Italian wine and Brexit: the consequences
More than three years after the referendum that was supposed to trigger Brexit, the United Kingdom’s exit from the European Union still seems uncertain. Since the British market is the third most important market for Italian wine, producers in Italy must pay particular attention to the outcome of the negotiations and act accordingly. Hard Brexit, Soft Brexit, deal, no deal… there are many possible scenarios, and a targeted strategy should be applied to each of them: what will it do for you? Find out at wine2wine 2019.
Regardless of any agreement made between the European Union and the United Kingdom, the consequences of Brexit will be enormous. The UK’s exit from the EU will affect the economy, trade, mobility and many other aspects in the lives of all citizens of the Old Continent. The same will apply to companies in this area. As far as Italy is concerned, for the most part, it will be agri-food companies that should be concerned about the implications of this split. In particular, it should be the wineries, for which the United Kingdom is still one of the most important customers, that should not be caught unprepared.
Among the products that could be most affected by a no deal situation is Italian wine. If the United Kingdom and the European Union do not reach an agreement, the consequences of Brexit would be catastrophic for many Made in Italy brand sectors, specifically the agri-food industry. Sales of Italian wines, fruit, vegetables and cheeses in the UK exceed €3 billion and are extremely popular commodities among British consumers. Not only that, after the United States and Germany, with as much as 827 million euros in 2018, the United Kingdom is the third largest destination market for Italian wines (Gambero Rosso). Unfortunately, the data on the United Kingdom’s relationship to Italian wine are not positive: according to the elaborations of the Vinitaly-Nomisma Wine Monitor Observatory, in the first eight months of 2019, the overshadowing trend has shown that Italian wine sales fell by 2.9%. This figure becomes even more worrying when one takes a look at the general average of wine imports into the UK which is up 7.3%, and +16.8%; the growth showed that there was a significant growth of French wine.
In the event of a no deal, the consequences of Brexit for the Italian agri-food sector will range. It seems likely, companies will be required to compile a simple customs document and pay duties of up to 35%. After a Brexit no deal, some old practices such as the use of customs stamps would become necessary again. Customs clearance times would become longer, resulting in a number of problems for fresh produce. Moreover, rather than there being a continuation of the tariff agreements between the UK and Italy, the tariff regulations that are usually applied to products coming from non-EU destinations into the UK would then take effect, which would mean that alcoholic beverages would be among the goods subject to higher tariff barriers, thereby making products coming from outside Europe equally as appealing.
Of course, the consequences of Brexit will also affect the United Kingdom. That is why the British Government has already begun to work on every possible scenario. One of the latest decisions taken by the UK government in favor of Italian producers is the suspension of certain import documents. In practice, in the event that the United Kingdom and the European Union fail to reach an agreement, the UK will suspend Form VI-1- the document required by the United Kingdom for wine imports from the European Union- for nine months. The suspension of the document will facilitate the entry of foreign spirits into the country, also reducing the costs of individual bottles (source: The Grocer). The decision, seen as a huge victory by the Wine & Spirit Trade Association, and in particular by its Chief Executive, Miles Beale, is certainly a positive sign of how the future could be rosier than it seems.
During wine2wine 2019 Miles Beale will explain how to deal with the current situation on the other side of the barricade: how will trade relations between Italy and the United Kingdom change? What market strategies should a winery adopt in case of a no deal Brexit? These and other questions will be answered at wine2wine 2019, during the session “Brexit and market strategy for Italian wine producers” to be held on 26 November at 14:15.