Diageo ‘buoyant’ on EU trade as Brexit looms

Dan Mobley, Diageo’s global affairs director, said the spirits group is “feeling buoyant” about its trade with the EU and is looking eagerly for the UK to strike its own trade deals with other countries to seize the extra opportunities they could bring.

 

“We are very pleased to see the withdrawal agreement pass and the certainty that gives us,” he told a London press conference, adding the company would take Brexit “in our stride.”

“There are two factors for a multinational on leaving the EU, leaving the single market and leaving the customs union. So you have the risk of tariffs on you products and the risk of disruption of your supply chain.

“Our supply chain is almost entirely indigenous in the UK….so we can source pretty much everything we need here and we don’t face any new tariff barriers on trade into Europe whatever the future relationship will be.

“The main concerns and issues we had previously have been resolved, notably the Irish border… It’s going to remain open so we have no problem moving product across that, which is a relief,” he said.

“We have certainty for our people, whether EU nationals working for us in the UK or British nationals working overseas; those issues are resolved.

“And we can certainly handle the free trade agreements the EU has with the rest of the world that include spirits – the UK has been very successful in replicating those deals and almost all the markets we export to have been covered by them. We expect the rest of them to be covered off by the end of this year, by the end of the implementation period.

“So we are now much more focussed on the opportunities longer-term that arise from Brexit.

“One was announced today – the details around the return of duty free shopping for UK travellers to the European Union have just been published by the government. That’s wildly popular with consumers and is a sales opportunity for us, not just at airports but it also at the Eurostar terminal and we are also told that coaches and bus stations will also be able to sell duty free.
“That’s a great new sales channel for us.”

Dan Mobley (Photo: Diageo)

Looking beyond Brexit, Mobley said the UK will need an independent trade policy and to attempt to strike free trade agreements with countries not currently covered by the EU.

“Some of the large emerging markets in particular have very high tariffs on spirits and on scotch, India being the obvious example, Indonesia is another one. So there is a real opportunity for us in the UK to start striking free trade agreements with those countries.

“Striking one with India is a priority for the UK and we work with the British Government on issues relating to a future FTA…India is the largest market for scotch ….If over time those trade barriers began to fall it would be a huge boon for Diageo.”

Earlier Diageo’s chief executive Ivan Menezes had sought to dampen fears that President Trump’s 25% tariff on single malt scotch whisky would harm the group’s sales in the US.

While North America is Diageo’s largest market, accounting for 35% of its global sales, the very fact that the company has such a comprehensive portfolio of leading brands across the spirits sector would help it to cushion the impact of the extra tariff, he said.

He pointed out that Crown Royal, the Canadian premium-priced whiskey enjoyed a net sales increase of 11% in the six months to the end of December and continued to gain market share.

The implication was that if American consumers switched from scotch whisky because of increased prices as a result of Mr Trump’s action, Diageo had a wide range of other spirits to choose from and expected to minimise the damage to its largest market.

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