With Russia invading Ukraine this past week, what effects could it have on the functional CPG industry? I think the easiest way to understand this topic would be for me to provide a zoomed out CPG industry view, before zooming back into the functional food, functional beverage, and nutritional supplement CPG categories. Many might not be aware that Ukraine is nicknamed the breadbasket of Europe. The Ukraine and Russia conflict is further exacerbating a run-up in prices for food commodities, which have been affected by extreme weather, labor shortages and a host of supply chain issues over the past year. For food manufacturers that rely on wheat and flour as key ingredients, the Ukraine and Russia conflict is yet another element for them to weigh as they attempt to control price increases. It’s not just the threats to grain shipments that could drive inflation, as Russia is a major low-cost exporter of nearly every kind of fertilizer. If global trade of fertilizers gets disrupted, it will mean higher costs for farmers, and in turn, more food inflation. As you can see, contagion and trickle-down risks are all over the place that will impact the functional CPG categories, but what about direct hits? I'll breakdown possible finished goods trade impacts and also a few ingredients that are used in common functional CPG formulations.
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