The vast majority of retailers, wholesalers and suppliers are unhappy with the result of the EU referendum and believe their businesses with take a battering in the short term, an OLN survey has found.
We polled hundreds of retailers – including independents, c-store owners and head office staff at multiples – along with dozens of suppliers, wholesalers and other industry insiders and found that 73% were unhappy with the result from a business perspective
Twenty per cent said they were happy with the news and the remaining 7% were unsure.
Ravi Kotecha, managing director of drinksupermarket.com, said: “We are devastated with the outcome. It’s just not needed.”
Philip Cox, who moved from Bristol to Romania to set up Cramele Recas, the country’s largest wine producer, called it “a complete disaster”.
Marks & Spencer warned the result could add complexity and administration and cost the wine trade.
Sixty-seven per cent of respondents expect it to negatively impact their businesses in the next 12 months, compared to 8% expecting a positive effect.
The outcome looks a little brighter in the longer term, however, as only 47% expect a negative impact over the next five years, while 24% said it would be positive and 29% said they didn’t know.
Charles Lea, owner of Lea & Sandeman, said: “It will probably be more negative than positive over the next five years. Sterling will be weaker, everything will be more expensive, but will it stay weak against the euro if the eurozone breaks up? The obvious uncertainty in the economy and politics will weigh heavily on the market.”
Among the initial ramifications:
- The value of the pound dropped to a 31-year low against the dollar and fell against the euro, wiping billions off the stock market and throwing buying plans into chaos for the wine trade, but offering a short-term boost to net exporters such as Scotch whisky producers.
- Shares at Majestic on Monday (June 27) went down 11%, while Conviviality dropped 9.9%. C&C Group and others with high exposure to the UK were tipped by Morgan Stanley to suffer severely.
- Small wine companies such as Dorset-based Bench Marque Wines have pledged to leave the UK and relocate somewhere in the EU.
- A retailer in the south of England told OLN black marketers are stocking up already and Calais is booming again.
- Jobs are being lost as several suppliers – including some of the largest agencies in the UK – told OLN they will be forced to axe sales, warehouse and logistics staff, while retailers are slashing jobs and abandoning plans to expand their teams.
- There are fears in Scotland that it could open the door for minimum unit pricing as the EU has repeatedly blocked attempts by the Scottish government to implement such plans.
- European competition law can no longer be used to stop local councils forcing Reducing the Strength schemes on retailers, which could hit the beer and cider trade.
- Big businesses are threatening to abandon the UK, although Burton MP Andrew Griffiths vowed to fight tooth and nail to keep Molson Coors in town and preserve jobs.
- Craft brewers are worried about a shortage of skilled staff if they cannot attract top European brewers, meaning quality will diminish.
Eighty-six per cent of the trade expects prices of imported products to rise, and they predict the brunt will be shared pretty evenly between retailers, suppliers and shoppers.
But some in the trade were upbeat about the results. Only 69% of retailers were unhappy with the Brexit result, compared to 77% of suppliers.
Matt Cowan, owner of wine merchant Vinology, said: “I have a very high international tourist trade so my prices will initially be cheaper due to the weak pound.”
Hercules Wines in Faversham, Kent, said due to its location it might boost business if a restriction was placed on the amount of alcohol Brits can bring to the UK from France. Current arrivals from the EU can bring 110 litres of beer, 90 litres of wine and 20 litres of sherry or port into the UK, but arrivals from outside the EU are limited to 16 litres of beer, four of wine and one of spirits, making the cost of a return trip to France not worthwhile.
Marco Attard, owner of Calais Wine Superstore, has had to put prices up but said it could be years before completion of Brexit disrupted his business model.
Attard said he didn’t expect a falling pound against the euro to deter Brits from shopping in Calais. “We’re expecting a good summer,” he said.
Stephen Finch, owner of Vagabond Wines, added: “Price-led operators are going to get hit a lot harder than the indie sector, which tends to be more quality-led and commands higher price points. And that is a definite silver lining for the indie trade.”
Australian wine could benefit as Australian winemakers have to pay a tax to send wine to the UK that bypasses other European countries, and this could be scrapped.
