Spanish vineyards are sending extra wine to Britain before Brexit

[MADRID] Spanish vineyards are making sure British tipplers are well stocked with Rioja by shipping as much wine as they can ahead of a potential hard Brexit.

"We already completed our sales for the first semester of 2019 with 90 per cent of our customers," said Santiago Frias, general director of Bodegas Riojanas, a vineyard in Cenicero in the wine-growing region of Rioja. "This will allow us to face the first collapse we expect in UK customs."

The Spanish Wine Federation, the country's industry association, has been advising members on how to minimize the impact of the possible crashing out of the UK from the European Union with no deal. Steps that vineyards can take to offset the pain of a hard Brexit include hedging against a fluctuating pound, making advance plans for transportation and ensuring that wines are correctly labeled, according to a circular to members dated Jan 17.

About 350km north of the capital Madrid, La Rioja is the largest of the European wine-exporting regions in terms of volumes shipped to the UK. In the first nine months of 2018, its wineries sold 32 million litres, one third of their global exports, in the British market, according to data from the Spanish Wine Market Observatory, known as OEMV.

Many Spanish vineyards are planning to increase their stock in the UK, a trend that could drive up transportation and warehousing costs, according the wine federation's circular.

In fact, Rioja vineyards have already been feeling the pinch from Brexit as the weak pound hits UK demand for Spanish "vino." Exports to the UK fell as much as 16 per cent in the first 11 months of 2018, a decline steeper than the 10 per cent slide in shipments to all markets, according to Grupo Rioja, an association grouping most of the region's wineries.

"By all means we can talk about a Brexit effect," said Inigo Torres, Grupo Rioja's manager. "Of course it could get worse in case of no deal. The sterling would further depreciate and the UK would turn into a third country with no custom agreement and probably higher duties. And that would amplify the negative effect."

Some Rioja winemakers are reacting to the Brexit threat by seeking to boost shipments to other markets. Baron de Ley SA is developing new export markets including Russia, Canada and Brazil, said Chairman Eduardo Santos-Ruiz in an interview.

"There's a not a lot we can do about Brexit," he said. "But we are already opening new markets as part of our export policy."

BLOOMBERG