Heineken & Champagne blame Brexit

Heineken exit, blame Brexit

It’s being reported Tesco is reducing its 53 Heineken SKUs to 22. The reason suggested is that Heineken is raising prices by about 6p (10 cents) a pint. Apparently, it’s all down to Brexit and the fall in value of sterling.

The UK Wine and Spirit Trade Association forecasts Brexit will add 22 pence to a bottle of wine. On top of this, there are the recent budget duty increases, in turn generating more VAT (GST) revenue.

Le Comité Interprofessionnel du vin de Champagne (CIVC) also pointed the finger at Brexit this week, blaming it for declining sales in the UK.

UK sales of Champagne in 2016 totalled 31.2 million bottles, down 8.7 per cent. The value drop was more dramatic: down 14 per cent to €440 million ($614.31 million). This is still a considerable amount, considering it’s one style from a single region. Compare it with the total value of all the wine made from shiraz exported from Australia in 2016 ($513 million), and there remains a $100 million difference. Throw in merlot and there is still $2 million left over.

Globally, Champagne sales fell 2.1 per cent by volume to 306 million bottles in 2016, with value down 0.6 per cent to €4.71 billion.

Like all authorities representing groups, the CIVC has to find excuses. The blame must lie anywhere but with the product it represents.

Brexit cannot be blamed for the 2.5 per cent decline in French sales that was put down to “continued economic weakness”.

Nor can Brexit be held responsible for exports to Australia. A total of 7.4 million bottles came into the country, down from 8.1 million in 2015. That’s not quite as bad as it looks, as 2015 was a record year, according to Tyson Stelzer, who said the 2016 figuresperfectly fit Australia’s buoyant growth curve, popping an average of 600,000 more bottles every year since 2009”.

Several countries did record increases, many off a small base. The best was the US, the second-largest export market, which reported a 6.3 per cent increase by volume and 4.9 per cent by value. Other value increases:

  • Japan: 3 per cent
  • Germany: 3.4 per cent
  • Netherlands: 6.3 per cent
  • Spain: 1.3 per cent
  • Italy: 6.4 per cent
  • Sweden, Denmark, Finland and Norway combined: 3.5 per cent

Japan is interesting in 2016 total Australian wine exports to Japan fell 0.4 per cent to $46 million Wine Australian explains it as

“This is due to a decline in bulk wine exports. After an initial surge following the immediate removal of the tariff on bulk wine under the Japan–Australia Economic Partnership Agreement, bulk wine exports to Japan declined by 42 per cent to $3 million. The tariff on bottled exports will reduce to zero by 2022. The tariff reduction to date has provided a boost to bottled exports, which grew by 9 per cent to $38 million.”

Total Champagne exports to Japan in the same period totalled 10.9 million bottles. Total Australian exports totalled 9.7 million bottles.

The value of Champagne was €252.9 million ($355.78 million) seven times the amount of total Australian exports.

Wine Australia sparkles, or not

For reasons known only known to marketing folk, Wine Australia posted an article on sparkling wine on its website on 17 March, which included:

“Prestige Australian sparkling wines from cool-climate, high-altitude regions are taking their place as the celebratory wine of choice for occasions both big and small. And not just celebratory occasions either. Australian sparkling wines of all shapes and styles are foaming into glasses at launches and lunches, dinners and drinks, picnics and parties, wine bars and wine lists everywhere.”  

If this is the case, it must be on the domestic market, as global export figures were 6 per cent down in value for 2016. Of the top 20 export destinations, 11 recorded value declines and 14 volume declines. Japan and the US kept their average value/volume figures up. The average value per litre did show an increase of 20 cents and is now $5.73 per litre FOB.

Adding to the confusion, Wine Australia released the Australian wine: Production sales and inventory 2015-16 Report on 22 March, in which it said:

“In 2015-16, the value of Australian wine exports grew by $216 million (11.4 per cent) to $2.11 billion and volume increased by 0.5 per cent to 728 million litres. Growth was driven by red wines (up 4.4 per cent) and sparkling wines (up 4.6 per cent) while white wine exports declined by 4 per cent.” 

Looking at other Wine Australia sparkling wine figures we find 

Period Volume % change Value % change
Jan-March 2015 + 27 -5
Apr-June 2015 + 40 -1
July-Sep 2015 + 92 + 13
Oct-Dec 2015 -16 -3
Jan- March 2016 -3 -21
Apr-June 2016 -21 -3
July-Sep 2016 -10 -3
Oct-Dec 2016 -11 -6

For the year to the end of December 2015:

  • 9.398 million litres
  • 49.168 million dollars

For the year to end December 2016

  • 8.066 million litres
  • 45.869 million dollars

Hard to see how sparkling wine is driving any export figures. Is Wine Australia using tricky figures to fool the industry?

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