Last call for alcohol: French winemakers prepare for ‘no-deal’ Brexit
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French champagne house Taittinger has stepped up production this year as it sends more bottles to the United Kingdom in preparation for the likelihood of a “no-deal” Brexit on March 29.
“We don’t have a crystal ball. We are in total unchartered territory as to what will happen,” Clovis Taittinger, deputy managing director of his family’s champagne house, told FRANCE 24.
Taittinger is just one of many French winemakers to have taken precautionary measures ahead of next month’s Brexit deadline. The impending divorce is expected to have messy consequences for the industry. The UK is France’s second-largest market for global exports of wine and champagne, according to a 2017 report by the Export Federation of Wine and Spirits in France. Only the United States, which has a population five times larger than the UK, spends more on French spirits.
If the United Kingdom leaves the European Union without a deal, there are fears that the value of the pound will plummet, driving up the price of French wine. The UK has already seen its economy slide over the past two years as efforts to negotiate a smooth exit from the bloc have faltered, giving rise to uncertainty. The pound reached its lowest point in more than a year in December, hitting €1.10.
“If the pound drops, the euro value of French wine will go up. This could mean sales will drop because it will be too expensive,” Christophe Chateau, of the Bordeaux Wine Council, told FRANCE 24.
Champagne on the frontline
The issue is of particular concern within the champagne industry. Although the UK is the second largest global market in sales of champagne, it is by far the largest in volume, with 27.8 million bottles consumed in 2017 – 4.7 million more bottles than the US in the same year.
“Champagne producers are saying that no matter what happens, it will impact the market,” Thibaut Le Mailloux, of the Interprofessional Champagne Wines Committee, told FRANCE 24.
With a no-deal Brexit looking increasingly likely, champagne houses have begun searching for ways to ensure they have enough stock abroad to carry them through the transition period.
“Precautions are being taken within the industry by individual companies. From what I understand, there are two main measures. The first is to take out insurance against foreign exchange risk. The second is that larger producers are overstocking in volume,” Le Mailloux explained. “It’s good common sense to anticipate stock. It’s better to export at today’s price than tomorrow’s.”
Taittinger champagne has done just that. The company has sent enough “emergency” stock to the UK – which makes up 20 percent of its global market – to continue serving its clientele for at least two months, according to Clovis Taittinger.
Le Mailloux warned, however, that loading bottles in UK was only a short-term fix.
“There’s no miracle solution to fight against the exchange rate,” Le Mailloux explained. “People drink champagne when things are going well, not poorly.”
Customs red tape
A smaller, more technical concern for some winemakers is transportation. As a member of the European Union, the UK has benefitted from the bloc’s electronic Excise Movement and Control System (EMCS), which simplifies the process of moving goods. But in the event of a no-deal Brexit, the UK will have to leave the system.
Without the EMCS, exporting wine and spirits across the Channel could become a logistical nightmare, ensnaring shipments in red tape and increasing transportation costs.
British wine importer Maisons Marques et Domaines (MMD) said it has been working closely with its French parent company and suppliers for months to prepare for a “worst-case scenario”.
“The major concern for us as a distributor revolves around movement of goods and tariffs as we enter into the potential headwind of a no-deal Brexit. Supply chain disruption and the burden of additional costs through taxation, direct or indirect, would be key challenges,” Richard Billet, managing director of MMD, told FRANCE 24 via email.
As a contingency, Billet said that MMD was bringing over enough product to meet their needs through the half year.
“Our priority is to take measures to safeguard our position as best we can… and focus on providing our customers the continuity of product and service that has served us well in previous crises, as we wait to see what the wider consumer reaction will be,” he said.
In Bordeaux, Chateau said that winemakers and suppliers have taken similar steps.
“Brokers in Bordeaux have begun registering for VAT (Value Added Tax) numbers in the UK to continue exporting,” Chateau said. “Winemakers are also shipping stock before there’s a need. More wine is heading out right now than usual.”
But without a clear picture of exactly how Brexit will affect customs procedures and duties, there is only so much that can be done.
“We’re waiting to see how things evolve, but we don’t know anything for now,” Chateau said.
One thing is certain: Brexit will have a major impact on the French wine and spirits industry in the immediate years to come.
“It is difficult to say what the long-term impact will be, but it is to be expected that the market may experience similar pressures to those of the global financial crisis 10 years ago,” Billet said.