ATB, Silpo, and other supermarket chains’ warehouses are under attack: what will happen to food prices?
10 August 15:15
ANALYSIS 
Russian strikes on logistics centers and warehouses belonging to major retail chains are causing significant direct losses to businesses, but do not currently pose a systemic threat to Ukraine’s food supply. Even the destruction of individual large warehouses should not lead to a sharp rise in food prices or shortages.
Economist Andriy Novak discussed this in a comment to "Komersant Ukrainian".
Russian Strikes on Warehouses: What Might Be the Consequences for Prices
Recent Russian attacks have targeted logistics infrastructure and Ukrainian business facilities. Against this backdrop, the question arises as to whether the destruction of warehouses belonging to major retail chains could lead to food supply problems and a new spike in prices.
Andriy Novak believes that, for now, there is no reason to speak of systemic consequences for the food market.
At the same time, the economist compared Russian strikes on Ukrainian facilities to attacks by the Ukrainian Armed Forces on large warehouse facilities in Russia.
“Of course, Russian strikes on our Ukrainian warehouses are, first of all, as has historically always been the case, nothing more than plagiarism on Russia’s part. In this case, it’s a copy of previous actions by the Ukrainian Armed Forces, which are taking out Wildberries’ large wholesale warehouses one by one,” Novak noted.
According to him, the scale of the economic consequences for the two countries differs significantly.
“If we compare the damage and consequences for the Russian and Ukrainian economies, the consequences for the Russian economy from Ukrainian strikes are an order of magnitude greater and worse. Why? Because Ukraine is targeting very large wholesale warehouses, which are the first and largest link in the supply chain for goods—almost 100% of which are imported, with 90% coming from China. At the same time, Russia is mainly striking, in fact, Ukrainian retail stores,” the economist explained.
Novak compared the cost of Russian missiles and Ukrainian drones
Another factor the economist highlighted is the ratio of the cost of weapons to the economic damage caused by the attacks.
According to his assessment, Russia uses expensive missiles for its strikes, while Ukraine can inflict significant economic losses on Russia using much cheaper drones.
“Therefore, the damage to the Russian economy is actually an order of magnitude greater. And also, if you consider the types of weapons being used, Russia is primarily carrying out strikes with ballistic missiles—very expensive missiles, each costing millions of dollars. In most cases, the cost of the missile itself exceeds the value of the goods it destroyed at a particular Ukrainian warehouse,” Novak stated.
At the same time, he noted, in the case of Ukrainian strikes, the ratio of costs to damage inflicted may be the opposite.
“Ukraine strikes with inexpensive drones that cost a couple of tens of thousands of dollars. And yet it inflicts billions of dollars in damage because, again, it targets Russia’s very large wholesale warehouses,” the economist said.
What the destruction of warehouses means for Ukrainian businesses
For a specific company, the loss of a warehouse, equipment, or inventory certainly means serious direct losses, Novak emphasizes.
“When it comes to the consequences for Ukraine, of course, for these companies whose warehouses are being hit, this represents direct economic losses,” he noted.
However, the expert distinguishes between the losses of individual businesses and the potential consequences for the entire economy and consumer market.
“But overall, at least for now, I don’t see any systemic damage that such Russian strikes could cause,” Novak emphasized.
He cites Ukraine’s decentralized warehouse and trade logistics system as one of the reasons.
“Unlike in Russia, our trading companies in this network do not suffer from ‘gigantomania’ and have not built such enormous warehouses covering hundreds of thousands of square meters, as is customary in Russia. In other words, our warehousing networks are much more diversified and spread out across the entire country. This is a major advantage—in this case, first and foremost for security,” the economist explained.
Could food prices spike due to the attacks?
Novak cites the high level of competition in the Ukrainian market as another safeguard against sharp price increases.
This applies to both traditional retail chains and online retailers.
“We have a much higher level of competition among various retail chains, both brick-and-mortar and online. And, in fact, this competition is very fierce in the domestic Ukrainian market. It prevents any single producer or retailer from raising prices, because consumers can instantly switch to another supplier,” Novak explained.
That is precisely why the economist does not expect a sharp rise in food prices simply because of damage to individual warehouses.
“I don’t expect any significant spike in prices, especially in the food market, which is generally the most competitive in our country,” the expert stated.
Is Ukraine Dependent on Supermarkets?
According to Novak, it is also incorrect to speak of the population’s critical dependence solely on large supermarket chains.
A significant portion of Ukraine’s food is produced by households.
“Even official statistics show that about 40% of food production in Ukraine comes from households. Therefore, it is clear that it is simply impossible to destroy or eliminate all of this, even in theory,” the economist said.
Thus, Ukraine’s food system consists not only of large producers, distributors, and supermarkets, but has a much broader and more complex structure.
Is Ukraine Facing a Food Shortage This Winter?
Novak is convinced that even amid a complex military situation, there is no reason to speak of a possible famine in Ukraine.
The main reason is the country’s significant domestic food production.
“We are not at risk of famine under any circumstances, because Ukraine has a significant surplus of virtually all staple foods and the raw materials used to produce them,” the expert stated.
In addition, domestic food supply is affected by problems with the export of Ukrainian agricultural products.
“Plus, we know that, although temporarily, the maritime route for exporting Ukrainian agricultural products is effectively blocked, which means that these products will be sold in significantly larger volumes on the domestic market,” Novak explained.
In such a scenario, the problem may not be a shortage of goods, but rather, on the contrary, a surplus of certain products and raw materials.
“In other words, we’re not likely to face a shortage here, but rather a huge surplus of products—at least of the main ones and their raw materials. Therefore, Ukraine is definitely not at risk of famine or even a food shortage,” concluded Andriy Novak.
Thus, Russian attacks on warehouses remain a serious problem for individual companies and can lead to significant direct losses. At the same time, according to the economist’s assessment, a well-developed logistics network, high competition, significant domestic production, and a surplus of staple foods currently provide no grounds to expect a systemic food shortage in Ukraine.
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