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Brexit and Alcoholic Drinks: Preliminary Aftershock Projections

September 7th, 2016

While Euromonitor’s forecasting capabilities have been vindicated and our views on nascent trends reiterated, macro-economic volatility has historically derailed seemingly linear growth trajectories. The launch of the Alcoholic Drinks industry Forecast Model is aiming to track such quarterly shifts, providing timely updates to our core research offering and exploring the industry’s hopes and fears in the form of scenarios. The much vaunted Brexit make for a fitting introduction.

Keep calm and carry on? The Brexit view from the UK

While the probability of a disorderly Brexit scenario is far from certain, adopting this worst-case scenario can shed some light on the downside risks for the UK itself moving forward.

Spirits appear to be the only major category projected to – narrowly – escape contraction in this case, while all others will be pushed ever further into negative territory. The category’s relative insulation could partly be down to the rise of a multitude of domestic distilleries – many of them on the micro side of the spectrum – that are set to gain a competitive advantage against the inflated pricing of imported products priced in hugely devalued pounds and/or facing additional tariffs and trade barriers.

RTDs/high-strength premixes, on the other hand, appears to be the most severely impacted category as their impulse and high energy positioning, high price elasticity and lack of brand loyalty will put them first in line for cutbacks.

total-volume-sales-alcoholuc-drinks-uk-2015-2020

Brexit: A stiff drink for Western Europe

While the impact of a disorderly Brexit scenario will be particularly disruptive for the UK, Western Europe will not escape the tremors and aftershocks – especially given the likely protracted nature of the negotiations which will only begin in earnest after Article 50 for leaving the EU is officially triggered – at the earliest in Q1 2017.

From the potential for remittances from Eastern European workers to be severely curtailed as migration becomes increasingly more stringent to consumer confidence taking a tumble in the face of persistent uncertainty, Western Europe seems to be about to embark on a new era of crisis even as the previous one is yet to be fully overcome.

Additionally, with the UK being a key trading partner for European drinks manufacturers in a market that is essentially entering a state of limbo, alternative export markets will need to be identified and approached sooner rather than later.

total colume sales alc drinks western europe 2015-2020

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