Queen's Port Supplier Feels Chill Wind of Brexit in Vineyards

(Bloomberg) -- Adrian Bridge’s family has sold port to Britain from Northern Portugal for over 300 years. Now, Brexit is casting a cloud over the wine that symbolizes the U.K.’s links with one of its oldest allies.

The U.K. is among the world’s biggest consumers of port -- a fortified wine, mostly red and sweet, produced from Douro valley vineyards often run by families with British heritage. Last year, one of Bridge’s brands, Taylor’s Port, was awarded a royal warrant of appointment as a supplier to Queen Elizabeth II.

Queen's Port Supplier Feels Chill Wind of Brexit in Vineyards

“We’ve seen wars, we’ve seen crisis, we’ve seen everything, and I guess we have to put Brexit into context,” said Bridge, 55. “Am I optimistic that something will be sorted out? Yes. Am I concerned? Yes.”

Reminders of port’s British links are sprinkled around the region, with names like Taylor’s, Croft and Graham’s displayed above cellars in Vila Nova de Gaia on the southern bank of the Douro.

For centuries, Britain relied on imported wine from countries like Portugal, and as it often didn’t survive the sea voyage, Portuguese wine was fortified with brandy to preserve its quality. A handful of British families moved to the area to produce and ship port home, and the U.K. remains key for them and the wider region.

River Jump

British tourists flood to cities like Oporto each summer, encountering groups of children who stand on the edge of a bridge over the Douro river, asking for as little as a euro to plunge into the cold, dark water below. The 65-foot leap is a tradition that’s been passed down through generations.

Queen's Port Supplier Feels Chill Wind of Brexit in Vineyards

“There’s a risk that business will suffer,” said Paulo Afonso, 82, who sells souvenirs in front of a port-wine lodge facing the river. “Everyone stands to lose from this situation.”

At state banquets hosted by Queen Elizabeth II, Symington Family Estates’s ports have been used for toasts, and its chief operating officer fears it might become a victim in any Brexit-inspired trade battle.

Wine “isn’t absolutely essential in peoples’ lives and its use as a weapon would have a very significant impact,” said Antonio Filipe. “It can be perfectly replaced by wines from Commonwealth countries.”

Alcohol Taxes

Under World Trade Organization rules, there’s little prospect of tariffs being applied to port. Still, the U.K. could apply new labeling requirements or raise taxes on alcohol as part of “retaliation” in a potentially acrimonious split with the EU, Filipe said.

Queen's Port Supplier Feels Chill Wind of Brexit in Vineyards

Moreover, the EU protects port as it does champagne in France or parma ham in Italy -- only port produced in Portugal can be labeled as port. The worry is whether it will continue to enjoy that protection in the U.K. after Brexit.

For some producers, the big worry is sterling, which has declined about 12 percent since the Brexit referendum. Just over a quarter of Adrian Bridge’s port sales go to Britain.

“For a supplier into the U.K. whose business is in euros the exchange rate is a fundamental issue,” Bridge, whose family owns the Yeatman Hotel overlooking Oporto, said. “It’s going to be tough, but I’m sure the U.K. will continue to enjoy some of the finer things in life, which include a glass of port.”

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