If you have a penchant for Californian Pinot Noir, Australian Cabernet Sauvignon, Syrah or Chilean Carménère, then you should be concerned about the effects of Brexit. And if you work in a global company with responsibility for global logistics, you should be aware of the results of Brexit, which may include increased costs, longer response times and greater bureaucracy - for companies in Denmark.
As you know, the British have reached an agreement, both with each other and with the EU, on an exit agreement, approved in January 2020. In other words, Brexit is a reality, albeit with many unknown factors. For many months ahead, long and difficult negotiations will take place between the British and the rest of the world, including the EU, on future co-operation agreements. But why should it be particularly bad for our everyday wine consumption?
This is because more than 80 per cent of the wine from overseas is imported by sea and put into large tanks and bottled as soon as it arrives on the European continent. Logistically, it makes very good sense, as heavy glass bottles and the air between the bottles do not have to be transported over the oceans of the world. It is therefore both cost-effective and better for the environment.
Brexit hits the value chains
The English port city of Bristol plays a key role in the global wine supply chain. The area around Bristol has developed into one of several hubs in the UK for companies that specialize in bottling wine. Among these is Accolade Wines, which employs over 500 people and fills 600 million bottles of wine annually. Accolade Wines fears that additional tariffs and bureaucratic paperwork will reduce their business base, the number of jobs and lead to rising prices for consumers.
But the consequences of Brexit go wider than cool Pinot Noir, Accolade Wines and the bottling industry. The value chain of many Danish companies is also affected. We see the effect on Danish companies which have their European distribution centres in the UK and deal goods produced, for exxample, in the Far East, shipped to the UK, then distributed to the European market. Those companies face an urgent need to revisit their logistics network. Other companies that have the UK as one of their core markets and if the goods are produced elsewhere, the customs process can mean extended delivery times and unpredictability in the core market.
How should inventories be brought together so that UK customers do not turn to local products? And what derivative effects will it have on liquidity?
Business leaders must therefore already now find answers to the very big unresolved questions related to the outcome of Brexit.
1. Map out scenarios for potential Brexit outcomes.
2. Understand the derivative consequences for markets and supply chains
3. Prepare action plans for the various scenarios that take into account, for example, restructuring of production and warehouse locations, composition of inventories, supplier landscape, logistics channels and liquidity needs.
The alternative is that you risk being caught on the hop, and this will result in lower earnings, dissatisfied shareholders and, not least, more expensive - or at worst severely delayed - American Pinot Noir.