How investing in a bottling plant in Europe could be the wisest move of the year
By Richard Siddle
If you had a spare few million to spend in 2019 then you might want to invest it in a bottling and packaging plant somewhere nicely positioned to all good travel routes in the centre of Europe.
At least if you are watching the fall out from the on-going car crash that is the UK’s attempt to exit the European Union. This week saw the long awaited vote by the British parliament on the official deal struck between the UK’s Prime Minister Theresa May and the EU.
Let’s face it did not go well. In fact it is hard to see how it could have gone much worse, not only for her, but for all the companies, businesses, and industries watching on and wondering when this political stalemate is going to come to an end and we can all get on with our lives.
So what’s all this got to do with bottling plants? Well, the UK currently leads the way across Europe in terms of how much wine is shipped there in bulk from around the world to be then bottled, and packaged up to be re-sold in other markets including the EU, but also further afield to the Ukraine and Russia.
In fact the UK has built up quite a nice line of business acting as the middle man, as it were, capable of taking increasing quantities of wine from key markets such as Australia, South Africa, Chile and Spain and then using their state-of-the art bottling facilities to pack and then move them on to other markets across the EU and beyond.
But if the Brexit deal does not go as well as the industry hopes then suddenly a lot of those bottling plants could suddenly find themselves losing a lot of business to their counterparts in Europe.
Came to light... The issue came to light during a government international select committee hearing last week looking at the possible outcomes of Brexit. Simon Standard, the European affairs director of the Wine & Spirit Trade Association, told MPs that a key part of UK business could be lost post Brexit.
In particular wine producers and brand owners that currently use the UK as their central hub for bottling bulk wine not just for the UK but for other markets would be "looking very seriously" at whether that was the right thing to do after Brexit.
The UK, particularly if it leaves the EU with no deal, might then become a more expensive country to carry out that bottling in, due to higher tariffs, costs and bureaucracy, and it would be beneficial to shift their supply chains to other markets.
“At the moment there’s a tariff on bulk wine coming into the EU that’s lower than bottled wine but once it’s in the EU, it can freely circulate even once it’s bottled.”
If the UK exits on a no deal then t could have to introduce WTO tariffs on all imported wine, that could be €9 per hectolitre and €13-15 for bottled wine, making it less of an attractive market to do business in.
“The costs on the individual products won’t be significant, it’s the question of the bureaucracy burden and the increase over shipping and moving the product in the short term that is the main issue,” he added.
Key packing sites include Accolade’s Accolade Park in Bristol, first built by Constellation, Broadland Wineries in Norfolk, Kingsland Drinks near Manchester, Encirc in Chester and Greencroft Bottling in the north east, near Durham. Each have invested large sums in recent years to upgrade all their bottling lines, introduce extra capacity and adapt their systems to be handle for a multitude of formats from bottle to box to pouch to can.
“Whether or not they may be forced to move their bottling plants from the UK, we’ll have to see,” said Stannard.
But with the political stalemate over Brexit in the UK getting worse many major producers and brand owners might look to vote with their own feet and spread their risks by starting to open up and explore alternative and new bottling arrangements within the EU itself.
Impact around the world
One of the biggest countries to be affected would be Australia which currently ships 80% of its wines to the UK in bulk. A quarter of that wine is then re-exported to countries, including Russia, Norway and Ukraine, after it has been bottled.
Interestingly Laura Jewell MW, Wine Australia’s regional general manager for the EMEA, said this week that having the bottling facilities in the UK was a key factor in the growth of Australian wine in the county.
She said: “The UK continues to show growth by both value and volume, driven mainly by the larger brands packing in the UK for distribution across Europe while it is still straightforward to do so.”
Jewell conceded that may not be the case in the near future. "Brexit negotiations continue apace, which will have some impact on freedom of movement of trade, but until they are finalised the uncertainty remains, and brand owners are putting contingency plans in place for both worst- and best-case scenarios.”
Quite what those scenarios turn out to be will have to wait and see and the picture is even cloudier this week after the latest shenanigans at the House of Commons. The UK has already lost its position as the world’s biggest financial centre. It could now risk losing its dominance as the central bottling and wine supply chain hub in the northern hemisphere.
So if you do happen to have a few million euros to spend then having a nice packing facility somewhere within a couple of hours of a major port could be quite handy indeed in the coming weeks and months.