Have British winemakers lost their luster?

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When Chapel Down announced in October that it was scrapping plans for a sale, there was consternation in the English wine industry.

Optimism in the sector’s prospects has been seen in the past year following record high yields and increased international asset purchases. But as wine estates struggle to attract buyers and reckon with a weak 2024 harvest and the UK budget, the spark has faded.

Ed Mansell-Lewis, head of viticulture at property advisers Knight Frank, said of the sale of Chapel Down: “It’s a shame because it could have been a very good benchmark.” “There hasn’t been that litmus test yet as to which valuers can point to.”

More wine investors are entering 2025 than in previous years, land agents told the FT.

Many of the country’s most famous wineries are bankrupt or heavily indebted, and are now looking for investors willing to take care of them or buy the capital outlay needed to increase production.

In addition to Chapel Down, two more of England’s largest, pioneering wine estates, Gusborne and Rathfinney, are seeking buyers or partners, with several being offered for private sale, according to wine estate agents.

Agents said that property developers established in the sector have reached a point where they either have to commit to a new investment cycle, sell or transfer the business to a relative.

“The question is not to throw in the towel, but to pass the baton. If you want to invest more, you have to be able to give it time. At the end of the day, it’s an agricultural process,” says Chris Spofforth, director of agriculture and property at Savills.

Lord Ashcroft, Gusborne’s majority shareholder, said in July this year that it was considering selling its stake, and Rathfinney said in April last year that it was looking for a partner or buyer. No official buyer has yet been announced for either estate.

“When buying an existing business, buyers are going to analyze the economics more than before, which can take longer,” Spofforth said.

“The economy has been very difficult in certain parts of the sector and the budget has not helped that.”

As with many sectors in the UK, higher minimum wages and National Insurance contributions have hit the viticulture business, agents said. Winemaking is particularly vulnerable to the reliance on low-paid workers, particularly for vineyard operations, said Nick Watson, head of viticulture at Strout & Parker.

“There was a lot of uncertainty,” he said, pointing to high interest rates and a rebound in inflation. “No market is immune to those macro pressures, so it shouldn’t surprise us that viticulture isn’t immune.”

Hattingley Valley, a well-known sparkling wine producer in Hampshire, made a loss of almost £8m in the year to September 2023, according to accounts filed at Companies House. Meanwhile, payments to creditors over a year were £5.6mn, up from £4.6mn last year.

Another award-winning property, Ridgeview in Sussex, made a loss of £1.5mn in the year to December 2023.

“There are businesses in the industry that took on debt when interest rates were very low and are now struggling to service the interest,” Mansell Lewis said.

I think we’ll see a consolidation where the very best businesses with low debt and good marketing channels begin to expand and buy those struggling to make ends meet.

The challenges are exacerbated by the weak harvest of 2024.

According to the trade group Wine GB, the 2024 vintage is expected to produce 6mn to 7mn bottles, which is a 30-40% reduction on the 10-year average. In the year In the 2024 harvest survey, 70 percent of respondents reported losing yield due to disease in the vines.

Representatives said that despite the challenges, they were still seeing a lot of interest, from existing players looking to expand, new entrants and foreign investors.

While early entrants wanted to plant from scratch, now buyers are opting for “turnkey” businesses with existing brands and infrastructure, says Savills Spofforth.

Agents said consolidation could increase momentum in the domestic market, where large British manufacturers are buying up struggling players.

“It’s inevitable that we’ll go through a consolidation cycle,” says Watson at Strutt & Parker, “but it won’t happen overnight.”