What does Brexit mean for supermarket wine?

What does Brexit mean for everyday supermarket wine prices? We take another look at this question now that the UK has triggered Article 50, kick-starting two years of negotiations that will lead to Britain leaving the European Union.

Brian Fuller, Southampton, asks: What will Brexit mean for supermarket wine prices?

This article was originally published in July 2016, but has been updated with new information to coincide with the UK triggering Article 50.

Supermarket wine prices

It looks almost certain that consumers will see some prices rise, according to the UK Wine and Spirit Trade Association (WSTA), if only because cost pressures on the trade have increased and only so much can be absorbed.

The devaluation of sterling since the Brexit vote, plus recent rises in inflation, will likely drive this in the short-term. Pre-referendum currency hedges will by now have mostly run their course.

In the immediate aftermath of the Brexit vote, wine import costs increased by 15% with the devaluation of sterling, the WSTA said.

Ninety percent of wine in Britain is imported and around 55% of that comes from the EU, show trade figures.

Initial trade estimates suggest that wines priced under £10 could be most susceptible to price pressure, which makes sense given tighter margins. However, beyond supermarkets, some restaurant and pub operators are also concerned that they will be forced to raise prices on wine lists, Decanter.com understands.

Medium-term, there is also a risk that Britain leaves the single market and customs union without a deal in place. This could mean import duties on wines.

‘A phased leaving process will allow time to establish an EU free trade agreement and to put in place the necessary systems and infrastructure,’ said Miles Beale, chief executive of the WSTA.

‘Failure to do so risks disruption to supply chains, chaos at UK ports, increases in costs for UK businesses and ultimately even higher prices for consumers.’

The latest budget also means that alcohol duty will increase in line with inflation, meaning further price increases for consumers.

The wines on the shelves

After the news that the UK had voted to leave the EU, Andrew Shaw, group wine buying director for wine distributor and retailer Conviviality, predicted in Decanter magazine that alternative wine producing countries will likely increase their market share on the retailer shelves – such as South Africa, Australia, New Zealand and even China.

However, Brexit threatens the sustainability of many suppliers in Europe who are heavily reliant on the UK market, such as Rioja, he added.

‘With EU wines representing about 55% of UK wine imports, there is no doubt that the UK market is of utmost importance for EU wine producers, and that the British really appreciate European wines,’ said Jean Marie Barillère, President of Comité Européen des Entreprises Vins (CEEV).

‘Ensuring smooth wine trade flows is important to both the EU and the UK economies.’

The UK is the second highest importer of wine both in terms of volume and value.

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