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Italy’s prosecco producers may be among the first to pay the price of Brexit

by Giorgio dell’Orefice

Italy’s wine world is in a state of high anxiety after Brexit. Wine is, in fact, the main Italian gastronomic product exported to the UK, which means that it is more exposed then other sectors to fallout from Brexit.

In 2015, 3.3 million hectoliters were exported to Britain for €746 million. That makes the UK the second largest market in terms of quality and the third in total value (after the US and Germany) for Italian brands. The figures capped a decade of steady growth in Italian wine consumption. Considering the massive slowdown of sales in Russia last year (more due to a decline in domestic income than to the embargo, which didn't include wine), the UK is the best performer of all Italy's major export destinations.

Italy's strong numbers become truly magnificent in the spumanti sector. Made-in-Italy bubbly sales in the UK surged 38% last year, led by Prosecco, whose sales rose by a whopping 48.5%, according to industry figures. Italian wine has in general been seeing a steady increase in sales for the past decade marked by several noteworthy achievements. One of these occurred five years ago when the shocking news arrived from the UK that wine consumption - primarily of Italian wine - in British pubs had passed consumption of beer.

We await clarification of the various steps needed to realize the will of the British people expressed in the June 23 referendum, including the start of talks to determine trade rules that will govern future commerce between the EU and the UK. But in the meantime there is no lack of issues that are causing ripple effects even in the short term.

A slowdown could come immediately due to the exchange rate shock: already, in the hours just after the Brexit results were reported, the pound sterling fell 30% against the euro. That loss has since dialed back a bit, but the trend in recent days is decisively towards a lower pound. That can only hurt products like Italian wine, one of whose main competitive features is its price/quality ratio.

And in this context it's impossible not to think of Prosecco. The king of Italian sparkling wine has based its success on being “easy” and affordable compared with French champagnes. It's clear, therefore, that a price increase due to a 20-30% devaluation of the British currency would immediately end up making the Italian beverage less competitive in that market than in the past. That's the growing fear of Italian producers.