As the UK is set to leave the EU, we can examine the potential impact of Brexit on retail sales of FMCG companies covered in Passport. The exact shape and form of Brexit involves many assumptions – it’s not clear at this point what deal the UK will get with the EU, or whether there will be no deal and trade will default to WTO conditions, along with the presence of other uncertainties. Euromonitor is working on the Macro Shocks model to help quantify these effects. Briefly there are three components in the model:

  1. Macroeconomic scenario forecasts for GDP, inflation and exchange rates from the Macro Model;
  2. Country/category footprint of company retail sales from Competitor Analytics;
  3. Category elasticities to income (GDP proxy) – to quantify the sensitivity of demand in relation to changes in GDP – coming from Industry Forecast Models.

Figure 1: FMCG Companies Standing to Lose Most Due to Brexit

Note: Y axis refers to company global retail sales difference from “No-Brexit” scenario and “No-deal Brexit” scenario in 2020, including currency effects. 13 Passport goods industries researched in value terms.

Nestlé to lose the most

The effect of Brexit on different companies is presented in Figure 1. The simple rationale is that the more sales the company has in the UK, the higher the effect of Brexit it will have. This is not as straightforward, however, as elasticities also play a role, as Brexit spills over to other countries. For example, the largest fmcg company by 2015 retail sales in the UK was Unilever – with more than USD5 billion in retail sales (or close to 6% of company total). Yet Nestlé stands to lose the most from Brexitits global retail sales in 2020 would be USD1.6 billion less with Brexit scenario, even though Nestlé had USD4.6 billion sales in the UK – which is less than Unilever. The impact is larger for Nestlé mainly because Nestlé’s categories are more elastic to changes in income than Unilever’s. Packaged food and beauty categories tend to be less elastic on average, but bottled water and pet care, where Nestlé has a strong presence, are more elastic. Unilever’s strength is in beauty which has been historically observed to have a strong recession resistance, which is illustrated by the “lipstick effect” term.

Looking at Figure 1, the companies can be split into three groups. The first group consists of multinationals that have high retail sales in the UK in actual value terms, but which account for a relatively small share of the company’s total sales in global terms. Multinationals with stronger exposure to the UK include Mars, Reckitt Benckiser, and Mondelez Inc – the UK accounts for 10-11% of global sales for these companies. Because of their actual sales value, these are likely to loose the most in value terms but will have potential to absord these losses. Next are large UK-based companies like Associated British Foods and Britvic that are half in the UK, half outside. Exporters from this group like Clarks International should benefit from weaker pound, while importers like Theo Muller should have more pressure on margins. The third group are almost exclusively in the UK – it includes largely own-brand retailers like Arcadia Group and Matalan Ltd which would be more hit if they import from outside of UK.

What is Brexit?

One problem with assessing Brexit is that it hasn’t actually happened yet. However, the Brexit effect is already priced in the current baseline Passport forecasts. For example, currency has already reacted to Brexit and pound Sterling is already some 15% weaker since June 2016. In order to evaluate the total Brexit impact, we took the following two scenarios from Euromonitor’s Macro Model: No-Deal Brexit and No Brexit.

The No-Brexit scenario assumes a boost in real GDP growth has the Brexit vote not happened and No-Deal Brexit scenario assumes the further decline in GDP growth if no deal with the EU is made. The difference between these two assumptions of GDP growth (fig. 2) is used to calculate the Brexiteffect on company sales. The scenarios also assume corresponding inflation and exchange rate effects.

No Brexit + No Deal Brexit = Brexit impact

Elasticities used

Elasticities measure the volume change in product demand in relation to disposable income change; in this case GDP has been used as a proxy for income. An example of a category with negative income elasticity, for example, is standard powder detergents – which are typically cheaper than liquid detergents. As the economy slows, these categories are boosted, as people switch from more expensive detergents to cheaper detergents. Another example is impulse purchase categories, like video games or ice-cream, which tend to suffer during economic slowdown.

An important thing to note is that this only assumes changes at the category level, but not at brand level – some economy-priced appliances may perform better than luxury appliances.

Company exposure to the UK

This is probably the most basic variable, but also the most important for the scenario – actual company sales in the UK. Among the larger companies, Associated British Foods has most exposure to the UK, at 46%, followed by Mars, Mondelez and Reckitt Benkiser which all have around 10-11% of retail sales in the UK. In contrast, some companies, like Henkel AG, have comparatively little exposure to UK.

Multinationals with 10 billion+ global FMCG retail sales and exposure to UK, 2015

Most exposed to UK (revenue from UK as share from total)

CompanyUK sales share
Associated British Foods Plc46.1%
Mars Inc10.9%
Mondelez International Inc10.2%
Reckitt Benckiser Group Plc (RB)10.1%
Estée Lauder Cos Inc9.7%
Inter Ikea Systems BV8.7%
Suntory Holdings Ltd8.6%
Kellogg Co8.1%
Ferrero Group7%
GlaxoSmithKline Plc7%

Multinationals with relatively little exposure to UK:

CompanyUK sales share
Coca-Cola Co, The2.9%
VF Corp2.6%
Lactalis, Groupe2.4%
Kao Corp1.2%
Henkel AG & Co KGaA1.2%
Grupo Bimbo SAB de CV0.7%
L Brands Inc0.2%
Inner Mongolia Yili Industrial Group Co Ltd0.0%
Dr Pepper Snapple Group Inc0.0%

Note: 13 Passport Goods industries researched in value terms.


It is important to mention that the Macro Model captures not only the Brexit effect on the UK, but also spill-overs to other economies. We can see from Figure 3 that many European countries are projected to suffer a negative Brexit effect on real GDP growth as well.

Figure 3: Brexit Spill-Overs Outside the UK – Brexit Effect on Real GDP growth in the 1st year of Scenario

Currency effects play a pivotal role

The model also measures currency effects. In Figure 1, we chose to report this in USD terms, including currency effects, as this is the default in Passport and relevant for most companies. However, many British companies report in GDP terms, which would diminish the Brexit effect greatly for these companies. Figure 4 depicts Brexit effect de-composition and helps to see the relative importance of spill-overs vs currency effects.

Figure 4: Example Using Forecasts for Unilever Group. 2-Year Effects, % CAGR (y-o-y exchange rate, current prices)


This article presents the rationale for modelling scenario impact using company exposure, category elasticities and Macro Model results. Probably the largest assumption in the model is that Brexit will result in the UK declining in terms of real GDP growth. In terms of effects, the largest effect is when currency is included, which accounts for as much as 85% of total scenario effect. If we looked at constant value effects only using fixed exchange rates, the impact on companies would be significantly smaller. Spill-overs, in turn, account for approximately 30% of the effect, while effect on UK demand represents approximately 70% of total scenario effect. In terms of interpreting the result, it’s important to note that companies whose production costs are in the UK, will be less hit by Brexit, as opposed to those that mainly import to the UK.

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