UK wine merchants have had to adapt to the realities of life outside the EU single market. Everyone agrees it’s created aggravation and expense. But there are differences in opinion in exactly how much Brexit is costing wine importers, and wine drinkers. By Graham Holter
Few people in the wine trade had good words to say about Brexit before it happened. Six years on from the referendum, most still haven’t. Stories abound of shipping delays, burdensome paperwork and rising costs. But can those costs really be calculated and quantified? Well, maybe they can.
Daniel Lambert, the south Wales-based wine merchant, has seen his Twitter fanbase explode to more than 15,000 followers – most of them with no connection to the wine trade – since he started articulating the post-Brexit realities of life as an importer. His forthright analysis has added some welcome light to a social media conversation more usually characterised by heat.
In a recent thread, Lambert revealed he was now in a position to tot up the additional costs that Brexit has imposed on his business, and how these translate to the price paid by the consumer.
In the days of EU membership, Lambert says, the average cost of shipping a pallet of wine from another member state was typically between £170 and £190. It was, he reports, “easy and cheap to trade”.
Now single pallets can cost as much as £280 from France, and £340 from Italy, and there are new charges associated with import/export forms, which can add another £25 to £150 per document. Lambert has recruited a full-time team member just to handle Brexit admin, which in itself adds an estimated 13p to every bottle he ships.
“We then need to hold more stock, due to the unreliable lead times, which means more capital is locked up,” Lambert tweeted. “I still don’t have a firm figure for this, but my best estimate is a further 20p a bottle. Remember this is just to stand still and offer our regular service.”
Add it all up and Lambert arrives at a Brexit premium of 58p per bottle. Factor in standard supply-chain margins, he says, and consumers are paying an extra £1.50 per bottle on the shelf, not counting other inflationary pressures such as fuel surcharges.
There’s a certain vagueness in the UK wine trade about the full impact of Brexit. This is understandable. Covid’s disruption of international and domestic trade has muddied the waters, making it harder to isolate the problems created (or exacerbated) by EU withdrawal. Shipping delays, for example, have been an irritant for importers and exporters all over the planet since 2020, with ports stricken by labour shortages and containers accumulating in the wrong places. There’s also a sense that Brexit is still a work in progress (nobody in Northern Ireland will need reminding of this) and maybe workarounds will emerge to mitigate the current problems. Or perhaps those problems will get worse.
The owner of one wine supplier, roughly the same size as Daniel Lambert Wines, hasn’t done the maths. But he is dubious about the £1.50 figure, at least as far as it pertains to his own business.
“Brexit is affecting input costs, but in reality this is far from the sole contributing factor,” he says. “I’m not even sure it is a major factor, despite what some in the trade like to say.
“The ongoing effects of the pandemic on supply chains, war in Ukraine, inflationary pressures generally … these all seem to be more immediate problems. For example, at the moment, delays in Europe aren’t really to do with Brexit but are largely being caused by a shortage of containers coming from China, where roughly four-fifths of the world’s containers are stored and shipped from. Ongoing pandemic restrictions in China are causing staff shortages and bottlenecks, meaning freight forwarders in Europe can’t access enough containers quickly enough, or at a good price.”
Then there’s the issue of global shortages of essentials like glass and cardboard.
“The cost and lack of availability of dry goods are causing significant delays for wineries preparing shipments, which has as big an impact on export costs and delays, while having nothing to do with Brexit,” he says.
For Charles Wharton, managing director of Ellis Wharton Wines in Cornwall, Brexit is “certainly annoying”, and it has “definitely added a cost”. But, he says, “that has probably been dwarfed by all the cost increases of the last few months”.
Wharton calculates that EU admin has added €49 per order and an extra €12 per pallet. On top of that, there’s a £50 charge for UK paperwork with each order. These costs are unwelcome, but only amount to an extra 5p per bottle, Wharton calculates, thanks to economies of scale.
“There have certainly been increases since Brexit, but I certainly don’t see prices increasing by £1.50 a bottle that I can relate to Brexit,” Wharton says. “Price increases in Burgundy etc from short harvests and other issues might have caused price rises, but I’m not sure these can be pinned on Westminster or Brussels.
“Shipping and haulage costs have pretty much doubled since 2019, but that includes increases in the last couple of months from the massive rise in fuel and energy costs.
“Whereas you used to be able to ship just one or two pallets of wine direct from a winery and make the numbers work, you now really have to be looking at a minimum four-pallet order to gain any benefits.”
Wharton says EU shipments “seem to be arriving in a timely manner now, if all the paperwork is correct”, which he attributes in part to the efforts of an “amazing freight forwarding agent that we use”.
He adds: “The problem now is more to do with deep-sea shipping. The container shipping companies are raking in massive profits as far as I can see, holding everyone to ransom because they are bumping orders or ignoring those that aren’t willing to pay their currently obscene surcharges. But this isn’t Brexit-related.”
