Navigating Brexit by Katya Torres de la Rocha, founder and MD of MexGrocer and key business hurdles that had to be overcome
Prior to January 1, 2021, preparing for Brexit was difficult, if not impossible, due to the government’s limited information on procedures. This was compounded by the pandemic and France’s December 2020 blockade of UK goods. Within the first eight weeks of 2021, it became clear that red tape would only worsen, making trade with Europe nearly impossible. Although there are no tariffs between the UK and EU, this exemption doesn’t apply to imported products, causing significant issues since comprehensive customs processes had not been established.
For decades, the EU was unprepared to handle goods from the UK made in other countries, leading to confusion, delays, and excessive taxation. For instance, in Finland, an additional 20% was added to corn flour, effectively doubling transport and tax costs. Moreover, some borders required lab inspections, further increasing costs and delays. In four cases, pallets were returned because customs refused to clear them, severely impacting our sales.
European sales accounted for 35% of our annual turnover. Consequently, I decided to open a second operation in Europe. Partnering with a long-term client in The Hague, we established Mexgrocer Europe B.V., replicating a warehouse and shipping containers from Mexico to Holland. This was incredibly complex due to the pandemic, requiring a ten-year lease worth over one million euros and a 20,000 square foot operation without physical inspection due to travel restrictions.
Ironically, post-Brexit, we had to ship to clients in Belfast from Holland. Shipping costs from Holland have doubled, and occasional shipments from the UK are fraught with issues. As a result, Mexgrocer Limited lost 100% of its European business, but Mexgrocer Europe has worked hard to recover and grow this segment.
The United Kingdom’s departure from the European Union, commonly known as Brexit, has introduced a plethora of challenges for businesses engaged in international trade, including MexGrocer.
As a company that specializes in distributing authentic Mexican food products across Europe, MexGrocer faced significant operational disruptions and increased complexities due to Brexit.
These problems span customs procedures, regulatory compliance, transportation logistics, cost implications, and market access.
Hurdles
Customs Procedures and Delays
One of the most immediate impacts of Brexit for MexGrocer was the reintroduction of customs checks and procedures for goods moving between the UK and the EU.
Previously, the seamless movement of goods within the single market allowed for quick and efficient cross-border trade.
Post-Brexit, MexGrocer must now navigate a labyrinth of customs declarations, import/export documentation, and potential inspections.
These new requirements can lead to significant delays at border crossings, disrupting the timely delivery of perishable food products and negatively impacting customer satisfaction.
Regulatory Compliance and Standards
Brexit has resulted in regulatory divergence between the UK and the EU.
MexGrocer must now ensure that its products comply with two separate sets of regulations and standards.
This includes food safety, labeling, and packaging requirements, which can vary significantly between jurisdictions.
Ensuring compliance involves additional administrative work, potential product modifications, and increased costs associated with dual certifications and audits.
For a company dealing in food products, maintaining the highest standards is critical, and any lapses can result in fines, product recalls, or reputational damage.
Transportation and Logistics Challenges
Transportation logistics have become more complicated and costly post-Brexit.
With the UK no longer part of the EU’s single market and customs union, MexGrocer faces new logistical hurdles.
Increased border checks lead to longer transit times, higher costs, and uncertainty. This is particularly problematic for MexGrocer, which deals in perishable goods that require timely delivery to maintain freshness and quality.
The added complexity of securing freight capacity and dealing with potential disruptions caused by customs backlogs further exacerbates these issues.
Cost Implications
The cumulative effect of new customs procedures, regulatory compliance, and logistical challenges significantly increases operational costs for MexGrocer.
Tariffs and non-tariff barriers, such as customs duties and compliance costs, directly impact the bottom line.
Additionally, fluctuations in the exchange rate between the British pound and the euro post-Brexit can further complicate financial planning and budgeting.
These increased costs may need to be passed on to consumers, potentially making MexGrocer’s products less competitive in both the UK and EU markets.
Market Access and Customer Base
Brexit has also created uncertainty regarding market access.
The UK was a significant market for MexGrocer, and the ease of access to the broader EU market allowed for expansive growth.
Now, with the UK outside the EU, MexGrocer must navigate two separate markets with distinct regulatory and logistical frameworks.
This bifurcation can dilute the company’s strategic focus and resources, making it challenging to maintain the same level of service and market penetration in both regions.
Additionally, trade agreements that the UK might enter into independently of the EU could alter market dynamics and competitive pressures, further complicating MexGrocer’s market strategy.
Brexit poses a series of substantial challenges for MexGrocer, from increased customs procedures and regulatory compliance to transportation logistics and cost implications.
The redefinition of market access adds another layer of complexity, necessitating a strategic reassessment of operations and market approaches.
To navigate these challenges, MexGrocer must invest in robust compliance mechanisms, explore new logistical solutions, and potentially renegotiate supplier and distributor relationships.
Adapting to the post-Brexit landscape is critical for MexGrocer to continue thriving in both the UK and the EU markets, ensuring that customers on both sides of the English Channel can continue to enjoy authentic Mexican food products.
