Musings on Wine and Brexit

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Ben Bernheim, grew up in France and is a recent graduate from Edinburgh University, Scotland, with an MA in Economics and Economic History.  He was a member of the winning tasting team for the Edinburgh Wine Society. He is currently spending the summer working in a few Israeli vineyards.

A year ago, I was asked to write something on the economic impact on the wine trade of Brexit. I didn’t. Partially because I’m lazy, but mostly because I didn’t have the foggiest what would actually happen. At the time, I don’t think anyone did. Twelve months and a general election later, that’s still the case.

Even if the details remain uncertain, what is certain is that Brexit will have a concrete impact. In the wine trade, I think this will fall into two main categories: shifting consumer preferences, and a change in price and availability of the wines on offer.

Tea or Coffee?

The other night I was making coffee in my Italian-made cafetière. My friend and I started talking about the Britishness of hot drinks. Was drinking tea (PG Tips of course) the patriotically British thing to do, with coffee the continental competitor?

We concluded that we were demonstrating our European cosmopolitanism by eschewing the humble teabag. I realised the same logic can be applied to wine and spirits.

Nigel Farage drinking beer (photo Jeremy Selwyn)

Nigel Farage would never be seen drinking iced pastis. Beer, gin, and Somerset cider are the obvious proudly British choices. Xenophobic hate crimes are sadly on the rise in modern Britain – will European wines be the next victims? I expect so. The rise of the local craft beer industry in recent years attests to a preference for the small local company that comes with a story and patriotism – and the imported wine available to most consumers is, for better or for worse, made on an industrial scale halfway across the globe.

Of course, wine is not wholly excluded from the small and local categories. Global warming and the rise of the English vineyard present an alternative option – local wines. I expect sales of English wine to continue their upward trend as an understandable consumerist expression of patriotism, aided by its current position in the premium segment. It may also begin to enjoy a price advantage.

Pierre-Emmanuel Taittinger and his UK partner Patrick McGrath MW on their newly purchased Kent vineyard.

As the pound plummets against the euro, European wines become more expensive, possibly exacerbated by the UK leaving the single market without a trade deal that includes wine – tariffs of 10 or 20% are plausible. The additional paperwork, customs checks and regulatory differences could then again add a few percent to the price in Britain. An overall increase of 50% the price of the wine itself is entirely possible – an assault on the old world £4.99 bottle – or maybe just very squeezed margins for retailers.

This change will however be most evident in expensive wines, as cheaper wines have a greater percentage of fixed British costs (bottling in for instance Bristol and duty, both paid in sterling). It’s possible that these tariffs will cease to apply to New World wines (other than Chile, whose wine is currently traded in the EU tariff-free). Australia, New Zealand and South Africa, Commonwealth countries the government has made clear it wishes to prioritise trade deals with, all already export large quantities of wine to the UK. Such trade deals would make them relatively more attractive than European wine.

If no tariffs are imposed on EU wine and none are lowered with the rest of the world – both still possibilities today – then their relative attractiveness will remain unchanged., Both however will become more expensive in absolute terms with the fall in sterling, and therefore relative to English wine.

With so much still uncertain and so much speculation, only a few things are clear. English wine can only become more attractive, both through image and pricing. Commonwealth wine will probably follow suit, its image and pricing improving relative to European Old World wine, although both will become more expensive with the fall in value of sterling. This will benefit English wine and alternatives like cider and beer.

To end on a risky prediction, I think Brexit will herald the return of pint-sized bottles of wine within the next few years, if only by a Champagne house in search of a quirky marketing gimmick – I hope to be writing about this twelve months from now.

 

The Wine and Spirit Trade Association (WSTA) is negotiating to protect the UK wine trade in the Brexit trade talks.

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