Unfortunately, we will never actually know what the cost of Brexit has been or will be for the UK as it has become so intertwined with Covid
Anticipating the extra costs that Brexit would generate, many wine importers have changed the way they buy, so that price increases can be minimised.
John Chapman, managing director of the Oxford Wine Company, admits that the impact of Brexit has not been quantified exactly. But he estimates it’s “closer to 30p or 40p across the board” in terms of the company’s own costs.
“We’ve bought better, we’ve renegotiated, or resourced, so most of our EU wines have probably gone up by 65p on the shelf,” he says.
“Instead of buying 100 cases of something, maybe we’re buying 1,000 cases. That way we can mitigate the cost, and admittedly not everyone can do that. But if you look at the prices that indies are buying at from the agents, the agents’ prices haven’t gone up by that much.”
The General Wine Company in Hampshire has “changed our business model to adapt to the challenges that we are all facing, and will continue to do that,” says sales director Sara Bangert. “With those adaptations there are some cost savings as well as extra expense. But the important focus for us is to keep our customers supplied with wine. If we have no wine to sell, we have no business.”
Can she put a figure on the additional costs that Brexit has created? “Unfortunately, we will never actually know what the cost of Brexit has been or will be for the UK as it has become so intertwined with Covid,” she says.
“Costs of wines from the southern hemisphere have shot up because of shipping costs but that has nothing at all to do with Brexit.
“Russia’s devastating attack on Ukraine adds another layer of costs in fuel while extra difficulties with dry goods etc are causing delays.”
One of several elephants in the room is the exchange rate. Any calculations, and conclusions, depend on the time scale you select, but if we focus on recent extremes, the pound was worth €1.06 in August 2019 and €1.20, briefly, in March this year.
“Currency has a much bigger effect than people realise,” says John Chapman. “Some people hedge currency, some don’t, so when you’re looking at real costs, what you do with currency can affect 9% or 10% of your final price.”
Yannick Loué, owner of Le Vignoble, with branches in Plymouth, Bath and Bristol, feels that exchange rates are currently working in his favour – so much so that he hasn’t really noticed price increases at all.
“I feel people’s pain about all the trouble, but the exchange rate is a lot better now than pre-Brexit,” he says. “We were near enough on €1.10 to the pound in those days, sometimes €1.09. Now we’re trading sometimes at €1.16, €1.17 and on a good day €1.19 or €1.20. When you do large shipments, that’s a lot of money you’re saving.”
Shipping is not a major element of Le Vignoble’s business model, but Loué reports “very little difference” in the costs of the wine he does bring in.
“We don’t really go to the trouble of using CHIEF [the Customs Handling of Import & Export Freight system] and all of that,” he says.
“I prefer to pay the shipper, the transporter, to do that for me. We pay for the clearance about £55 per shipment: one pallet, 10 pallets, or even more than that. And we pay £65 for the declaration. So all in all it costs us another £120 per shipment but you can have as many pallets as you want. If you do that cleverly, and take into account the exchange rate, our prices actually haven’t gone up. And we have negotiated more with our suppliers.”
Has Loué noticed Brexit-related price increases from UK agents he works with? “No. The only things we’ve seen recently, which are now starting to hurt, are raw materials – and a lot of [wine] production has been cut by half in France. Someone has to swallow that at some point. Loss of production and raw materials going up – bottling, cardboard, you name it – that’s what’s been affecting us big time.”
Then there’s fuel. “I used to fill my van up: £80 for a full tank. Now it’s £120, £40 extra every week. You multiply that by 52 weeks … who’s going to pay for it? Do I need to put an extra pound on each bottle? I don’t know how to swallow it at the moment. If it carries on like that, we’ll have to put the price up, like everybody else.”
It’s possible to imagine a scenario in which Brexit’s impacts are reduced or reversed. Streamlining the current system seems a feasible ambition. A return to the single market could even happen, in the long term. But for now, wine importers have adjusted to the new normal, even if there’s disagreement about exactly how painful this is proving.
Attention is turning to storm clouds gathering on the horizon, and some which have already started to burst.
Tony Schendel, director of sales at Hayward Bros, believes that exact Brexit costs are “impossible to quantify” but actually “fairly minimal”.
So what are the costs that he’s worried about? There’s a long list, including the dry goods shortages that others have mentioned.
“There are lots of increases in shipping costs from the new world which are nothing to do with Brexit,” he says. “It was the smallest harvest in Europe and New Zealand for a generation – again, nothing to do with Brexit.”
Schendel also cites higher costs from London City Bond, created by staff shortages. This, he concedes, may be a Brexit-related issue, but equally Covid is likely to have played its part.
New labelling requirements for European wines, which will create headaches for the supply chain, are a problem that Schendel argues has been created by the UK government rather than Brexit per se.
“Smaller merchants and those that do groupage are definitely worst hit,” says Schendel. “The truth is there are more costs on the way, and no sign of reversals in next 12 to 24 months.”