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European spirits exports tumble 19% in 2020

Exports of European spirits fell by 19% last year due to tariffs and Covid-19 restrictions, according to a new report.

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European spirits exports reported a double-digit drop in 2020

European spirits exports reached €6.8 billion (US$8bn) last year, figures from Spirits Europe’s Trade Review 2021 revealed.

In the report, Spirits Europe said 2020 had been challenging for the industry due to on-trade closures and travel restrictions as a result of the pandemic. Furthermore, the US-EU trade spat saw punitive tariffs enforced on the spirits sector.

Last month, the US and EU agreed to a five-year suspension of tariffs on products such as vodka and Cognac, marking a major breakthrough in the Boeing-Airbus dispute.

However, the EU and UK continue to impose a 25% tariff on American whiskey as part of the steel and aluminium dispute.

According to the report, the US was the biggest export market for EU spirits, falling by 16% in 2020 to €2.74bn (US$3.3bn). It was followed by the UK, which dropped 2% to €586 million (US$700m) and China, which recorded a 10% decline to €535m (US$636m). Of the top 10 markets for EU spirits, Japan witnessed the biggest decrease, falling by 43% to €107m (US$127m).

However, Australia, Ukraine and Canada reported increases, up 9%, 15% and 1% respectively.

Since 2018 when EU tariffs where first imposed on US whiskey, the sector dropped by 37%. Between October 2019 and August 2020, EU liqueur and cordial exports to the US fell by 28%, compared to the same period the previous year.

Spirits Europe noted that China remains a ‘stable’ export market, however producers may face ‘significant red tape and costs’ due to new rules on food and drink makers that are due to come into effect in 2022.

Spirits Europe noted several untapped markets with great potential, including Mercosur, India, and the Southeast Asia and Sub-Saharan Africa regions.

In 2019, the e-commerce market for alcoholic beverages had an estimated value of €19.6bn, with more than half coming from China. By 2024, Spirits Europe said the channel is set to double in size to €40.5bn, outpacing the growth of the total trade in alcoholic beverages over the next five years.

Ulrich Adam, director general of Spirits Europe, said: “In the next decade, 85% of global growth will take place outside of the EU. International trade and the ability to export our products throughout the world will be more critical than ever before, not just for our sector, but for the EU’s economy as a whole. When companies export and invest abroad, they export high quality standards, creating mutual benefits and paving the way for a sustainable recovery.”

10-point plan

The report contains 10 recommendations to boost growth of EU spirits exports, including resolving the EU-US trade disputes, ensuring the effective implementation of free trade agreements and ratifying them without delay, and covering the need for ‘constructive’ talks with China on regulations.

Adam said: “We should start by going back to tariff-free trade in spirits with the US, our first global market. Rebuilding the transatlantic alliance is a must if we want to focus on economic recovery and on tackling common challenges efficiently, through a positive and ambitious agenda, including a reform of the World Trade Organization (WTO). Going forward, we need to ensure that sectors in which the EU has a trade surplus are not brought into unrelated disputes and that trade policy acts as an enabler of sustainable growth.”

Spirits Europe also called for the creation of a level playing field between local and EU actors in third countries, and the strengthening of the role of the WTO, as well as tackling illicit trade.

Spirits Europe’s trade and economic affairs director, Pauline Bastidon, added: “Future growth in our sector will greatly depend on the EU’s capacity to rebuild transatlantic ties, maintain a constructive dialogue with China, ensure robust enforcement of commitments made by third countries, fight protectionistic measures in markets holding great potential such as India, and strengthen the role and relevance of WTO.

“All these are shared objectives with the wider EU economy, and a must to be able to put this health and economic crisis behind us all and embark on a green and sustainable transition.”

We explored the challenges facing European spirits companies in our latest report.

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