There was palpable shock in the air when it was announced at 11am on Tuesday 18th April that we are about to be submerged into another vote. As the political establishment come to terms with another gruelling 8 weeks of electioneering and, the public groans with more political shenanigans I wonder what effect it will have on the world of wine & hospitality?
Consumer confidence Effect Factor – 6/10
According to one leading Marketing agency consumer confidence has been in the doldrums scoring minus points for over 12 months. Consumer confidence has a significant effect on spending, as consumers feel more confident they spend more on highly discretionary areas such as alcohol. Wine is even more sensitive to this now, as the market has moved upwards – consumers are buying better and less of it. So, low or negative consumer confidence means that they are less likely to buy more wine; albeit that this is no different to 12 months ago.
The change is in the outlook – a good Brexit deal could improve consumer confidence and give the sector another push, but that seems a way off currently.
As the negotiations wax and wane consumer confidence could take other hits, but is unlikely to get a boost.
BREXIT – 5/10
BREXIT has two major influences on the wine industry – trading regulation including CCT tariffs and currency. Currency we will deal with later. The basis that this election has been called by Theresa May is on strengthening her arm for BEXIT negotiations.
The clarity and firmness with which she can deal with BREXIT is a good thing. If we all know where we stand for trading purposes e.g. which countries are more cost beneficial to buy from, which countries can supply then so much the better. So leaving a tariff free EU wine zone considering how much we import currently would be the best result.
However, we should consider that tariffs have been in place for Australian and NZ wines for the entire time of the UK’s EU membership since 1973. Their UK market has grown exponentially. At the same time, South Africa has had a beneficial quota which has allowed a certain lower level of tariffs, and its exports to the UK have been unexciting. Conversely Chile has had no EU tariff and has grown significantly in that time.
That being said France, Italy and Spain are the largest producers in the world and they sell bucket loads of the stuff in the UK without CCT tariffs – they will not want to forego this market.
So pros and cons with regards to the effects of tariffs.
CURRENCY – 9/10
This is the major concern and has an almost immediate and telling impact. The US$ is 1.28: £1 at the time of writing. These last 6 months have been the lowest for 10 years. Whilst the Euro has been as low as 1.10: £1 and in the last few weeks has recovered to 1.19:£1. Those lows are the lowest for 7.5 years.
Other currencies AU$, NZ$, SAR and have largely followed.
The issue is that swift, dramatic movements of currency puts businesses out of business. Price increases become part of the scheme of things, and few businesses want to sit on currency for long periods. They are very damaging and whilst the establishing of BREXIT rules and out-takes moves towards stability, that’s all it is. We need to establish stable currency rates.
Pubs – pick a side? 4/10
Sadiq Khan has partnered up with CAMRA highlighting that 1,200 pubs have been lost in London in the last 15 years. Wine is an increasing and important part of the drinks served in pubs and a General Election highlights an opportunity to bring the subject of ‘What a Pub is for’ to the surface.
Equally for individual establishments and drinks brands it is an opportunity to align with its community, although this is not without its pitfalls. Budweiser publicly opposed Trump and whilst some supported this, it also generated the opposite #BoycottBudweiser.
Let’s hope that just because Sadiq Khan has highlighted his support it doesn’t put off other high profile, and possibly opposing MPs from getting behind reducing pub closures.
Will we see Heineken and its new pub acquisition support one side or another?
Will we see wine brands support one side or another or wholesalers drive a political message?
Inflation – 6/10
Inflation is already being seen and felt by consumers, and the prospect of more is not greeted with any enthusiasm. Already showing at 2.3% compared to last year according to Kantar Worldpanel.
Immigration – 9/10
Many of the best Sommeliers serving in UK restaurants and helping UK restaurants to become some of the best in the world are from Eastern Europe. We have interviewed some of them in this column. Indeed many hospitality workers come from abroad and many hospitality businesses rely on a willing labour force to do the many roles that for various reasons the ‘home’ population doesn’t want or can’t fulfil.
The freedom of movement is critical. If there is restricted movement and a growing, more threatening atmosphere to foreign hospitality workers then there is a major threat to the whole industry. It becomes disappointing on a moral principal level and a practical operational level.
We will be watching this like a hawk.
Duty 5/10
The unfair and inexorable rise of Wine duty in the Treasury’s misguided understanding that it raises more money (evidence shows that holding duty raised more money in 2015) will no doubt continue as a theme with government. Let’s hope the brilliant research and campaigns by WSTA manage to put some hold on this most regressive of tax increases.
And more in hope than expectation that changes are shared by future Chancellors in more open and transparent ways than the last one or in the Gordon Brown days.
Legislation 2/10
The dim days of minimum pricing debates seem far off. Sugar has now taken the centre stage debate – thankfully. Let’s hope that it doesn’t come back.
OVERALL EFFECT – 47/80
There is much to consider with the election and yet more unsettled times. So let’s hope, overall, that this election provides a platform to create some stability for the wine industry, as the most popular alcoholic drink of choice for 74% (WSTA) of consumers and for the hospitality industry at large, especially the people who work within it.
Alistair Morrell
Hospitality & Catering News, Wine & Drinks Editor