the impact of brexit on the food and drinks/fruit juice...
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The impact of BREXIT on the food and drinks/fruit juice industry
Francois SonnevilleRabobank Food&Agri Research
Break-ups can be good or bad
Brexit in progress but outcome unclear
Leave 51.9% Remain 48.1%
Arguments will be economical and political
4
“No cherry-
picking”
“If UK wants access
to #SingleMarket, it must also
accept the free movement of
citizens. Our four freedoms are
inseparable.”
“You cannot have
free movement of
goods and
services and
capital and not
people”
“Unless we feel a
guarantee that V4
people are equal,
we will veto any
agreement
between the EU
and Britain.”
After Brexit borders might be erected
Import TaxFree movement
EU regulationsEconomy/FX
FX movements have impact today
0,75
0,77
0,79
0,81
0,83
0,85
0,87
0,89
0,91
0,93
0,95
GB
P/EU
R
UK Juice industry needs some EU workers
Sector UK EU Non-EU Total
Meat processing 37% 56% 7% 76,505
Fruit & Vegetables processing 52% 38% 10% 38,958
Manufacturing other food 60% 25% 15% 95,414
Processed fish 68% 28% 5% 12,080
Bakery products 68% 19% 13% 63,7998
Dairy products 69% 22% 7% 23,065
Animal feed preparation 75% 23% 3% 22,223
Grain & starch manufacturing 84% 9% 7% 12,484
Total 58% 32% 10% 345,353
Regulation will change, not disappear
Import taxes between UK and World
• After leaving EU, UK no longer has trade deals
• 1st: schedule commitments 164 WTO members– MFN tariffs (highest, most restrictive rate)
– UK support agricultural sector
• 2nd: UK trade policy (single countries, unions)– Bilateral
– Less restrictive on trade than MFN
MFN Tariffs for different products
Dairy products, Beef, Sugar
Pork, Poultry, Seafood, Eggs, Fruit & Vegs,
Grains, Consumer Foods
Flowers, Fertilizers, Oilseeds, Beverages, Tropical Products
High (>30%)
Low (<10%)
Mid (10%-30%)
Trade policy negotiation options
Juice is small in UK trade picture
0
20000
40000
60000
80000
100000
120000
Mln
GB
P
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Mln
GB
P
UK Exports2016
UK Imports2016
120 800
Winners & losers in different scenario’s
After deals inputs might flow directly to UK
OJ Belgium OJ NL OJ Ger
Mix NL Mix Belgium OJ Spain
AJ Pol AJ Ger Others EU
Others non-EU
Import tax lower when value added in UK
Current EU tariff for oranges is lower than for orange juice, but does this offset higher transport/processing costs?
Value of FCOJ is lower than Recon juice, leading to lower basis for taxation
Processing and blending might be cheaper when done after all borders are crossed, depending on labour costs
Conclusions• Brexit negotiations are ongoing but effects are already felt
• FX-rates, mobility, regulation and trade will all be affected
• After UK WTO membership, bilateral deals will shape trade flows
• UK can protect or open-up, both leading to winners and losers
• In juice, Brazilian OJ and Chinese AJC might be winners or losers, depending on the terms of potential UK-Brazil/UK-China trade deals
• Spanish OJ and German/Polish AJ might face tariffs which would hurt
• Sellers and buyers should consider limiting impact Brexit by redesigning value chain and move closer to end consumer
Important notice
This presentation has been prepared exclusively for the AIJN Juice Summit 2017, and does not carry any right of publication or disclosure. Neither this presentation nor any of its contents may be
used for any other purpose without the prior written consent of the Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank” or “Rabobank International”).
The information in this presentation reflects prevailing market conditions and our judgment as of this date, all of which may be subject to change. This presentation is based on public information.
The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied is made as to
their accuracy, completeness or correctness. The information and opinions contained in this document are wholly indicative and for discussion purposes only. No rights may be derived from any
potential offers, transactions, commercial ideas et cetera contained in this presentation. This presentation does not constitute an offer or invitation. This document shall not form the basis of or be
relied upon in connection with any contract or commitment whatsoever.
Rabobank International
Francois Sonneville
Senior Analyst Beverages
Telephone +44 (0)207 809 3811
Mobile +44 (0)787 688 1024
E-mail [email protected]
