Fine wine trading post-Brexit: the implications and opportunities

On the 22^nd January 2020, Liv-ex’s Managing Director, James Miles gave a speech at a WSTA event on global trading post-Brexit for fine wine merchants. The event was for senior level management working in the fine wine sector wishing to discuss the implications of Brexit, along with the opportunities it may present.

James’ speech can be found below. Other speakers included Miles Beale (Chief Executive of the WSTA) and Michael Saunders (WSTA Chairman & CEO of Bibendum).

The WSTA will be representing the interests of the UK wine and spirits trade in discussions with the government. If you would like to contribute to this discussion and help shape the voice of the fine wine trade, please get in touch with Rebecca at the WSTA.

Good afternoon everybody. Thank you, Michael, Miles and team, for organising this event.

I think starting a discussion about what fine wine trading might look like after Brexit is a seriously good idea. It is great that so many of you have come today.

Last night, I had an interesting conversation with an old friend in the trade, a founder member of Liv-ex, someone who was kind enough to back us when Justin and I were starting Liv-ex 20 years ago.

The thread of the conversation was that, having agreed to come along today, under some duress from me, my friend was wondering whether it was really going to be worth his while. “What’s in it for me?” was the gist of the question. It’s a great question. It is THE question isn’t it. It is the question that we are all asking the WSTA to answer today.

I can’t speak for you. I know you will make up your own minds. But the reason I am here, the reason Liv-ex is supporting this event, the reason that we are members of the WSTA, is because we see this as a defining moment for the future of the trade. Simply put, we want the best possible outcome from Brexit. We are not interested in just protecting or consolidating our position, we want to enhance it. We want to knock it out of the park!

As Michael has said, the irony is that while the fine wine trade has more to gain and lose from Brexit than any other segment of the trade – we are not just importers, we are also exporters – we are very unrepresented on our trade body. That’s nuts! If we’re going to get the outcome that we want from Brexit, we are going to need the WSTA’s support and they are going to need ours. Who else is going to make our case to government?

In the next 12 months, we – the fine wine trade – are going to be asked, for the first time in 50 years, to refashion, not just our trading relationships with Europe and the rest of the world, but also many aspects surrounding the way in which our trade is regulated. At Liv-ex we want a say in that.

From our No Deal planning at Liv-ex we know what a bad outcome could look like in a worst-case scenario. Amongst other things:

Tariffs on imports from the EU
Additional paper forms to fill in
The requirement to get certificates of analysis on every wine we import
The need to strip label every bottle with “Imported by Liv-ex”

Can you imagine? For some of us that is probably an existential problem. How do you get a certificate of analysis on DRC? What are you going to do? Send a bottle to the lab. A bad outcome, such as this, could seriously hamper our ability to trade and will certainly raise our costs substantially.

Personally, I am much more optimistic than that. With the WSTA’s help we have already mitigated some of these risks and now – I think – is the time to focus on the positives.

In the super competitive, globalised future that we – as a country – have chosen for ourselves, success and failure will be all about competitive advantage. In this respect we – the UK fine wine trade – are well positioned. We are genuinely world class at wine merchanting. We have significant competitive advantages.

This is rooted in the fact that we have more practice than anybody else. We have been THE global hub for wine trading for 800 years. We have:

A very dynamic local market. A critical mass of merchants and traders. Huge stocks. We are the largest net importer of wine in the world.
We are also big exporters. We have built broad based distribution networks linking producers to the trade and consumers across the world. Liv-ex as an example has customers in 42 countries. The UK is the 10^th biggest exporter of wine in the world – not of English fizz – but of other people’s wine. We are the biggest player in secondary market trade too.
We have a deep pool of wine knowledge. Not just in this room and across the trade, but amongst our journalists and critics. Our educational programmes – organised by the WSET and IMW – are the global standard.
We have best in class logistics and storage
And most important perhaps – a light touch regulatory system – including our bonded warehouse system – which is the envy of the trade everywhere.

All of these things are backed up by the English language, English common law, a business-friendly government and our position in the global time zone that allows us to speak to LA and Tokyo in our business day.

Try replicating that package in Europe, the US or China – good luck with that! At Liv-ex we have tried and – believe me – it’s not possible.

So, what does a good outcome look like. I believe it looks very much like what the WSTA are trying to achieve for us:

Zero tariffs on any trade in wine
A commitment from government to remove barriers to trade wherever they exist
If we need to introduce new rules and regulations let’s ensure that compliance is digital and can be automated to keep costs down
Can we build upon our Bonded system? The government is talking about Free Ports in the UK. What about a Free Port for Wine?
Can we get government support to promote the UK wine trade around the world – to let them know that the UK is not just open for business, but that this is the best place in the world to buy and sell wine. When the world thinks wine, let’s get them thinking about the UK first

This vision – the WSTA’s vision – for fine wine trading after Brexit, is an outcome that we – at Liv-ex – would welcome. What is more, these things are all in the gift of UK Government, if we come together and make enough noise.