Anson: How is Brexit affecting Bordeaux wine?

On 30 June, 2016, I wrote a column about how the Brexit vote looked from a Bordeaux wine perspective a week after it happened.

Bernard Magrez was optimistic that it wouldn’t happen at all because ‘the economy takes precedence over emotions’.

Most other commentators were keen to underline the long history between Bordeaux and the UK, and were sure that the two sides would find a way through.

The most prescient perhaps was David Ornon, at the time at Château Guiraud.

He said that London merchants had practically become a second Place de Bordeaux over the preceding decades, but that in the future Bordeaux might begin trading more directly with Hong Kong and other partners, and lessen the volume of trade passing through London.

So here we are, four-and-a-half years on, and Brexit is now a done deal. Seven weeks in, and you could be forgiven for thinking that Europe is seeing more of the dividends promised by the Conservative Party than the UK.

Amsterdam is becoming Europe’s biggest share trading centre, Danish fish auctions are busier than ever as Scottish fishing boats head over there to escape the red tape, Irish ferries are doubling their services to mainland Europe, and small European airlines are taking up the slack as British firms are locked out of charter, leasing and cargo flights.

Has Boris Johnson’s Brexit deal provided a similar public service for the Bordeaux wine trade, if not for its winemakers?

There was a timely reminder last week of just how important the UK is to Bordeaux. During a year when the industry was battered by Covid, a continued cooling of the China market and US taxes, the UK provided a rare bright spot.

Export figures for Bordeaux in 2020 overall made for painful reading. The value of AOC/AOP wine shipments dropped by almost 14%, or €288million on 2019 figures, to €1.8billion, according to a report released last week by export federation FEVS.

The US was down 23.5% to €441million, and there was a 30% drop to China, although exports to China increased by almost 50% just in December alone as taxes against Australian wines came into play and the merry-go-round continued.

In contrast, Bordeaux exports to the UK rose by 6% in volume in 2020, and by 12% in the final three months of the year, no doubt partly because of stockpiling before Brexit.

These are early days, and the situation is not helped by travel bans due to Covid, but it’s clear that not everyone in the region is going to be impacted in the same way.

Brexit and Bordeaux’s classified châteaux

You can breathe a sigh of relief for the classified estates on both Left and Right Bank.

They are insulated, at least for now, because of the Bordeaux system; they make the wine but are not responsible for delivering it to the end consumer.

As Emmanuel Cruse of Château d’Issan put it, ‘We are protected to a certain degree because it is the négociants not the chateaux who have to deal with the paperwork. The UK is one of our largest export markets, and extremely important to us, and we are watching the situation carefully.’

There are uncertainties of course, not least ensuring the tasting samples for the upcoming en primeur campaign make it through red tape if being delivered across the English Channel. Plus, there are concerns over the volatility of pound sterling in terms of UK buyer power.

But for their day-to-day interactions with the UK market, this is the area of Bordeaux likely to see least difference.

Brexit impact on small châteaux

No such luck for the thousands of smaller châteaux who sell direct.

As is clearly the case with small businesses over in the UK, it is the independents, those without the flexibility of scale, that are suffering the most.

John Mitra, who owns Château de Faure Haut Normand in Fronsac, and exports 30% of its production to the UK, reports they have been unable to ship any wines to private clients since 1 January.

‘No shipper is prepared to take single case shipments at the moment,’ says Mitra. ‘The problem is not business to business, but business to consumer. The major companies such as FedEx or Chronoviti will accept shipments but have no mechanism for customs clearance so it’s pot luck if it gets through.

‘We would rather wait than risk the wine being spoiled on a freezing quayside.’

All of this on top of the already difficult trading conditions of 2020. ‘Dig a little deeper into those [2020] export figures to the UK,’ says Andrew McInnes, of Domaines CGR, ‘and you see the volume of exports was up, but the value dropped by 19%’.

He adds, ‘The average price of wine exported to the UK is now €8.44, a drop of 24%. This is a figure that takes into account all shapes and sizes, so bulk imports, bottles, BIBs… a fairly high number when seen as a per bottle price, but considering the UK is a fine wine hub, not surprising. All is not lost… but many small producers are really suffering.’

