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Wine and Breakfast, er, Brexit

Don't panic...

I'm not going to get all political. This blog is going to neither wail and complain about the dire consequences of leaving our European family, nor smash a Champagne bottle on the prow of the good ship Britannia as she sails off to trade waters new.

The only concession to talking politics I will make up front is in regards the stats for the wine industry as a whole: perhaps it's unsurprising that the official trade body for the wine industry in the UK the Wine and Spirits Trade Association was fully lobbying to remain in the EU, and the vast majority (90%) of merchants also said they would prefer to remain. When your primary product is so dependent on Europe and in particular the free and easy flow of goods across borders as well as the Pound-Euro exchange rate, it is logical that as a business-person you'd hope to eliminate any potential threat to the stability of this trade.

Nonetheless, we are here. We've not actually exited the EU yet, and we don't really know what our relationship is going to be like with the EU or what kinds of new trade deals we are going to be able to make yet. Chances are, in general, things won't really change much for quite some time, and the currency and financial markets will remain volatile until such time as the new arrangements have bedded in and stabilised. We're looking at least at 5 years before that happens realistically.

OK, what does this mean for wine in the UK?
It's a fascinating question, and one that could have many answers. Here, in my humble opinion, are a few possibilities:

  1. We carry on largely as previously. This means that eventually, trade deals that are broadly similar to what we had previously will be struck, and we will have access to the same wines from the same places we did before. Prices may well be different depending on exchange rates, but in effect, the choice of wines will be largely unaltered.
  2. The balance of where we get our wines from changes. This is also distinctly possible. If, say, we manage to produce a rapid trade deal with Australia, New Zealand, the USA or any other wine producing region, faster and more favourably than any deal with the EU, it's possible we will see more wines from these places as they may be comparatively cheaper than their EU counterparts if a lesser or no deal is struck. The opposite is also, theoretically, possible; the EU deal may well be painless and easy, but a US deal not so.
  3. You may start seeing UK wines on the shelves as a matter of course. This is probably quite likely no matter what, as both the quantity and quality in UK wines improves. It's a no-brainer for a merchant if you can still get great wines on your shelves without the hassle of importing or currency changes. Volumes produced (and climate change...) will need to increase hugely before you start seeing entry-level prices, but they are trending that way.
  4. Negotiations go pear-shaped, and the price of wines (and much else) increases. It's unlikely, in my view, but possible that we end up in the short-term with no deals anywhere, and we revert to tariffs on all imports. Not a great scenario for a merchant, as we'd have no choice but to put our prices up, meaning a lot of consumers change their priorities about what to spend their money on.
So that's all quite long-term. What about right now?
Yes, generally speaking I was referring to things above in terms of a 3-5 year time-frame. Right now, prices will trend upwards slightly, no question about it. Even the supermarkets with their enormous buying power will eventually have to start putting prices of wine up simply on the basis of the pound being currently 12-15% lower compared to the Euro and 16-18% down on other currencies than it was earlier on last year. Outside of the real entry-level stuff like Yellowtail, Barefoot or Blossom Hill, the days of regular £5 wines may be on the wane if the pound stays at its current level.

In many ways, independent merchants have a bit more flexibility and manoeuvrability: if a particular wine from a particular region is becoming too expensive, we have a bit more scope to look outside less traditional wine regions to source out the bargains and be able to explain and introduce these to consumers in a way a supermarket doesn't or can't. Say, for instance, the Euro continues to climb against the pound, then entry-level Claret may start getting beyond the reach of most. We might be able to substitute that for a similar wine from Slovenia which is only cheaper because of where it's from, rather than any lesser in quality.

In any event, as I've previously gone through, a £5 wine in a supermarket was actually only worth €0.75 to the producer after taxes, duties, transport and admin costs were factored in - not even including costs of items such as cork, bottle, labels or packaging. Following the fall of the pound that same bottle should either cost £5.50 (although the larger supermarkets will take the hit to their margins for a while), or the supermarket would squeeze the producer down to €0.65. At €0.65, you're not getting a lot of value in that wine.

I know I harp on about it, but just £2.50 more would buy you a wine which gave €2.40 back to the producer. That's over 360% more quality for just 50% more cost to you.

So, in summary, we don't really know what effect on wine Brexit will have long term, but in the short term, prices are likely to go up a bit?
Yes, that pretty much sums it up. All the more reason to be guaranteed of getting value for money by visiting your local independent wine merchant!


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