How English wine reached maturity

Ed Mansell Lewis, one of England's leading vineyard agents, is learning French.

Knight Frank’s head of viticulture has seen an increase in enquiries from international wine producers, including Champagne companies, and believes a common language could be good for business. “I see my French teacher twice a week,” he laughs. “We’ve been role-playing to buy vineyards.”

A rapidly warming climate has made England's southern counties fertile ground for the wine industry – and fertile ground for overseas producers looking to reduce risks as extreme weather and disease strike their vineyards in the south.

Winemaker Chapel Down indicated this week that it was considering a sale to fund new vineyards and a winery, news that boosted the company’s share price by 10 per cent. The potential takeover of England’s largest producer, which is currently trading at a market value of £125m on London’s Alternative Investment Market, is the latest sign that England’s wine industry is moving from its humble roots to a mature sector.

“There is an emerging market for consolidation opportunities,” says Lewis, who has identified land in England for major producers including Chapel Down, Taitinger and Nytember. “It used to be about buying bare land and developing it. Now it’s about mergers and acquisitions.”

Once the butt of jokes, the concept of English wine was changed by the emergence of award-winning sparkling wines such as Gosbourne, Nitembre and Hambledon, which sparked comparisons with Champagne – and interest in Champagne houses.

Taittinger was the first to set foot on English soil with the purchase of a fruit farm in Kent in 2015, while Franken-Pommery Monopole has partnered with Hatingley Winery in Hampshire and is now building its own winery in Winchester. Rumors have circulated for years that LVMH subsidiary Moët & Chandon is considering a similar move.

Meanwhile, Spanish cava giant Henkell Freixenet in 2022 acquired Bolney Wine Estate, and California-based Jackson Family Wines (JFW) last year bought 65 hectares of land in Essex's Crouch Valley to grow Chardonnay and Pinot Noir to produce still and sparkling wines New. . Investment in English wine has risen from £20 million in 2017 to £80 million in 2023, according to property consultancy Strut & Parker.

“Over the last 15 years, the industry has evolved with the realization that you can make exceptional world-class wines on these shores,” says winemaker Charlie Holland, who was tasked with launching the English-language JFW project and until earlier this year was Gosburn's chief executive.

English success has come at the expense of other winemaking regions. Unpredictable weather, high temperatures and the ensuing spread of fungal diseases have decimated vineyards around the world, leading to a 9.6 percent year-on-year decline in global wine production in 2023, according to the International Organization of Vine and Wine (OIV).

However, England has bucked the trend, last year recording its best year ever with 22 million bottles, compared to 13 million bottles during its last record year, in 2018.

“Vine growing is now moving north in Europe,” says Patrick McGrath, CEO of luxury wine distributor Hatch Mansfield, and the man who persuaded Pierre-Emmanuel Taittinger to grow grapes in England. “Vine growing is happening in Holland and Sweden – and everyone has to adapt to the challenges.”

“It's not good news for any of us, but English sparkling wine is on the right side of climate change,” McGrath adds. “If we had known we were heading towards another ice age, we would not have seen the same level of investment.”

For most of its history, England was a heavy wine-consuming nation, not a wine-making nation.

Since Roman times, the British had attempted to grow vines, but England's wet and cold climate made it almost impossible. Finally, after World War II, researchers found that Kent's climate and landscape could support the growth of cool-touch grape varieties such as Seyval Blanc and Müller-Thurgau.

The first commercial vineyard in England was Hambledon Estate, which opened in the 1950s. But the road to success was long and difficult – at one point the farm was reduced to just 4 acres. In 1999 it was acquired by stock analyst Ian Kellett, who turned it into the largest producer of sparkling wine it is today.

Despite its award-winning production, Hambledon was unable to keep up with the costs of its expansion plans, leaving it vulnerable to takeover. Last year, the company was acquired by wine merchant Berry Bros & Rudd and Symington Family Estates, a wine and port producer based in Portugal's Douro Valley, with a £22.3m takeover bid.

