Brexit and the British Wine Trade

I just got an email from a British wine merchant I am dealing with. He said that this morning he lost £500,000 worth of business on his 2015 en primeur sales because of the vote, presumably because of the collapse of the GBP against the Euro. Ugh.

Are the wine shops now changing all their prices, could find deals at todays exchange rate.

He will make it up in volume.
Euro falling equally so, so it’s a wash, no?

the Euro is not falling anywhere near as fast. Go Dollar. beat the Euro.

Now if only the Yuan would collapse.

How is he running his business?? At 50:50 forecast level, the Brexit was a realistic scenario and everyone dealing futures (no matter if stocks or wine) should have been properly prepared for this…especially when dealing in the 5 or 6 digit value range. There are tons of certificates to secure a certain exchange ratio to back your business.

The Chinese will be happy to oblige.

That was my thought - if you can lock in at the same prices GBP today, you’re saving 5-10%. Of course, those sellers may not deliver . . .

+1

This Brexit will have some consequence on the Bordeaux classified since London did wish for more than 20 years now, to be “THE” place where the Bordeaux wines should be negociated worldwide.

Main question : what about the financial funds that have in stock huge amount of classified waiting to find a market ?

Some opportunities will come out, this is for sure !

Most importers are not in the dynamic currency hedging business, it fits the model more poorly than other industries. Price lists EP ex negoce have changed dramatically overnight for each country.

Crazy to think that literally overnight, what is it, maybe $1billion+ worth of wine (mostly Bordeaux) just got around 10% cheaper to buy. And it’ll get cheaper?

Water always finds its level and the Rothschild family is laughing all the way to the bank.

Not cheaper overnight. Bordeaux wine merchants are very savvy and will adjust prices where it makes sense at the euro level as to not disrupt pricing continuity.

Dont want a strong dollar, makes exports to hard

Exogenous events can destabilize even the most conservative small businesses. Way risky to me (way too risky after PC)

Jay

Just to clarify - this merchant said that it was GBP 500,000 on sales he’d already made? Not on future business?

This is not a strange alien risk for any one who is operating an import/export business. Commercial banks can show the merchant a range of currency hedging instruments, and even do some basic analysis for him.

It could be that USD EUR GBP and CHF will be traded @ approx the same exchange rate in the near future

I don’t know how the Swiss ski industry survives when the majors go to par with swissy. It was pretty painful up at 1.40 and 1.20 the last times we went there.

I think those used to Klosters are somewhat in elastic.

In the 70s many American wine merchants bought older German and French wines in the UK. As I recall the UK merchants had bought the wine with a strong pound but the dollar was weak against the French franc and the German mark whereas it was ok vs the pound.

Not clear. It was incidental to the main purpose of the email and I did not follow up. I think he meant that he lost half a million pounds of business because his client no longer wanted the futures, but it may have been just an estimate. He’s a wine merchant and I dounbt he has a Ph.D. in finance.