The development of the Ukrainian furniture industry in 2023
The Ukrainian furniture industry is one of the key sectors of the country’s economy, with about 11,000¹ business entities, the vast majority of which (more than 90%²) are small and medium-sized businesses.
According to the state register of legal entities in Ukraine, there are 1,292 enterprises representing the furniture industry and having NACE codes of class 31.0 in their list of activities. 81.3% of them are active enterprises that received income in 2023.
The total income of the TOP 10 largest furniture manufacturers in Ukraine for 2023 amounted to about $350 million³. An important fact is that 7 out of the 10 largest manufacturers are members of the Ukrainian Furniture Manufacturers Association, including: JV LLC “MODERN-EXPO”, LLC “MEBEL-SERVICE”, LLC “SOFRO”, JSC “NOVYI STIL”, LLC “TD SOKME”, LLC “MORGAN FENICE” and LLC “GRADE-PLUS”.
¹11,020 – the number of registered legal entities and individual entrepreneurs as of March 1, 2024 under the NACE code 31 – furniture manufacturing according to data from the Opendatabot portal.
7,329 – The number of active business entities by economic activity in 2022 under the NACE code 31 – furniture manufacturing. Report from the State Statistics Service.
²According to a survey conducted by the Ukrainian Association of Furniture Manufacturers (UAFM). The total number of respondents is: 164, of which 138 are furniture manufacturers.
³According to open data from the Opendatabot portal.
Prior to the full-scale invasion, the main regions where the furniture industry was located were Kyiv and the Kyiv region, as well as the Lviv, Kharkiv, and Dnipropetrovsk regions.
According to a survey by the Ukrainian Furniture Manufacturers Association, the leading regions for the furniture industry in terms of the number of operating enterprises are: Kyiv and the Kyiv region, Lviv, Zakarpattia, Kharkiv, Rivne, and Cherkasy regions.
Due to military actions on the territory of Ukraine, 11% of enterprises have completely or partially relocated. The most attractive regions for relocation turned out to be Rivne, Zakarpattia, Lviv and Ternopil regions. Grant support from the state and international organizations had a significant impact on the decision to relocate.
According to Volodymyr Mysyk, head of the Brand Roomio company, which relocated from Kharkiv in the spring of 2022: “Relocation forced us to gather all possible and impossible internal resources of the entire team, to take a step into the unknown. Fortunately, we were able to restore production within two years to the level that took us 4 years to reach in Kharkiv“.
Impact of the War on Production and Supply
The start of the full-scale war brought a lull to the industry for several weeks, and for some, even days. In the first months of 2022 after the invasion, furniture manufacturers were engaged in volunteer activities, producing anti-tank hedgehogs, benches and loungers for heating points of the Territorial Defense Forces, and furniture for displaced person centers. In September 2022, the share of enterprises in the industry that had completely ceased operations was at 6.3%, and half of the industry was operating at 40-60% capacity⁴.
70% of the surveyed entrepreneurs noted that their sales increased in 2023 compared to 2022. However, only 53% managed to exceed their 2021 sales results.
⁴Research by Diya.Business: The State and Needs of Businesses in Ukraine: A Sectoral Perspective, September 2022
Furniture manufacturers have been quick to change their sales strategies and tactics in wartime conditions. The most contrasting moves were made by retailers operating in the domestic market.
Taras Kolesnyk, owner and director of the Welovemebel brand (mass-market and mid-range price segments) comments on the company’s activities during the war: “We are currently focusing more on online and partnerships with Epicentr. In 2023, we added cheaper products to our assortment, which was wrong for our target audience – it’s not a very interesting product for them, we should have invested in the segment we understand. We entered all available marketplaces and made direct deals with Rozetka and Epicentr’s online platform under conditions where they are the seller“.
Yuriy Kucherovskyi, owner and head of the ToBiSho furniture brand, who actively developed his business through marketplaces in the niche of inexpensive serial furniture before the war, decided to separate the B2B line of business: “In 2023, we continued to diversify sales by category, focused on narrow B2B, and significantly expanded services for our business partners“. According to him, 2023 in Ukraine was marked by the following:
- Reurbanization – buyers moved from large cities to regions and rural areas;
- Growth in demand from international charitable foundations and commercial organizations as part of setting up housing for displaced persons and those who lost their homes due to Russian military actions;
- Renewed demand for furniture beyond the “sanitary minimum”.
Due to the full-scale invasion, supply chains for raw materials and components to Ukraine have changed. If in 2021 the main country from which Ukraine imported plywood and MDF was Belarus – 46.5%⁵ of total imports under commodity codes 4411 and 4412, then in 2022 and 2023 Ukraine completely refused to import particleboard, MDF and plywood from the aggressor country and Belarus, reducing the amount of purchases of panel materials for furniture production (groups 4410, 4411 and 4412) from $151.6 million to zero. In total, imports of particleboard, MDF and plywood were halved from $312 million to $145 million.
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⁵The export and import volume figures are provided according to the data from the State Customs Service of Ukraine.
Currently, the main suppliers of MDF to Ukraine are Poland, Turkey and Germany, in addition, the needs of the domestic market are met by a Ukrainian manufacturer. The main suppliers of plywood are Latvia, China and Estonia.
In commodity groups where we were not dependent on the aggressor country, in particular in the import of metal and plastic fittings (groups 8302 and 3926), the decline in procurement volumes in 2023 compared to the pre-war and record export volume of 2021 was at 32% and 33% respectively. This is reflected in both a reduction in export volumes and a reduction in sales volumes in the domestic market.
At the same time, in 2023 we imported 27% more metal hinges, rollers, armatures and other fittings than in 2022.