Hambledon's history shows how newcomers to English wine have evolved over half a century: first researchers and hobbyists, then wealthy investors and retirees with spare capital, and now strategic commercial buyers.

“We see a huge commercial opportunity,” says Rob Symington, director of Symington Family Estates. Sparkling wine is growing faster globally than still wine, he adds, and with only 7% of the domestic market, there was plenty of room for growth.

Symington also spotted an opportunity to buy before English land suitable for farming became less expensive. The value of land under vines in England is currently estimated at £123,500 per hectare, up from £99,000 per hectare last year, according to Strutt and Parker. But this is nothing compared to the average price per hectare in Champagne, which is one million euros.

“In five to 10 years, it will cost us a lot more than it does today. It's higher risk but higher return over time,” says Symington. “I'm sure we won't be the last non-UK wine producer to come to us.”

The same goes for local big names. Emma Fox, chief executive of Berry Bros & Road, says that although her immediate priority is developing Hambledon, she would “never say no” about buying more vineyards in England.

Land values ​​are likely to rise significantly as the industry begins to seek protected designation of origin for winemaking provinces as has happened in Napa Valley and the Champagne region. Mark Driver, the former hedge fund manager who founded Rathfinney Wine Farm and other wineries in Sussex, has successfully applied to register “Sussex” as a protected designation of origin. Other provinces may soon follow suit.

Despite all its success and potential, the English wine industry is likely to remain a small part of the overall British economy.

Despite the increasing investment and vineyards, the industry remains largely fragmented, consisting mostly of small and medium-sized wineries, which generate revenues unlikely to attract serious investors. Producers with 100 hectares or more are rare, accounting for only 1% of the industry.

It is known that making a profit from the wine business is very difficult, due to high operational costs that are exacerbated by inflation and high borrowing costs. The owners of these companies tend to get involved because of their passion for winemaking, not because wine is the most profitable business.

As a result, selling can be “a very emotional and painful decision,” says Mansell Lewis. “Not everyone sells because they want to. It's not a perfect market, where there's a deal if supply and demand are equal. You have to make sure they're the right partners for each other.”

Only a few English producers are profitable, with several major producers making losses in the past few years. Chapel Down's operating profit rose 81 per cent to £2.4m in 2023, from £1.3m in 2022. By contrast, Gusbourne made an operating loss of £1.3m in 2023.

“It’s hard to get a decent return on investment in wine, which is why there are so many family businesses in it,” says Symington. “An investor might look at it and say, ‘The numbers don’t add up.’”

The industry is currently focusing on enhancing awareness in the local market, which currently accounts for 93 percent of total sales.

One strategy is to promote wine tourism, in the hope that consumers will get used to buying local wines at the cellar door, where producers can make much higher profit margins than if they sold through retailers or bars and restaurants.

Many UK consumers are hesitant about the prices of English sparkling wine, especially when faced with a range of cheaper, mass-produced sparkling wine options from Europe on supermarket shelves.

English wine sales have flatlined in recent years, raising concerns about overproduction. In 2022, the sector sold 8m bottles, with the top 25 producers accounting for 83 per cent of sales, compared with 9.3m in 2021 and 7.1m in 2020.

However, supermarkets tell the Financial Times that sales have soared in the past year. Aldi says it saw a 60 per cent increase in sales of its English wine range in the year to June, while Marks & Spencer says sales rose 35 per cent in the same period, with English sparkling wine now outselling cava.

“There is a lot of rapid growth within the industry, which is good, we're not at the stage of overproduction yet,” says Charlie Holland. “But there are inevitable growing pains with a young industry, so we need to work collaboratively.”

But for many big foreign investors, the English wine industry is perhaps best viewed as a safe haven against prevailing climate trends.

In addition to its Crouch Valley location, California winemaker JFW has been buying vineyards in Washington and Oregon in the northern United States, and across the border in Vancouver, as a hedge against the potential for lower yields in vineyards closer to the equator.

“(JFW) is a family business, thinking about the future, about climate change, about the warming of the planet,” Holland says. “To be a sustainable company for generations, that’s what they have to do.”

Additional reporting by Laura Onita