Anyone exporting to the US should benefit as they will benefit from the exchange rate.
Nik Darlington, owner of Red Squirrel Wine, said: “I’m not happy with the outcome, but I accept it. Crucially, whatever one does in the UK wine trade, we work in a confidence business. We didn’t get the result most of
us wanted, we didn’t get the result I wanted, but we need to accept it, keep our heads up and plough on.
“If we get all maudlin about it then confidence plummets and we’ll talk ourselves into another recession.”
Alex Layton, marketing and PR manager at Negociants UK, said: “Potentially it might mean consumption or demand drops – but, with cheaper currency tourism might get a boost.”
It will cause damage to consumer sentiment, increase inflation and induce a recession. Short-term there will be upward pressure on costs due to weak pound, reduced sales, reduced investment. Long-term tariffs and non-tariff barriers to trade will increase. The cost/complexity of operating in EU will increase.
Andrew Bird, Marks & Spencer
The pound has now got a lot weaker and I had not planned for that. The silver lining is that it applied to all of us. Wine looks like it will be significantly more expensive but there won’t be much difference for us when we look at it competitively. We will have to consider whether people will start going for cheaper wine or move to beer, a lot of which is made more locally so prices may remain more stable. It’s most likely good news for English wine. We are still trying to assess what wine producing countries will be affected but we are still going to import from the places we believe in. In terms of my staff who are not UK nationals, nothing is going to happen for two years and we are reasonably hopeful that whatever immigration policy is implemented won’t relate to “everyone out”.
Stephen Finch, Vagabond wines
The fall in the exchange rate will have at least short-term ramifications for us, and since we are not in a position to forward purchase euros, we are feeling this immediately. All the wines we import directly have gone up in price, and I would expect our UK suppliers’ prices to rise over the coming months. Shoppers will mainly bear the brunt, since we do not work on large enough margins to absorb the increased costs. This goes for most suppliers too.
Lucy Driver, South Downs Cellars
We’ll do everything we can to protect our business, our people and our customers. There isn’t much more we can do at the moment than carry on and wait and see, but if we don’t eventually strike trade deals on the movement of goods in Europe we will have a problem. At the moment the [Brexit supporters’] view is that the movement of people is the real problem. We would argue that restrictions on the movement of goods needn’t go together with restrictions on the movement of people. We’ve got to put some of our prices up. It’s affecting French, Italian and Spanish wines more. We buy all our New World wine in sterling so if we’re buying a container of Australian Sauvignon it’s cheaper than it was last week, but European wines are more expensive.
Marco Attard, Calais Wine Superstore
This means an unstable market and unrest and uncertainty for a long time to come, economic downturn and currency as well as possible tax increases with the next budget. There will be uncertainties until we leave but as that’s going to be at least two years the negativity and uncertainty will continue for many years.
Ruth Yates, Corks Out
Instability never helps markets and it’s a bit up in the air at the moment. I can’t imagine it affects our conversations with wineries because they will still want to do business with us. Sterling will impact prices in the short term if it continues to fall. I think we have to absorb it ourselves to give consumers some consistency. We buy currency in advance so we have security for some time and that gives us comfort, but if it gets down to £1 to €1 that affects prices. In the warehouse we have quite a lot of eastern European workers, particularly at Christmas when temp agencies use staff from the EU. The general noise coming out of the Brexit team is that everyone already in the UK shouldn’t be affected.
Jay Wright, Virgin Wines
We are keeping calm and carrying on with our plan. We don’t think anything dramatic is going to happen in the short term so it’s business as usual. Until the dust settles and it becomes clear what effect Brexit has on us we won’t make any big changes and will stay focused on making us the best and only place to buy wine.
Rowan Gormley, Majestic
It’s an excuse for suppliers to effect price changes and direct purchase from Europe will be limited. English wine is not good enough value to be a replacement. Economic volatility is bad for business.
Andrew Lundy, Vino
Brexit will seriously damage the economy and cause the break up of the UK. Wine is still classed as a luxury item and, once the economy begins to suffer, luxury purchases are the first to go.
