Belgian Brewers Aren’t Waiting for Brexit to Enter the U.K. Market

  • Twenty brewers head to London for first Belgian Beer Festival
  • Pound has fallen 5 percent since U.K. triggered Article 50

Follow @Brexit for all the latest news, and sign up to our daily Brexit Bulletin newsletter.

The U.K.’s impending departure from the European Union has been blamed for weakening the pound, putting London banking jobs in danger and curtailing economic growth. Now it’s putting at risk a fledgling attempt to bring the complexities of Belgian beer to British drinkers.

Twenty beer makers from Belgium, which is home to six of the world’s 11 Trappist breweries, descended on London last month to showcase their brands at the inaugural Ales Tales Belgian Beer Festival, where they are seeking to strengthen their foothold in the U.K. market.

About a thousand people lined up to taste the hops and barley concoctions just four months after the U.K. announced its intention to leave the bloc, which precipitated a 5 percent drop in the pound and the longest fall in consumer spending in more than four years. And since negotiations still haven’t started on Britain’s future relationship with the EU, businesses are left guessing what a trade partnership would look like, raising the specter of new tariffs and questioning the reliability of international supply chains. But some brewers are still willing to take the risk.

“I have no clue about what will happen, but it makes no sense to wait,” said Yvan De Baets, co-owner of Brasserie de la Senne, which was an exhibitor at the festival. “The U.K. and the EU are not that stupid and I’m sure they will negotiate something that both parties will be happy with and exports both ways will still be easy.”

In beer-crazy Belgium, a country of about 11 million people and 1,500 different beers produced by some 224 breweries, craft production has a special status like wine-making in France or the distillation of whiskey in Scotland. UNESCO even added Belgian beer to its list of Intangible Cultural Heritage of Humanity. As such, these niche producers in a founding member of the EU may prove a gauge for the post-Brexit appeal of the continental consumer products.

While these producers operate in the shadow of industrial giants Anheuser-Busch InBev NV and Duvel Moortgat NV, the challenges they face highlight the economic uncertainties arising from the U.K.’s plan to quit the EU in 2019.

To read about how Guinness may fare after Brexit, click here

“It may not be the best time to try and start exporting to England, as nobody knows what is going to happen, and the pound is going down making our beers for the British people more and more expensive,” said Jef Van Den Steen, who turned from beer journalism to brewing 15 years ago. “But it will not stop me from trying.”

He is already exporting 80 percent of the 15,000 hectoliters of unfiltered beer he makes at De Glazen Toren in the town of Erpe-Mere, halfway between Brussels and Ghent, mostly to the U.S. and Italy.

‘Shadow of Brexit’

“I was a bit scared when I started organizing the festival with a shadow of Brexit and thought brewers would be reluctant, saying ‘let’s wait for two years before we start looking at the U.K.’,” Nicolas Tondeur, the organizer of the Belgian Beer Festival and a banker at BNP Paribas in London, said in an interview. “None of them mentioned it when we met.”

With the fall in sterling, U.K. consumers cut back on spending for a third month in July, with food being among the worst hit, according to a report from IHS Markit and Visa. This comes as the Bank of England downgraded its economic outlook and Governor Mark Carney warned that Brexit uncertainty is weighing on business and households.

Belgium’s 3 billion-euro-a-year ($3.5 billion) beer industry is keeping a close eye on the U.K. market even though it’s only the eighth biggest export destination globally after France, the Netherlands, U.S., Germany, China, Italy and Canada, according to the Belgian Brewers’ Association. Its share of U.K. imports rose to 6.5 percent in 2015 from 4.4 percent in 2010, according to the British Beer & Pub Association.

Earlier this year, the Belgian Brewers Association submitted their views on Brexit to the Belgian Cabinet of Ministers, according to its president Jean-Louis Van de Perre, an InBev and KPMG veteran.

Squeezed Margins

“Will the U.K. increase import tariffs, will it change something with respect to product specification, have a system favoring local beers to protect domestic production?” Van de Perre said, speaking from his office in a centuries-old Brewers’ House in Brussels’ Grand Place. “I hope it doesn’t happen as if the U.K. wants to export their own beers to the EU, they will get a similar reaction.”

Jonny Garrett, a spokesman for Cave Direct beer merchants, which imports beers to the U.K., remains sanguine.

Brexit “was a real blow to our business and has really squeezed our margins,” Garrett said. “We hope in the long run that a good deal will be struck for trade with the EU and will campaign for it if necessary. In the meantime we have adjusted our pricing and continue to grow our Belgian and German brands really well.”

Watch Next: Carlsberg CEO Sees Growing Interest in Expensive Beers

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE