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When Chapel Down announced in October that it had scrapped its plans to sell, there was disappointment in the English wine industry.
Optimism about the future of the sector has grown over the past year following bumper harvests and increased international land acquisitions. But as wineries struggle to attract buyers and contemplate a poor 2024 harvest and a strained UK budget, the glitter has worn off.
“It's a shame because it would have been a very good indicator of valuation,” Ed Mansel Lewis, head of viticulture at property consultancy Knight Frank, said of the Chapel Down sale. There is no litmus test yet, which valuers can point to.
Would-be wine investors are entering 2025 more cautiously than in previous years, estate agents told the FT.
Many of the country's best vineyards are either lost or heavily indebted, and are now looking for investors to keep them operating or buyers willing to take on the capital expenditure needed to increase production.
Apart from Chapel Down, two of England's biggest wineries, Gusbourne and Rathfinny, are looking for buyers or partners, most of which are privately sold, according to wine agents.
The agents said that the real estate founders who are now established in this sector have reached a stage in their life where they must commit to a new round of investment, sell or transfer the business to a relative.
“It's not a question of throwing in the towel, it's a question of passing the baton. If you are going to make an additional investment you need to be able to make a time commitment. “Ultimately it's an agricultural system,” says Chris Spofforth, director of farms and estates at Savills.
Gusbourne's majority shareholder Lord Ashcroft said in July this year he was considering selling his shares, and Rathfinny said he was looking for a partner or buyer in April last year. No buyer has yet appeared publicly at any location.
“When buying an existing business, buyers are looking at the economics more than ever before, so that takes longer,” Spofforth said.
“In some parts of the sector the economy has been very difficult and the Budget has not helped that.
Agents say the higher minimum wage and national insurance contributions have affected the viticulture industry in the same way as many other sectors in the UK. Winemaking has been particularly exposed because of its reliance on low-paid workers, particularly in vineyard operations, said Nick Watson, head of viticulture at Strutt & Parker.
“There's been a lot of uncertainty,” he said, pointing to higher interest rates and rising inflation. “No market is immune to this great pressure, so we should not be surprised that viticulture is not exempt from that.”
Hattingley Valley, a well-known wine producer in Hampshire, made a loss of almost £8mn in the year to September 2023, according to accounts filed at Companies House. Meanwhile its payments to creditors for over-the-year funding rose to £5.6mn, up from £4.6mn a year earlier.
Another award-winning estate, Ridgeview in Sussex, made a loss of £1.5mn in the year to December 2023.
“There are businesses in this industry that took out loans when interest rates were very low and now they are struggling to meet interest rates,” said Mansel Lewis.
“I think we're going to see a consolidation where the best businesses with the least debt and the best sales methods start to expand and buy out those who are struggling to access the economy.”
The challenges are compounded by the poor 2024 harvest.
According to trade group WineGB, the 2024 vintage is expected to produce 6mn to 7mn bottles, which represents a 30 to 40 percent decline in the 10-year average. In its 2024 harvest survey, 70 percent of respondents said they had lost their harvest due to vine disease.
Agents say that despite the difficulties, they still see a lot of interest, from existing players who want to expand, from new entrants, and foreign investors.
Whereas earlier entrants wanted to plant land from scratch, buyers now prefer a “ready-made” business with an existing brand and infrastructure, says Savills' Spofforth.
Agents said the merger was likely to boost domestic sales, with major English producers buying struggling players.
“It will definitely go through the consolidation cycle,” said Watson at Strutt & Parker, adding, “but it won't happen overnight.”