The British people’s vote Thursday to leave the European Union isn’t playing so big in Peoria.
Caterpillar might call the central Illinois city its headquarters, but the construction equipment-maker also has 9,000 workers in the United Kingdom. Its presence there, alongside a host of other Illinois companies in different industries, demonstrates just how close to home potential fallout from the EU vote might hit.
Uncertainty roiled the financial markets Friday, sending U.S. stocks down the most in 10 months. All 30 stocks in the Dow Jones Industrial Average ended the session lower, and Caterpillar was among the worst performers. Its shares closed down 6.64 percent.
While it said it respects the voters’ decision, Caterpillar on Friday asked “the British government and its European partners to make all efforts to move forward swiftly to negotiate a new settlement,” according to a statement on its website from Mark Dorsett, Caterpillar U.K. director.
“The U.K. is an intrinsic part of our European supply chain and we urge all parties to reach an agreement that quickly removes the uncertainty, allows the U.K. to retain full access to and from the single market and protects the interests of businesses with strong commitments and investments in the U.K.,” said Dorsett, who added the company “remains committed to a competitive presence in the U.K.”
Dorsett’s concerns were echoed by other local companies.
Mondelez International, the Deerfield-based snack food company, has much at stake in Europe, which accounts for more than a third of its $30 billion in annual sales. The U.K. is among the top three European markets for Mondelez.
Key to that equation was the 2010 acquisition of Cadbury by predecessor company Kraft Foods, which added the top-selling British chocolatier to its portfolio. Mondelez has nine locations in the U.K., including five manufacturing sites and a global chocolate research and development facility.
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“We are confident that we are well-positioned as a business to navigate the consequences of the vote,” Valerie Moens, a Mondelez spokeswoman, said in a statement. “As a business that sells products across the EU, we are closely monitoring the situation in terms of next steps. Our brands are much-loved by U.K. consumers and we remain committed to manufacturing in Great Britain.”
Deerfield-based Beam Suntory, the world’s third-largest premium spirits company with $5 billion in annual sales, also has a significant operational footprint in the U.K. Matt Shattock, Beam Suntory’s chairman and CEO, said in a statement Friday the company and industry will work through trade, tax and regulation issues raised by Brexit.
“We remain as committed as ever to our teams, commercial operations and brands based in the U.K., where we have more than 300 employees, including our distilleries in Scotland,” Shattock said. “The spirits industry thrives in most economic conditions, and this development does nothing to change the demand for our products in the U.K. or anywhere else.”
Baxter International, Abbott and AbbVie, Chicago’s big pharmaceutical companies, all generate big sales in the United Kingdom and other European countries and also have manufacturing plants across the Atlantic.
The U.K. is AbbVie’s third-largest market, with $688 million in sales last year, well behind the U.S., where the company had $13.5 billion in sales. The company does not break out total European sales.
For Abbott, the U.K. generated $430 million in 2015 sales. Germany, the Netherlands and Switzerland were all bigger markets. Baxter said European sales totaled $2.77 billion last year, about 28 percent of its total revenue of $9.9 billion.
Baxter spokeswoman Deborah Spak said, “It is still too early to know what the full impact of this vote will be. But given our long and close collaboration with patients and health care providers in the U.K. and across the EU, we will remain fully engaged as this issue moves forward in order to continue to meet their needs.”
Declining foreign currencies have hammered U.S. companies with big international operations because their sales abroad are worth less when translated back into dollars. These companies have to brace for further weakening of European currencies after Britain’s vote to leave the European Union battered the British pound, said Damien Conover, director of the health care analyst team at Morningstar.
Otherwise, Conover said he doesn’t think Brexit will have a “material” negative effect on pharmaceutical companies. Health care spending tends to be inelastic, meaning that people still need medicine even in a financial crisis.
Others say it’s too early to assess the impact.
Few Spirits, a 5-year-old Evanston distillery, recently landed its products on shelves at upscale British retailer Marks & Spencer, as well as at Majestic liquor stores across the U.K. Exports to the U.K. account for about 20 percent of the company’s annual sales, which are expected to top $2 million this year.
Paul Hletko, founder of Few Spirits, wasn’t optimistic about the short-term impact of Brexit on his business. “It’s going to hurt the U.K. economy, and I think it’s going to hurt the pound,” Hletko said. “Anything that makes our products more expensive there isn’t going to help us.”
Hletko said he wasn’t expecting the Brexit vote to pass. Neither likely were his British retail partners, who brought in significant stock but hadn’t paid for it yet, he said.
Long-term, Hletko expects the U.K. to remain a strong trading partner with the U.S., and a good market for his company. “My guess is that it equalizes over a five-year time frame, ” he said.
Other Illinois companies with significant presences in the U.K. that will closely watch how events unfold include Northern Trust and Navigant Consulting, both based in Chicago; Moline-based Deere & Co. and Deerfield-based Walgreens Boots Alliance, which has more than 2,500 Boots-branded retail pharmacies in the United Kingdom.
The U.K. is also a major market for Lincolnshire-based CDW. In 2015, Lake Forest-based W.W. Grainger acquired Cromwell Group, a distributor of maintenance and repair supplies in the U.K. Lake Forest-based Tenneco and Deerfield-based CF Industries also have manufacturing operations there.
“In the immediate term, it’s business as usual for the company,” CF spokesperson Chris Close said. “Like many others, we’ll be watching how the exit process develops, and will be prepared to adapt to the outcome.”
Robert and Sonat Birnecker, husband-and-wife founders of Koval, an 8-year-old Chicago-based distillery that produces organic whiskey, liqueurs and specialty spirits, weren’t toasting the Brexit news Friday. The fast-growing company projects annual sales of between $5 million and $6 million, with Europe accounting for about 10 percent of that total. Koval exports to the U.K. through a German distributor.
“At the end of the day, it’s bad for our European business,” said Robert Birnecker. “It’s already clear the pound dropped significantly. That makes it much more difficult for us to export to the U.K.”
While product already stocked in the U.K. is “at the old price,” the decline in the pound is ultimately going to lead to Koval’s products being “significantly more expensive,” he said.
“It makes it harder for us to gain any traction in the marketplace,” Birnecker said.
Birnecker said unless the pound recovers, Koval may have to offer short-term incentives to keep sales up in the U.K.
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