Spirits industry ambivalent over Mercosur agreement

Brazil is seen as providing the biggest opportunity for drinks exporters

The Irish beverage industry exported just over €1m worth of produce to Brazil in 2018, compared to exports of €623m to the US, where some 60 per cent of Ireland’s whiskey exports are sent, according to Bord Bia. Photograph: iStock

The Irish beverage industry exported just over €1m worth of produce to Brazil in 2018, compared to exports of €623m to the US, where some 60 per cent of Ireland’s whiskey exports are sent, according to Bord Bia. Photograph: iStock

 

Figures in the spirits business were largely ambivalent on the back of a landmark trade agreement between the European Union and Mercosur member countries Argentina, Brazil, Paraguay and Uruguay.

“The big prize for everybody is Brazil,” said Pat Rigney, founder of the Shed Distillery in Leitrim which sells products including Drumshanbo Gunpowder Irish Gin and is shortly entering the Mexican market.

While Mr Rigney’s company is looking at South American markets including Brazil, he said import tariffs remained “enormous”. When tariffs were removed, he said, the country would present an opportunity. “We want to be a global brand so we want to be there in a meaningful way,” he said. Mr Rigney also said that Paraguay and Uruguay were “modest” markets.

The Irish beverage industry, which includes all drinks, exported just over €1 million worth of produce to Brazil in 2018, compared to exports of €623 million to the US, where some 60 per cent of Ireland’s whiskey exports are sent, according to Bord Bia.

Patricia Callan, director of the Alcoholic Beverage Federation of Ireland (ABFI), welcomed the agreement as “a significant boost for the Irish spirits industry at a time of developing uncertainty in the international trade environment”.

‘Significant extra’

She added that ABFI considered the four-year phase-out of tariffs to be a “significant extra” given that the normal phase-out period was at least seven years.

“This deal, we are also told secures strong geographical indication [GI] protection for GI products, such as that in place for Irish whiskey, Irish cream, Irish poitín, which is vitally important for our sector, along with a wine and spirits annex that seeks to prevent non-tariff barriers,” Ms Callan said.

Whiskey accounted for 42 per cent of the €1.5 billion in beverage exports from 2018, while liqueur accounted for 23 per cent. Gin exports were worth more than €5 million last year, Bord Bia also noted.

Quintessential brands, which owns the Dublin Liberties Distillery, has established its own US import company which is looking at the south American market. Darryl McNally, the master distiller in Dublin Liberties Distillery, said the Brazilian and Argentinian markets were becoming more developed. “They’re the China or Japan of five years ago,” he noted in respect of their attitude to whiskey.

Duties removed

The European Union’s trade deal with the Mercosur countries will see duties on whiskey and other spirits removed over time. Currently those products are taxed at between 20 per cent and 35 per cent.

The difficulty for those in the industry planning to sell to Mercosur countries is the lack of clarity around the timeline as to when tariffs will be fully lifted. Once they are lifted, Irish exporters will be “in the game”, Mr Rigney said.

The Mercosur countries comprise a region of more than 260 million consumers in the fifth-largest economy outside the EU with an annual gross domestic product of €2.2 trillion.

However, the markets have traditionally been closed markets with high tariff and non-tariff barriers. Just €45 billion worth of EU goods were exported to the Mercosur countries in 2018 with €23 billion worth of EU services exported in 2017.