Brexit is a reality for Britons and many aspects of life in the country and beyond its borders are being affected by it. The wine industry, which, according to the Wine and Spirits Trade Association (WSTA) contributes £11bn (€13,000m) to the country's economy and upwards of 130,000 jobs, is no exception.
The withdrawal last summer of the VI-I export certificate -a form created in the EU in the 1970s to protect the continent's wine regions from cheap imitations-, which would have cost consumers £130 million a year, came as a relief to the industry, but professionals say there are still many open fronts.
"The pandemic and Brexit have created the perfect storm and it is difficult to separate one from the other," says Master of Wine Álvaro Ribalta, a wine specialist with a long career in the British market. " Spanish and other European wines are in the same boat when it comes to Brexit," explains Ribalta. He adds that the most worrying thing for European wines is "the cost of importing wine, which has risen, especially because of the bureaucratic procedures involved".
He shares a revealing example. “Bringing a 600-bottle pallet before Brexit was £250; that same load now can go up to between £360-£390. This difference has an impact on the price”. The unfavourable change of the pound against the euro is another reason for the price hike.
Delays at the border add to the drawbacks pointed out by all those interviewed. To avoid them, some businesses have decided to stockpile and fine-tune their forecasts.
The new bureaucracy is a burden on the industry in general, but many feel that small wineries are the hardest hit by the changes. Importer Daniel Lambert, who caused a bit of a stir on Twitter earlier this year when he publicly expressed his frustration, lobbied relentlessly to withdraw the VI-1 form. "A lot of wineries are having real difficulty completing the documentation and paperwork because they haven't had any help or guidance from the Spanish government," Lambert says. "Thus, importing from Spain is taking a lot longer; the documents that is being submitted is not correct and we are not able to get the product into the UK."
Ana Gómez, co-founder of restaurant and wine shop L'Oculto, which specialises in small, artisan wineries in Spain and has won a Decanter award on several occasions, is well aware of this state of affairs. "For small producers, bringing wine to England now is difficult because of all the paperwork. For instance, they are not told until the last moment what the registration number of the carrier’s lorry is, and without this information they cannot fill in the form. Furthermore, many people live in isolated areas with limited Wi-Fi and cannot be constantly checking emails or their phones. For some of them it might not be worth it anymore and they might not send more wine to the UK, which is understandable”.
According to a study by Accolade Wines, Spain has a 6.1% wine market share by volume in restaurants, well behind France and Italy, which together share half of the British market, and behind Australia, the United States and Chile. While consumption in restaurants dropped in 2020 for obvious reasons, Long Wines says that supermarket wine sales increased 20% since the lockdown began, as well as online sales, which rose 50%.
"It's difficult to predict in retail sales because it's tied to the size of the import," Lambert explains. "There are now extra fixed costs for the two new declarations, around £150 for both. Logistics are now 35-40% more expensive, but that may come down again, once there are more hauliers doing those routes. Obviously, the larger operators are better equipped to cope with these new fixed and logistics costs, while smaller businesses are taking a bigger hit. At the moment, it seems that the larger ones are coping better with Brexit.”
For the past decade, Xabier Álvarez Valdés has been at the helm of an east-London restaurant called Tranga (formerly Trangallán). Since the beginning of the pandemic, he also sells quality fruit and vegetables. With a carefully curated wine list and a loyal clientele, Xabier has noticed changes in consumption habits since Brexit.
“Since the referendum, especially between 2018 and 2019, we began to notice that people were not willing to spend. The £50 bottles weren’t selling as much, ad customers chose £30 bottles, or house wine… The depreciation of the pound against the euro has also impacted on prices”, he explains. In spite of the new situation, he is optimistic about the future of Spanish wine in the UK market. “British consumers understand that wine is not cheap because it is an artisan product. Moreover, as Spanish wines are the best value for money of the big three -France, Italy and Spain- I don't see it looking so bleak for Spanish wine, because prices are not sky-high”.
According to a report on consumer trends during the lockdown published by the WSTA, wine sales in supermarkets during 2020 indicate that rosés saw the highest increase, with a 22% rise in volume compared to 2019.
On the other hand, the report says that Argentinian wines are the great winners of the first year of the pandemic: their sales increased meteorically, up 41% over the previous year. Finally, consumption in bars and restaurants fell by 60%.
Last spring, the WSTA celebrated the news that Chancellor Rishi Sunak was freezing taxes on the beverage industry -particularly punished both by the pandemic and by the difficulties caused by Brexit. It is estimated that wine and spirits businesses will save £190 m with this measure (tax for each 750ml bottle of wine stands now at £ 2.23, £2.86 for sparkling and £2.98 in the case of fortified).
Now the WSTA has renewed calls for a duty freeze, urging the government not only to maintain that measure in the autumn budget, but also to extend the hospitality industry’s VAT reduction (from 12.5% to 5%, now applicable only to soft drinks and food) to include alcohol too. The WSTA argues that it would help with the economic recovery and would prevent escalating costs for British shoppers, especially considering that Christmas is round the corner.
Meanwhile, reality leaves no room for doubt. According to a report by the consultancies CGA and AlixPartners, almost 10,000 establishments with a license to sell alcohol closed in Great Britain in 2020 -mainly pubs and restaurants. This figure represents a net reduction of 5,975 if new openings are taken into account.
Faced with the uncertainty of Brexit, exponentially amplified by the pandemic, professionals in the wine business have no choice but to adapt quickly to changes to cope with what’s to come in the future.