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Brexit: How Will England Vote Impact the Wine Market?

The British pound dropped about 9% on Friday against the dollar and about 7% against the Euro as a result of the referendum vote, meaning an overnight corresponding price increase for all wines from within the Euro currency zone and the US.

As the pound decreases in value we should expect supermarket and energy prices to rise across the line for England, leading to smaller wine budgets and more expansive wines, a double whammy for wine retailers, distributors, and importers. 

A decrease in buying power that is bound to have an impact on British imports and consumption. The most likely outcome seems to be a drop in European wine imports, and high price wines like high end Burgundies and Bordeaux being among the biggest looser in terms of market share.

On the winning side, I can see low and mid price range Argentinean Malbecs gaining market share in England as an easy and more economic replacement to Bordeaux. Malbecs are very popular with my British guests, but I have a feeling I will be seeing less of them in the near future. The Cabernet and Carmenere of Chile fit the same flavor/structure profile and should be sought after as well. Of course other new world countries could expect an uptick in exports to Britain, Australian wine prices have been depressed for quite some time and represent great value for example. South Africa, New Zealand,  and Eastern European wine country outside the Euro currency zone can be concerned as well for different reasons.  

In the US, I am hoping that we will have more inventory of high end European wines coming to the market, if they don't go to Asia, and that would translate to slower price increase on those wines than what we have seen in the last few years, maybe even a decrease in prices at auctions (delay investing in that fine wine hedge fund, or buying some Sotheby's shares).

What do you think will be the most likely consequences on the global wine market from the Brexit? Has anyone heard from their British costumers yet, what is their take on this development? 

Disclaimers: These are only my opinions and should be treated as such, consult with a professional financial adviser before making any investment. I am not responsible for any losses you may incur from investments decisions based on this post.

This post was inspired by a Jancis Robinson article on the same subject:

  • While a devalued pound will clearly have some effect on wine imported to the UK, I think it's probably a modest impact from currency alone, benefiting the lower price tier. The big question will be whether or not it triggers an economic recession locally or globally.

    The even bigger elephant in the room is the more than negligible possibility—over the next decade or two— that the EU project will fail to some degree; Spain and Italy will go off the euro and possibly fracture. This is by no means a certainty but if Spain and Italy are no longer linked to Germany in terms of common currency, you can assume a revamped lira or peseta would trade significantly lower against the dollar—assuming we don't collapse our own currency of course.

    May you live in interesting times...
  • This is a short term imbalance as those in the financial trade called the vote wrong. Both sides of the vote predicted a drop in the pound, but my guess is that in a week it will regain at least part of its value and by the end of the summer we'll actually have a real idea of what this will mean. The bigger issue is that with every announcement of the break-up (starting with the official declaration to the EU that they need to do which starts the two year separation time frame) it will have a detrimental and unforeseen effects on the currency. More than value, stability will be the biggest issue.

    In terms of buying, I doubt that much will change on the average £5.50 bottle price that the wine drinking public appears to be more attached to than the European Union.