Changes in External Sales
In 2023, the export of the woodworking and furniture industries of Ukraine accounted for 6.3% of commodity exports or $2.3 billion.
Prior to the full-scale invasion, Ukraine set a historical record in furniture exports – $1.05 billion.
However, as we mentioned earlier, during the war, Ukraine’s furniture exports underwent significant changes. This includes the loss of major contracts with global companies such as IKEA, the cessation of any exports to Russia and Belarus, and a reduction in supplies to Asian countries. In 2023, furniture manufacturers exported $786 million worth of products.
According to a survey by the Ukrainian Furniture Manufacturers Association (UAFM), 60.1% of furniture manufacturers had export sales in 2023. About 20% of the surveyed companies are primarily focused on foreign sales, with exports accounting for 40-100% of their turnover. It should be noted that the Diya.Business survey in September 2022⁶ showed that only 31.3% of respondents in the furniture industry had export sales, but 50% planned to enter export markets.
In 2022-2023, the Ukrainian Furniture Manufacturers Association organized 10 national exhibitions at international trade shows in Germany, the United Kingdom, Poland, Italy, and the UAE. Under the slogan “Stand with Ukraine,” more than 200 furniture brands participated in the exhibitions, of which about 30% were companies without prior export experience.
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⁶Research by Diya.Business: The State and Needs of Businesses in Ukraine: A Sectoral Perspective, September 2022
The main regions where exporting enterprises⁷ are located are Lviv, Volyn, and Khmelnytskyi oblasts. Next in terms of sales share are Dnipropetrovsk, Kyiv, and Kharkiv oblasts.
Volodymyr Patis, co-owner of Eskada M and President of the UAFM, comments on export challenges and achievements during the war period: ” We managed to increase our export percentage thanks to the fact that we have been working on our model for several years and on what could make us interesting for our foreign clients. We focused on efficiency: how to be competitive in price, how to streamline the process, and we also spent a lot of time communicating with new clients from abroad. And all these actions led us to an increase in orders during the full-scale war, because we had already achieved these efficiency results. By securing a loan from ECA (Export Credit Agency), we purchased a large amount of raw materials, which also made our product more competitive and accelerated the order fulfillment process. In addition, several of our managers were separately handling export contracts. So speed, price, and focus – these are the factors that allowed us to reach this level.”
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⁷Export Potential Dashboard by Region from Diya.Business.Export Direction.
Challenges Facing Furniture Manufacturers and Ways to Overcome Them
The survey conducted by the Ukrainian Furniture Manufacturers Association (UAFM) showed that the TOP 3 main challenges facing Ukrainian furniture manufacturers today are the following:
- Lack of qualified workers,
- Unpredictability of the situation in Ukraine and the domestic market,
- Lack of sufficient number of clients in the domestic market.
The solutions to these problems are comprehensive and require the full involvement and work of industry participants to overcome them. To address the lack of qualified workers, the UAFM is creating the “Furniture School” project to train machine operators and designers, which will allow for quickly training the most in-demand specialists for the furniture industry. Tha launch of the special courses is planned for the summer of 2024.
Through the school, employees receive a quick entry into the profession and professional practice; within one month, they master the professions and get the opportunity for official employment in their field: machine operator or furniture designer.
Olena Fetsents, co-owner of the Frop company, spoke about ways to attract new employees: “The problem of lack of qualified workers requires involving all possible resources to solve it. We post vacancies on Work.ua, Robota.ua, on our website, on the Instagram page, on Facebook, in all possible chats, on Telegram, etc. And this is constantly happening and controlled: there is a separate HR person who handles this, and I also control and check new vacancies every 3 days.
As for the qualifications of employees, we have been working with a dual form of education with the third vocational school, and now we will start working with another institution in a dual form of education. Accordingly, they send us their students, and we also take students for internships. I have also been the head of the commission during the state exams for woodworking students for 5 years in a row, so I have the opportunity to choose the best ones.“
The Association is also actively working on the issue of market unpredictability. In conditions where we cannot influence external circumstances, we must learn to be flexible and adapt to changing conditions. This is the purpose of the FBA Academy, which focuses on adapting to the current situation, among other things. Over two years, we have released 5 special courses and over 170 students. Currently, resales of specialized courses are available: “B2B Sales in Crisis Conditions” and “Marketing Strategies for Brands Entering New Markets”.
To increase the number of clients and revenue, we highly recommend attending LEAN tours, intensives, conferences, and other offline events. It is there that you will have the opportunity to learn from the valuable experience of your colleagues, learn about the latest trends and best practices in lean and efficient production. Such events allow you not only to expand your knowledge but also to establish useful business contacts, exchange ideas, and find new partners or clients. In addition, you will be able to personally familiarize yourself with innovative solutions and technologies used in the industry and evaluate their effectiveness.
An effective tool for mitigating the risks of falling domestic demand is developing exports, particularly through participation in trade missions and international exhibitions. The Ukrainian Furniture Manufacturers Association has high expertise in selecting the right event, whose attendees will match the product and expectations of the furniture manufacturer. The 2024 exhibition calendar, where the UAFM organizes national expositions, includes 2 events for manufacturers of serial furniture and 3 events for manufacturers of custom-made furniture, doors, and other interior decoration products.
Conclusion
The Ukrainian furniture industry in 2023 faced serious challenges due to the full-scale war and significant changes. However, it has demonstrated adaptability and resilience, particularly by finding new sales markets, exploring opportunities, and uniting around problems. It remains an important task to support the development of the industry and facilitate its recovery after the end of hostilities.
*The analysis was prepared by Directorate of the UAFM and Oksana Donska, Member of the Board of the UAFM