Brexit and Bordeaux négociants

Négociants are on the front line of the new inconveniences. Wines that are being sent to the UK now have restrictions and administrative hoops to jump through, from greater focus on traceability to fumigating palettes used for transporting the wines (as per regulation ISPM15, if you’re wondering).

But then pretty much the entire point of négociants’ existence is to help smooth the way for trading across different regions and sub-regions.

It’s possible that the new reality will lead to the expertise offered by the Place de Bordeaux becoming more highly prized – ironically after a period when many producers have been opening up more direct relationships with their consumers.

Catherine Duperat, director of the Maison des Négoces, says, ‘We are committed to continue to work with England as we do with all our clients outside of the EU. It will undoubtedly be more complicated to access the British market… but Bordeaux négociants are well placed to adapt and help.’

Jean-Marc Dulong, of négociant firm Crus et Domaines de France and who worked in wine before the UK’s 1973 accession to the EEC and so witnessed the easing up of red tape at the time, says, ‘For merchants, whatever the activity, Brexit means more documentation, more paperwork, more delays for the whole chain of intermediaries along the chain.

‘There are headaches for the freight forwarders, carriers, customs, customers and agents.

‘At our end the extra administration has meant hiring two people to cope with the work, and we have started a UK-registered company to be proactive in terms of payment and storage.’

He adds, ‘We believe some of the major UK importers are helping small châteaux to adapt on this side. It might take time but we will adapt.’

‘The consumer should see no impact at all once the systems are well in place – except perhaps in the range of available wines.’

Storage and logistics companies

‘Brexit is a radical change for anyone transporting wines to the UK,’ says Line Genout of Bordeaux City Bond, the largest bonded warehouse in the region.

‘For the moment we are analysing the situation, putting in place procedures to facilitate movement and to ensure we are fully following all the rules so there are no holdups at customs.’

One thing that has already become clear is that moving individual shipments of single cases, even single pallets of wine, is going to be a headache in terms of cost and time.

Grouping shipments together is one option (even though there will be paper work per supplier within a consignment), as is keeping stock in the EU for as long as possible and making this a new base for UK merchants selling on wines to customers in other parts of the world.

‘It’s certainly likely that British businesses will increase their stock holdings in France to avoid these complex procedures,’ says Genout.

‘And it’s worth pointing out that there is an opportunity for Bordeaux to be at the heart of these commercial opportunities and to offer expanded logistical and storage solutions to English businesses.’

What’s at stake

One of the things British merchants are unquestionably brilliant at it is sourcing fine wines on behalf of international clients, working on tight margins, taking advantage of exchange rates, and selling and reselling wines in and out of the UK.

Just look at that €8.44 average import price of wine in 2020, much of that for high-end wines that go back out of the country.

Ironically, the loss of sterling value after the Brexit vote in 2016 saw this particular market get a huge boost as people took advantage of British merchants’ stock, which got 20% cheaper overnight.

Brexit is going to make it extremely difficult for them continue to service clients with the same ease, and smart fine wine merchants across Europe will be paying attention to the opportunity.

Edward Dunnett, CEO of Onshore Cellars, a company that supplies high-end wines to the yachting industry, provides a clear example of what’s at stake here.

This is a company that has historically used the UK as the main source for its purchasing, but will no longer be doing so.

‘The Super Yacht market is niche and demanding,’ says Dunnett. ‘We work on short timescales, often with 24-hours-notice given for securing hard-to-find bottles. Even if the prices for these wines in the UK remains extremely competitive, I can’t have 100k of wine that misses a delivery to a yacht, and we get stuck with the stock.’

He adds, ‘I believe that the border issues will resolve themselves in time, but I am not sure if this is now not too late… Covid has shown us that life goes on despite adversity, and Brexit is similar in many ways.

‘We have been preparing to cut off UK suppliers for a while in preparation, as none of us knew what it would mean. While we will still need to buy from the UK in the future, it will no longer be our first choice.

‘Covid has changed people’s attitudes in many ways, as borders seemingly close without notice, and I suspect people will think harder about moving time-sensitive goods through borders in the future even when things open back up.’

The UK wine trade is right now lobbying hard for the government to better understand the implications of all these moving parts, and to push for legislation that ensures the UK remains at the centre of the wine trading world, because the alternative is now clear.

‘It seems logical that if you forcibly remove supply but the demand remains the same, then the market itself will change to meet the demand,’ Dunnett says.

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