Concerns over the Brexit trade deal on both sides of the channel means that wine is being stockpiled ahead of the UK officially leaving the EU.
UK wine retailer Majestic said that it would bring in between £5m and £8m of additional stock in its current financial year, to the end of March.
This would be done ‘in order to mitigate any potential supply chain Brexit disruption in March 2019’, said Majestic, which reported net sales for the six months to 1 October up by 5.4% on the previous year, to £229.1m. Adjusted pre-tax profits fell by nearly 63%, to £2.5m, although the firm said that this mostly reflected up-front investment for future growth.
Merchant Bibendum PLB is also looking at bringing forward some stocks of wine.
‘As part of the C&C family, Bibendum PLB is very well positioned financially to navigate the uncertainties around Brexit,’ said Bibendum CEO Michael Saunders.
‘We are pulling forward the shipping of very significant buffer stocks to cover potential disruption.’
Much of the UK wine trade has already felt the margin pressure of a weak pound sterling, which has so far failed to recover to levels seen prior to the Brexit referendum in June 2016.
On Brexit specifically, there has been particular concern in the trade about the potential for a no-deal scenario.
Burgundy advised to ‘overstock’ UK
The same concerns are being felt across the English channel.
At a press conference on the day of the Hospices de Beaune sale earlier this month, the president of the Union des Maisons de Vins de Grande Bourgogne, Frédéric Drouhin advised producers to ‘overstock’ shipments to the UK, to avoid being short of wine, should customs clearance get too complicated.
Burgundy’s number two market by volume and revenue in the first eights months of 2018 has been the UK – with 14% of total revenue and 16% of total volume. But Brexit has created a ‘backdrop of uncertainty’ according to a new report published by the Burgundy Wine Council (BIVB).
Though the UK is second only to the US for exports from Burgundy, Burgundy exports to the UK slipped 7.6% by volume in the first eight months of this year, and revenue by nearly one per cent.
‘We are obviously very worried about our future capacity to ship wine to the UK, because it is unclear how Brexit will pan out,’ Drouhin told Decanter.com.
‘Because of this uncertainty, our recommendation is for producers to talk to their customers in the UK and to think ahead,’ he said.
‘We advise shipping enough wine to cover six months of sales, rather than the usual two months.’
Why does the trade deal matter?
The UK is set to leave the European Union on 29 March 2019, although the current withdrawal deal agreed by British prime minister Theresa May and the 27 other EU member states would allow for a transition period in order for all sides to agree next steps on trade.
If the withdrawal deal is voted down by the UK Parliament, then the risk of the UK leaving the EU with no agreements in place would increase, albeit this would not be inevitable.
The Wine & Spirit Trade Association last week launched a ‘don’t bottle it’ campaign with the hashtag #notonodeal, in order to push Members of Parliament into finding a solution that ensures some kind of deal with the EU remains in place after 29 March next year.
It said, ‘Crashing out of the EU with a no deal scenario would cause delays at the border, restrict movement of people, exacerbate significant cashflow challenges for businesses, especially [smaller firms], and create massive uncertainty for both businesses and consumers – an outcome the WSTA deems totally unacceptable and unnecessary.’
Miles Beale, the WSTA’s chief executive, added that contingency measures by merchants and retailers would still not fully protect businesses in a no-deal scenario.
‘Despite the businesses we represent putting in place contingency measures as best they can, a ‘no deal’ Brexit presents a multitude of difficulties which are outside of their control.’
Around 55% of wine consumed in the UK is imported from the EU, according to WSTA figures.
Beyond Brexit, there is also added supply pressure on importers and merchants due to small 2017 harvests in several key European regions, plus an extra duty tax rise on wine in the recent UK budget.
Extra reporting by Panos Kakaviatos.