European brands will shun UK

04 April, 2008

Importer warns weak pound may force overseas producers to abandon market

Graham Holter

and Laura Clark

Retailers of European wines are reeling from the effects of a weakening pound, which has added 10% to 15% to their importing costs in the space of a year.

In May 2007, the euro was worth around 68p, but this has now risen to 78p, making wines from France, Spain, Italy and Germany far more expensive.

The situation has been made worse by the duty increase and rising costs, prompting suggestions that some European producers may abandon the UK.

David Gill, managing director of Bottle Green, the UK importer behind the French Connection brand, said: "Producers are saying the last market they will start in is the UK - there's no money in it. They are being forced to take their wines to other markets."

"People are already at breaking point and they will go bust or withdraw from the market," another supplier told OLN. 

Matt Dickinson, sales and marketing director of Thierry's, said: " The thing about exchange rates is a lot of people buy ahead, and the effect is not

felt immediately. My inclination is the pound will be at l1.30 by the end of the year. The days of l1.45 to l1.50 are no longer with us ."

Waitrose wine buying manager Justin Howard-Sneyd said retailers could address

currency movements with hedging positions. "The question is when it will start hitting them. If they don't hedge at all, it will hit them early. It's going to reduce margins or force retail prices

up, or retailers will go back to suppliers and say 'can you help us out?' But it's not an environment to find cost reductions very easy."

Pierpaolo Petrassi, Tesco product development manager, said: "A 10% change in the euro rate can have an absolutely gargantuan effect on the cost of the wine. The pound is as low as I can remember it. And that is a significant factor in terms of not just the price of the wine but shipping costs, too.

It's eating into our margins without a shadow of a doubt, and we're feeling the pinch."

Liberty Wines director David Gleave added: "We

can try to manage our currency exposure and pass on increases in an orderly manner, when vintages change.

But I think we're in for a pretty tough 18 months."

VOX SHOP

How are you coping with a weaker pound?

"We are producing a new list and prices are up quite sharply - we reckon between 10% and 15%, definitely no less than 10%. Though that figure is also duty . We are putting prices up in one fell swoop and hoping that's it. It might take a couple of months for customers to get used to it, but

they will."

Rodney Fletcher

Rodney Fletcher Vintners Horsmonden, Kent

"It's added at least 15% to importing costs, and

no wine business

would take on that amount. Those increases are being implemented slowly because you can't scare the customers off. I'm having to sell more wine from

Chile, Argentina and South Africa ."

Justin Waples

Hedley Wright

Bishop's Stortford

" If any retailers haven't felt the effects of the weakening pound

they're blind.

What enrages me is the supermarkets are still doing BOGOFs and three for £10 - they do a massive injustice to our side. I'm sure non-European wine sales will go up across the board."

Simon Deakin

Deakin Fine Wines

Horsham

"Importing has become much more expensive and margins are squeezed . I have

sent a letter to all our customers

to tell them the landscape is changing and, with duty and shipping costs increasing, prices will go up. The price point

we're most concerned about is £9.99."

Paul Trimming

Cadman Fine Wine Shop

Northampton




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