Wine to be hit hard by worst case Brexit scenario, says Euromonitor

By Jo Gilbert

Published: 06 September, 2016

Sales of wine and RTDs could be the worst affected categories if trade agreements collapse following a UK exit from the EU.

Market research publisher Euromonitor International has released an update on the alcoholic drinks sector looking at different Brexit scenarios.

They have collated data at opposing ends of the spectrum, forecasting total volume CAGR sales for alcohol until 2020 based on the presumption that the UK remains in the EU, and compared this with a doomsday Brexit situation where the UK leaves the EU with no re-negotiated trade agreements in place.

According to Euromonitor, under this "disorderly Brexit" scenario, wine will be particularly affected, with sales dipping far below expectations compared to if the UK stayed within the UK.

Sales would also fall behind sales results from 2011-2015.

Spirits appear to be the only major category projected to - narrowly - escape contraction in this case.

"Spirits' relative insulation could partly be down to the rise of a multitude of domestic distilleries - many of them on the micro side of the spectrum - that are set to gain a competitive advantage against the inflated pricing of imported products priced in hugely devalued pounds and/or facing additional tariffs and trade barriers," Spiros Malandrakis, senior analyst of Alcoholic Drinks at Euromonitor, explained.

"RTDs/high-strength premixes, on the other hand, appear to be the most severely impacted category as their impulse and high energy positioning, high price elasticity and lack of brand loyalty will put them first in line for cutbacks."

Brexit Scenario UK Total Volume Sales CAGR Brexit Scenario UK Total Volume Sales CAGR

While the impact of a disorderly Brexit scenario will be particularly disruptive for the UK, Western Europe will not escape the tremors and aftershocks - especially given the likely protracted nature of the negotiations which will only begin in earnest after Article 50 for leaving the EU is officially triggered, at the earliest in Q1 2017.

Western Europe also faces the prospect of having to recalibrate its export markets, which have historically used the UK and London as a hub.

If the worst scenario goes ahead, London is likely to lose its elevated status as Europe's wine capital.

"With the UK being a key trading partner for European drinks manufacturers in a market that is essentially entering a state of limbo, alternative export markets will need to be identified and approached sooner rather than later," Malandrakis added.

Brexit Scenario West Europe Total Volume Sales CAGR