Rabobank: EU Referendum outcome to have 'critical implications' for beverage sector

By Erin Smith

Published: 08 July, 2016

According to a new report released by Rabobank today, the results of the referendum vote "will have critical implications for the beverage sector, given the UK's role as both a major importer (e.g. wine) and major supplier (e.g. scotch)."

While the scale of change is unknown, Rabobank warned there will be effects felt on both sides of the channel specifically for the wine industry.

The report said: "The fallout of the Brexit vote will have critical implications for the wine industry. Wineries in the EU will feel the effects most directly, but there will be tangible knock-on effects felt in nearly all major wine-producing regions. The prospect of the largest wine-importing country in the wold leaving its free trade agreement with the largest wine-producing region in the world will have an obvious impact on trade flows in the long term, but the marked devaluation of the British pound will begin to drive some of the changes almost immediately."

A long-term consequence of leaving the EU Rabobank predicts is that EU countries will increase efforts even more to try and develop markets outside of the UK. The UK historically has been considered one of the most important wine markets in the world, which long-term could be eclipsed by either China or the US as EU countries switch focus.

"The EU is, by far, the largest supplier of wine to the UK- France, Italy and Spain alone supplied 60% of British imports in 2015- and assuming the soft British pound reduces demand for wine imports, those wines will need to find new markets. EU suppliers are expected to redouble their efforts in other markets, such as the US and China, which will impact domestic suppliers, as well as other foreign competitors," according to Rabobank.

Rabobank recommends that "foreign beverage companies with a strong focus on the British market will likely see increased challenges in that market, and they might consider alternatives as to where they can focus their sales efforts in order to generate greater returns."

In the short term, importers in the UK may want to consider 'pipeline loading', which is moving as much product into the end market as possible ahead of any new trade agreements being put in place.

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