Peter Osborne Fine Wines
Short term economic shock followed by long-term damage will cause problems throughout the craft beer supply chain. Divergence in regulations between the UK and EU is likely to mean we will have to have different packaging for UK and EU products at some point. This will push up costs. Recruitment of key staff from other EU countries is likely to become much more difficult in the short term.
Jamie Delap, Fyne Ales
We remain committed to the long-term prosperity of the Scotch industry. It is a priority that the UK continues to benefit from open access to the EU as well as favourable international trade agreements to protect the UK’s important export industries.
Currency rates will cause havoc to business. Negotiating new trade and tariff deals with EU and other countries will take years and cannot be better than what the UK has right now.
Philip Cox, Cramele Recas
The immediate exchange rate damage will have a short-term shock, but more importantly the long-term risks are tariffs. I can’t see anything other than a slow, gradual decline in all areas.
John Critchley, Morgenrot
The FX, along with duty, is a major part of the cost build-up, so I don’t think there is any way that this will not be seen reflected in the prices UK consumers pay for wines and spirits. But I am an optimist and have to believe that now the decision is made, we have to find a way to make the country stronger.
Val Lewis, Enotria
It’s business as usual. The most immediate consequence of the referendum result is the fall in sterling. We have forward cover to see us through the next few months. We’ll use that period to talk with our suppliers and monitor the situation. We have weathered economic uncertainty before and are confident we have the team and infrastructure in place to do so again.
David Gleave MW, Liberty Wines
There will be uncertainty for a bit and we need to wait for things to calm down. Currency has already recovered a bit. It will all be fine in the long term. We have the fifth largest economy in the world and lots of countries do well without the EU, which is pretty much the worst performing block in the world. Australia, New Zealand and Canada do without the EU, and we will be very strong partners with the EU anyway.
Patrick McGrath MW, Hatch Mansfield
In the short term it’s headless chicken time for the out-of-touch politicians but the rest of the population will just get on as they always do. Long term it’s all positive as we now have a whole country with its regional geographical identity re-established.
Highland Brewing Company
The depreciation of sterling and loss of consumer confidence will reduce both profitability and volumes. In the long term we will see squeezed margins and volumes and probably more bureaucracy due to being outside the single market.
Peter Karsten, World Beers
TRADE BODIES / KEY INFLUENCERS
The process of leaving the EU will inevitably generate significant uncertainty. Of course, we are confident Scotch will remain the pre-eminent international spirit drink. But equally, there are serious issues to resolve in areas of major importance to our industry and which require urgent attention, notably the nature of future trade arrangements with both the single market and the wider world.
David Frost, Scotch Whisky Association
While our members felt the wine and spirit industry was stronger in the EU, we will work to assist government in preserving our access to the single market, supporting British drinks exports and agreeing the best possible international free trade agreements. The WSTA will do everything it can to ensure the UK’s wine and spirit industry has a powerful voice with a view to promoting the great British drinks industry’s leading position.
Miles Beale, Wine & Spirit Trade Association
It is vital government acts quickly to secure economic stability and protect consumer confidence. We will be vigilant to ensure the Brexit negotiations do not harm the competitive position of beer in Britain.
Brigid Simmonds, British Beer & Pub Association
A new recession would discourage companies and institutions from investing in promotion programmes in the UK. Uncertainty is never good for business and nobody knows exactly how the unravelling from the EU will work out.
Anne Burchett, Sopexa
Non-EU base-price, bulk wines may benefit. I do some consultancy work in Moldova whose bulk wines might look even more attractive.
Robert Joseph, Wine consultant
I sell exhibition space to EU producers. I worry they will not want to spend their cash with a UK business they may perceive as not supporting them.
Judy Kendrick, JK Marketing
We respect the British decision to leave the EU, but we also deeply regret it. For our sector, and many others, a strong UK within a strong EU is the scenario offering most certainty and the best prospects for growth. This decision will lead to years of uncertainty, with likely knock-on effects on investment, jobs and growth – not only within the UK and EU, but around the world.