Post-Brexit and the wine producers

Meininger’s tracks the impact of Brexit upon the wine industry in a two-part series. This week, we show how wine producers cope with the new situation. L.M. Archer has asked around.

Philip Cox of Cramele Recas, Romania's largest wine producer / Credit: Cramele Recas
Philip Cox of Cramele Recas, Romania's largest wine producer / Credit: Cramele Recas

A recent British Chambers of Commerce survey of over 2,900 UK exporters shows export sales fell 41 percent during the first quarter of 2021, in large part due to Brexit. (At time of publication, this figure dropped to 28% in the second quarter survey).

“The UK imports around half, 55 percent, of their wine from the EU,” adds Miles Beale, chief executive of Wine and Spirit Trade Association (WSTA). “The UK wine and spirit industry, as a whole, generates £49bn (€57bn/$69bn) in revenue, and supports 360,000 jobs.” 

“It is difficult to ascertain the full impact of Brexit on the industry due to our limited experience of it since 1 January, including Covid and ongoing negotiations,” continues Beale. “However, it is clear that businesses in many industries are struggling to move goods across borders, due to a range of issues – some teething problems, some more fundamental.”

What about wine exports? “London has been the center of trade in top wines of Europe for centuries,” says David Parker, CEO of Benchmark Wine Group, a worldwide fine and rare wine retailer, and president of the National Association of Wine Retailers. “With it being separated financially from the producing countries of Europe – France, Italy, Spain, Portugal and others – by Brexit, we expect costs to rise for wine that continues to trade through the UK, and alternative sourcing directly from the continent to become more dominant.”

“The UK imports around half, 55 percent, of their wine from the EU,” adds Miles Beale, chief executive of Wine and Spirit Trade Association (WSTA). “The UK wine and spirit industry, as a whole, generates £49bn (€57bn/$69bn) in revenue, and supports 360,000 jobs.” 

“It is difficult to ascertain the full impact of Brexit on the industry due to our limited experience of it since 1 January, including Covid and ongoing negotiations,” continues Beale. “However, it is clear that businesses in many industries are struggling to move goods across borders, due to a range of issues – some teething problems, some more fundamental.”

 

Miles Beale, chief executive of Wine and Spirit Trade Association (WSTA) / Credit: WSTA

 

Teething problems

Teething problems, indeed. “Brexit suddenly required wine suppliers to work through UK-based importers and distributors,” says Gabe Barkley, CEO of MHW Ltd., a beverage alcohol importer, distributor, and service provider for major international brands. “This prompted a high volume of brands to seek out a limited volume of UK importers in a short period of time. It has created a more competitive landscape for wine producers and has particularly been a challenge for smaller producers.”

Barkley notes UK customs declaration import regulations, new licensing requirements, product safety certificates, inspections, and rules of origin checks as additional obstacles. “When you also factor in the global shipping disruptions and clogged UK ports, wine producers are facing significant trade challenges getting across the English Channel,” says Barkley.

“Whether the customer chooses to ship ex-cellar or FCA (free carrier), someone has to bear the onus of these costs,” says Will Oatley, managing director of Louis Latour Agencies, Maison Louis Latour’s UK subsidiary. “Frequently, shipments have to be re-routed via transport hubs to minimise overheads, subsequently deliveries are delayed, promotions missed, and sales lost. This must be resolved quickly. Otherwise, [the] New World will happily fill this void.”

 

Will Oatley, managing director of Louis Latour Agencies / Credit: Louis Latour Agencies

 

What cost patience?

“Producers must be prepared to be patient with this market for the next two years,” counsels Barkley. Some producers can afford to endure that long.

"Thanks to a free trade agreement between Chile and the UK, which was established early in the Brexit process, and to existing well-structured logistics arrangements for supply from South America, Viña Concha y Toro has been able to continue trading with and in the UK with relatively low levels of impact to date,” reports Thomas Domeyko, corporate distribution offices manager for Viña Concha y Toro, Latin America’s largest wine producer and exporter.  

 

Gabe Barkley, CEO of MHW Ltd. / Credit: MHWLtd

 

But for many producers, like Philip Cox of Cramele Recas Wine, Romania’s largest wine producer and seller of premium wine, patience isn’t possible.

“The biggest problem right now is still transport, but it’s not just the shortage of drivers within the UK,” says British-born Cox. “For exporters shipping to the UK, a much bigger problem is the current turmoil on the transport market caused by the delays in customs and unloading in the UK, which have in turn caused a large amount of European transporters to stop working UK routes.”

Cox calculates a 30 percent rise in transport costs to the UK, and an increase in transit times from approximately five days to eleven days. He also notes that drivers aren’t the only ones fed up with the UK. “I know for a fact from many other producers that many have given up completely trying to sell in the UK,” says Cox. “Particularly smaller producers that depended previously on small scale groupage shipments of individual pallets or cartons – which has become completely impossible now due to the customs costs for such operations, which are all charged per invoice, and not per transport.” 

Ultimately, Cox estimates an increase of about €200 (£172/$242) per invoice. “We spend now an additional €100,000 (£86,090/$121,115) per year on admin costs linked to the UK, and have taken on two extra employees to deal solely with the UK admin. But we have increased our prices to account for that, so it’s for sure consumers end up paying it,” he concludes. 

All told, Brexit proves one expensive divorce from the EU for wine producers and consumers alike.
 

L.M. Archer

First part: "Things may slowly get worse"

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