Impact of Russia - Ukraine Conflict on Italian Food Ingredients Manufacturers

As if inflation and shortage of products were not enough ever since the pandemic started, the Russia-Ukraine conflict has thrown another spanner in the wheel of the world economy limping back to normalcy. It has caused a significant impact on the world economy. Entire Europe including Italy and Germany is facing the brunt being situated very near to Russia and totally dependent upon Russian energy for its manufacturing. The world is now staring at recession and stagflation as a consequence.

To know more about how the Pandemic caused shortages and supply chain disruptions you may click here.

What is the outcome of the conflict?

• In retaliation against the sanctions imposed on her, Russia has cut down the supplies of gas to Europe. Hence the manufacturing sector in Europe including Germany and Italy has literally crippled. They are facing a serious energy crisis. Besides shortages, the prices of the same have shot up through the roof.

• The price of petroleum products has spiraled up in all parts of the world. In Italy, there is an extraordinary increase in the cost of inland transport.

• For Tomato product manufacturers, from the fresh tomatoes to packaging, gas to electricity, everything has gone up multifold. The picture is no different for the Arborio Rice manufacturers either since Arborio, also known as Risotto rice happens to originate from Italy too.

• Likely disruptions, uncertainty, and imminent price rise have caused speculation. Besides due to operational reasons, the safety stocks, as well as stocks on the water of the importers all around the world have swelled up significantly.

  
  

Consequent to the above factors the tomato and rice manufacturers in Italy have run out of stock. Hence they are rolling over the previous contracts to next season at new prices. The expectations about the new crop of tomatoes and rice are not optimistic too.

What can be expected down the line?

• Due to the likelihood of further lockdowns in China and uncontrolled Covid across the world, absenteeism of staff at most workplaces will continue to cause supply chain disruptions and stock shortages of Tomato products and Arborio rice in the next few months.

• There is all likelihood of a further and steep increase in prices of Italian products. The price rise can be to the tune of 50% or more. Manufacturers have already started signaling the sharp increase.

  
  

What can you do to minimise the impact on your business?

• Select your suppliers wisely on a long-term basis and work closely with them. Forecast your demand as accurately as possible for them to plan their inventory.

• Don't panic and overstock since that causes disruptions in day-to-day business.

• Surely there are alternative quality products available. Be open to using them as a backup plan. It is understandable that you will have to come out of your comfort zone and need to tweak your recipes. Believe me, such an effort is worthwhile as it will keep your business running and costs under control.