Prosecco — has the bubble burst?
Brexit pops Britain’s insatiable thirst for Italian fizz
By Simon Greaves
Prosecco exports have fallen in Britain for the first time in a decade under pressure from market uncertainties bubbling up around protracted Brexit bargaining, Italian domestic political wobbles and a weaker pound. Diehard fizz drinkers are switching to homegrown English sparkling wines.
Coldiretti, Italy’s leading farming association, reported that Prosecco exports fell 7 per cent in the first six months of last year. Before the overseas sales downturn, more than a quarter of all Italian exports -112.7m bottles in 2016 — were consumed in Britain, with Germany and the US following closely.
But by 2017 Prosecco’s growth surge had stalled after British consumption overtook Italian with the market appearing to reach saturation. The subsequent reduced consumption in Britain has, however, been replaced by German and American drinkers buying more — their imports were ahead 5 per cent compared to 2017 levels.
The recent reversal has come after the Prosecco industry saw a 45 per cent leap in production in two years — to 3.55m hectolitres in 2016.
The UK consumption gap has been quickly filled though. In the same first half of last year sales of English sparkling wine were up a corresponding 7 per cent compared to 2016, with last year’s heatwave helping English vineyards to their best grape harvest.
Coldiretti farmers said they were concerned that a clumsy no-deal exit from the EU by Britain may result in legislation on trade with taxation that proves to be unfavourable to Italian grape growers, and its agri-food exporters generally.
Italian lobbyists have expressed concern that as yet no agreement has been reached on the post-Brexit recognition and protection of food products with specific designations of origin. The association is afraid that imitations could swamp European markets, causing supermarket shelves to be stocked with inferior products such as cheap versions of Parmesan and fake Proseccos.
It also warned that 85 per cent of Italian products using the traffic-light system of nutrition marking could be rejected, further squeezing their food export market.
Peak Prosecco?
Despite some suggestions of “peak Prosecco” having been already reached there is a prediction that production will hit 12.7m cases by 2020, up 14 per cent on current output, while the UK’s contribution reaches a hearty 8.3m cases by 2022.
Some wine and spirits market watchers are even predicting shortages of all sparkling wines in the UK after Brexit. Their sales almost doubled over the past five years and peaked last year with £1.3bn turnover in the 12 months to September 2017. A Wine and Spirit Trade Association’s market report pointed to a combination of Brexit and low yields limiting supplies as overall growth slows amid weakening demand.
Ciaran Myles, the association’s research and insights manager, said: “With reports of lower yields from the slopes of northern Italy, inflation and all the complications that come with Brexit, volumes of sparkling wine might go a little flat in 2018 but the UK sparkling wine market is well-placed to weather tough times.”
In the overall sparkling wines segment of the drinks market, sales have fizzed in the UK for the past five years, volume sales surging by between 89 and 206 per cent by value in the years between 2012 and 2017, leaving a UK market embracing brands from Champagne to Prosecco, cava, cremant and English sparkling wines worth more than £2bn a year.
Free trade deal
The trendy Prosecco market is by far the biggest share — about 85m bottles will be sold this year.
Meanwhile, in 2017 the 503 commercial vineyards in England and Wales saw lower yields following air frosts in April, but volume growth will be supported by more and more land being planted with vines.
The WSTA is relying on a free trade deal with the EU beyond Brexit so that business with the UK is not too disrupted. The UK is the EU’s top market for volume wine exports after Germany, Britain’s producers being the largest exporters of spirits in the world.
The importance of political stability is underlined by UK sparkling wine sales in 2017 of 35.8m gallons, up 5 per cent on 2016 but coming with signs of weakness in the first year of single-digit growth since 2011, according to UHY Hacker Young, so there is little room for complacency.
Drilling down into the brand structure, Brexit related inflation has been blamed for hitting sales of cheaper and less well-known labels.
“The UK reduction in volume on entry-level Champagne is linked to Brexit and a reaction to certain aspects if Brexit,” according to Jean-Marie Barillere, president of the Union des Maisons de Champagne.
The declining markets in France and the UK are being offset by increasing consumption in the US, Japan, Hong Kong and China as drinkers there acquire a taste for fizz.