British drinkers stocking up on their favourite wine for Christmas may find they need a stiff drink at the checkout.
The plunge in the value of the pound has meant the cost of buying wine from the big wine-producing regions – including the Continent, Americas, Australia and South Africa – has shot up dramatically.
But this may prove a boon to Britain’s fast-growing wine producers, making their vintages more price competitive than foreign rivals.
British wine: The vineyard at Chapel Down in Kent
As one of the world’s biggest wine-drinking nations, but one of the smallest producers, Britain is very vulnerable to currency fluctuations. The UK imports 98.5 per cent of the 1.8 billion bottles of wine drunk here each year.
Dan Jago, managing director of London wine merchant Berry Bros & Rudd, says: ‘There has been such an extreme shift in the value of the pound since the referendum that the cost of buying wine has gone up by about 15 to 20 per cent.
‘With the exchange rate as it is, we will see the cost of goods going up and price increases on wine across the board are inevitable.’
Having traded for almost 320 years, Berry Bros is used to taking the long view, as Jago points out. It bought wine at the current exchange rate eight years ago.
But he adds: ‘This recent change has been particularly dramatic. While it doesn’t affect the stock we already have, it means what we buy from now on becomes more expensive.
‘We’re looking very carefully at our pricing and will be putting the price up of some products.
‘It’s not a blanket increase, but markets such as the 2015 Burgundy, which start selling next year, will be really affected, both because it’s one of the best vintages for years and you have the Forex effect on top of that.’
Sparkle: Champagne Lanson’s Paul Beavis
In contrast, on the firm’s online trading platform, where private investors can buy and sell fine wines, business has been booming.
Jago says: ‘There’s been a big increase in trading since the Brexit vote particularly from the US and Asia as people are seeing a good opportunity as prices in pounds have fallen by 10 to 15 per cent.’
Among wine sellers, Berry Bros, a Royal Warrant holder, isn’t the only one to put prices up.
Last month, online retailer Naked Wines emailed customers to say it was increasing the price on half of its wine by about 5 per cent, explaining: ‘The cost of wine has gone up. Back in the good ole [sic] days of early 2016, we lowered our prices when exchange rates were in our favour. Since then the pound has steadily plummeted and duty has gone up (again), meaning the cost of wine has crept up.’
Champagne Lanson is the second-biggest champagne brand in the UK. Its managing director Paul Beavis admits that having costs in euros and selling in pounds is not ideal. But he is waiting to see what the effect will be, telling The Mail on Sunday: ‘We are in a planning phase at the moment and looking at the impact of the currency changes.
‘We don’t know what the effects will be, but we do expect things to change next year because it is a pressure we’re not in control of. It will absolutely have an impact.’
Last month, the Wine and Spirit Trade Association estimated that after the pound’s fall in value the average bottle of wine from the Continent would go up by 29p. Miles Beale, WSTA chief executive, said: ‘Wine prices are likely to increase. Sterling’s fall in value as a result of the Brexit vote is of grave concern. The currency fluctuation has already been felt.’
The WSTA is calling on the Government to rethink its excise duty policy, pointing out that planned tax rises on alcohol will add to the problem.
Beale said: ‘Wine consumers could face a double blow if duty rises of £120million are added to the impact of the devaluation of the pound. Together it could cost over £400 million this year alone.’
bad year: London wine merchant Berry Bros says certain vintages will be hit
Olly Wehring, editor of just-drinks, an industry news site, told The Mail on Sunday: ‘The bottom line is the price of wine on UK shelves will rise. But for wine costing less than £10 a bottle, consumers are so used to buying at a certain price point they won’t pay more for wine.’
While big supermarkets are likely to resist putting up prices, they are expected to introduce wines from less-established areas that they can sell at prices consumers are used to.
‘Supermarkets are used to selling wine at certain prices, such as £3.99 or £4.99,’ says Jago, who worked at Tesco for eight years. ‘It’s difficult to get people to change and you don’t want to break the relationship by selling at something like £5.19.’
Wehring agrees: ‘There is little brand loyalty at this level,’ he says. ‘Instead of paying more for their usual brands, customers will look to buy different wines from lesser-known regions for the same price.’
A beneficiary could be the domestic market, in particular sparkling wine. Jago says: ‘English sparkling wines are seeing a real surge. Not only are English producers making great wines, they’re seeing real sales, growth in Europe and around the world.
‘While some of their costs will go up – glass is bought from mainland Europe – they’ll really benefit from the exchange rate.’