How will Brexit affect the wine industry in the UK and the EU in 2017?

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While we have had time to come to terms with the eventual departure of the UK from the EU, some of the economic logistics still need to be worked out. One of the things most experts can agree on is that the wine industry in the UK will be greatly affected, but we just don’t know how. Here is a look at some of the potential outcomes of Brexit:

UK residents will have to pay more for wine

As a result of the falling pound sterling, bottles of wine from EU countries may cost UK residents 29p (35 cents USD) more in 2017. The falling pound sterling is leading to narrower profits for wine importers, merchants, and retailers, so consumers are expected to get hit with this increase in cost. We could also be looking at tariffs on EU wines post-Brexit, according to the Wine & Spirit Trade Associate (WSTA), the UK’s wine trade body.

The WSTA is hoping that the UK will be given tariff-free access to the EU wine market (a perk of being a member of the EU), though government officials of EU countries may not be willing to oblige. After all, the WSTA is essentially asking for trade benefits of being an EU member without any of the financial responsibilities. However, EU wine producers are putting pressure on their governments as it is in their best interest to eliminate obstacles in order to sell their wine.

UK residents may have to start drinking non-EU wine

Despite the fact that there are 470 vineyards and 135 wineries in the UK, 99% of wine bottles consumed in the UK are imported, and half of that comes from the EU. But due to the increase in cost for EU wines, UK residents may see more non-EU wines in their supermarkets in the near future. A spokesperson for Conviviality — the leading independent wholesaler and distributer of alcohol in the UK — says shoppers can expect to see more wines from South Africa, New Zealand, and Australia post-Brexit.

However, many in the industry have released statements that they are unconcerned about the effect Brexit will have on their exportation of wine to the UK. For example, a spokesperson for the French vineyard Chateau Guiraud said that its business with the UK will remain stable in the long term. In addition, one of the most prolific wine areas in France (Bordeaux) exports a lot of its wine. The top five regions it exports to is Hong Kong, the US, China, the UK, and Japan. Given its high exportation beyond the EU, this bodes well for the soon-to-be-separate UK.

One positive possibility of Brexit for UK vineyards is that UK residents may begin to drink more domestic wine. We have already seen countries such as Australia, New Zealand, Chile, and South Africa reducing their dependency on imports of wine and increasing their own wine production. Major UK grocery retailers such as Tesco and Aldi have already come up with their own brands of wine, and the penetration level of private label in some of the European countries is more than 50%.

EU wine producers may see a reduced profit

Brexit will not only affect the wine industry in the UK, but it will also affect the industry in the EU, although not as radically. While Italy and France are still the top wine-producing countries in the world, the overall European market has seen some change over the last two decades. In the early 2000s, Europe supplied about 73% of the wine in the international market. In 2014, the market share was down to about 60%. If this trend continues, it is expected that, by 2030, Europe will no longer be the world’s largest wine producer. This change in the global wine industry, along with Brexit, puts the EU wine industry in a more precarious state than it has been previously.

For example, 5.7% of food and drink exports from France go to the UK, earning France 625 million euros annually. If tariffs are implemented or the increase in cost to consumers in the UK are too much, French manufacturers may see a decline in profit.

Marques de Murrieta has already seen a reduction in the number of shipments to the UK since the referendum. Other EU players put on a hold on shipments immediately following the result of the vote, and others still found their shipments slowing as the pound continued to drop in value. Moreover, buyers from outside of the EU and the UK (such as the US and Hong Kong) are choosing to buy EU wines from the UK rather than directly from the EU merchants due to the favorable exchange rate.

In addition, as the UK currency drops and the prices of EU wines increases, we can expect that Brits will buy fewer bottles of wine, once again affecting profits for EU-based wine companies.

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