Wetherspoon boss could pull Prosecco and Champagne from pubs over Brexit

The boss of UK pub chain Wetherspoon boss Tim Martin has said he would have no qualms over pulling Prosecco and Champagne from the shelves of the group’s 900 pubs in favour of alternatives if negotiations with the EU turn sour post-Brexit.

Wetherspoon chairman Tim Martin

Martin’s comments came with the release of the pub chain’s H1 results for the 26 weeks ending 28 January, which reported revenue growth of 3.6% to £830.4 million, and a 20.6% uplift in profits before tax to £62m.

Martin, a staunch supporter of the UK’s departure from the EU, used the announcement to highlight the strength of his business in the face of ongoing difficulties and criticism of the Brexit process, while also threatening action against Champagne and Prosecco produces should higher tariffs be imposed.

Commenting on the results, Martin accused trade organisations such as the CBI and the BRC of having “misled the public” by saying that food prices will automatically rise if the UK leaves the EU without a deal.

“This is a fallacy – the EU is a protectionist organisation which imposes high taxes on food, clothing, wine and thousands of other items from non-EU countries – which comprise around 93% of the world’s population,” he said.

He went on to state that the fear over a much bigger EU economy being able to withstand a “Mexican standoff” better than the UK over trade was also a “fallacy”.

Using a hypothetical example, Martin said: “Wetherspoon is one of the biggest customers, or possibly the biggest customer, of the excellent Swedish cider-maker Kopparberg. If trade barriers were imposed, so as to make Kopparberg uneconomic, then Wetherspoon could switch to UK suppliers or those from elsewhere in the world.

“In this case, the principal losers in a trade war would be the inhabitants of a small town in Sweden, where Kopparberg is produced, rather than the UK economy. Unfortunately for the Swedes, the EU negotiators, unlike those of the UK, are not subject to judgement at the ballot box, so Kopparberg’s influence on the outcome may be minimal.”

Trade war

In outlining this example, Martin said the same could be said of Champagne and Prosecco, implying that if unfair taxes were imposed on such products, he would simply stop stocking them, and instead source alternatives from other countries.

“In almost all cases there are suitable, and often excellent, alternatives to EU products available elsewhere,” he stated. “In fact, the biggest danger for EU producers, whose wine industry, for example, has lost huge market share to the New World, in spite of import taxes, is that UK consumers take umbrage at what they see as the overbearing behaviour of EU negotiators, and decide to favour products which originate elsewhere.”

Martin, who is no stranger to controversy, distributed 200,000 pro-Brexit beer mats across his pubs in the run up to the referendum last year, later revealing that the vote to leave had resulted in £18 million being wiped off the value of his shares. 

Despite this, Martin has remained steadfast in his belief in the long term benefits of the UK breaking away from the EU.

“Most economists who criticise Brexit use hypothetical arguments, but, in the real world, the UK can eliminate import taxes, improving living standards and simplifying the Byzantine tax system – both of these factors will improve the outlook for consumers and businesses in the UK.”

Approach with caution

Returning to its half year performance, Martin said the company had seen like-for-like sales increase by 3.8% and total sales by 2.6% in the six weeks to 11 March 2018, a slower start for the second half, and that the company remained “cautious” going into the second half.

“The company anticipates higher costs in the second half of the financial year, in areas including pay, taxes and utilities,” he added. “In view of these additional costs, and our expectation that growth in like-for-like sales will be lower in the next six months, the company remains cautious about the second half of the year.

“Nevertheless, as a result of slightly better-than-expected year-to-date sales, we currently anticipate an unchanged trading outcome for the current financial year.”

Paul Hickman, analyst at Edison Investment Research, observed that while the company had “performed strongly” in the first half, freezing weather will have impacted the start of the second half, calling initial reports unrepresentative, and also noted Martin’s insistence of using results announcements as a platform for his political beliefs.

“We believe there will be few winners in the challenged consumer economy in the months ahead,” added Hickman. “Wetherspoon has a well-understood and consistent value brand which should equip it to perform relatively well.

“Tim Martin’s repeated use of results announcements to expound his political views on Brexit at considerable length does serve as a reminder that this company is led by a single, strong-minded individual. This has never been a secret but is something that investors in the shares need to take into account.”