Beer, Wine & Spirits

Wine prices set to increase as Brexit sends sterling lower

Cracking the US is a great opportunity for UK's largest wine company: CEO

It's bad news for all British wine lovers: Bottle prices are set to increase in 2017 as sterling continues to depreciate against the euro.

It is another consequence from Brexit; as the British currency falls against the euro, U.K. retailers are under pressure as the cost of imported goods go up.

Recently, British supermarket chains battled with Unilever after the consumer goods giant asked them to raise food prices to offset the higher costs of imported goods. Now, the wine industry admits that it will not be able to protect consumers from their higher costs given the low margins in the business.

"I'm sure all retailers will have to pass that on eventually because wine is an extremely low margin business," Rowan Gormley, chief executive officer at Majestic Wine, told CNBC on Wednesday.

The head of the largest U.K. wine retailer said that for now consumers were safe because they bought stock in advance, but when they run low, new orders will bring higher prices.

"I do think it's inevitable, if the pound has a sustained fall against the euro that will have to be reflected in the price of oil, of wine, all kind of exciting liquids," Gormley added.

Amy Price, senior food and drink analyst at market research firm Mintel, told CNBC via email: "The deterioration in the exchange rate will put upward pressure on prices of imported goods, including wine. This puts wine under greater competitive pressure from other drinks categories such as cider, much of which is produced in Britain using British ingredients, which should be better able to avoid price rises."

Investment opportunity

However, there is good news for wine investors. Peter Shakeshaft, chief executive officer at fine wine broker Vin-X, told CNBC last week that the wine market went up by 22 percent so far this year.

"The pound going down has obviously held (wine investments), but even apart from that it's still moving in the right direction," he said.

Shakeshaft said that the increased consumption of fine wine is also set to push prices higher.

"The good news is because you're drinking so much, there's less and less available, which means prices will obviously go up," he added.

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