained its money in the crisis, afterward in Ukraine they expect ten years of growth. For your understanding, Danone has been operating in Ukraine for two decades, invested 1,2 billion UAH, and the company will make more investments in the future.
Vitali Vereshchagin, General Manager, Caparol
“The crisis allows us to clean up all the bad processes in the company, reflect on where we are, and work on the implementation of solutions immediately.”
In March, Caparol Ukraine has everything at the zero level, but the company restarted its local production of paints already in April. Therefore, since June, Caparol is profitable again. The company retained all its employees, the team is supportive, and every month they meet for the monthly town hall meetings to share the news. Also, in the summer, Caparol launched a new range of paint products, it should be noted that in peacetime that could last two years. The new paints allow easily to fix the small damages on the wall caused by hostilities, which is very relevant for Ukraine today. Regarding the construction sector, there is no building or rebuilding right now, but we can see the work on finishing the existing sites and repairing. As for the forecasts, Caparol Ukraine prefers to stay conservative, but it will make certain investments, namely in the company’s safety (building the bomb shelters), energy efficiency (setting up solar panels), and production increase (half of the factory employees are in the military right now). Thus, even in crisis, the business sees the dimensions for growth.
We thank all the speakers and the participants for such an insightful discussion! If you want to connect to any company featured in the meeting, please let us know!