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When Chapel Down announced in October that it had canceled its plans to sell, disappointment spread through the English wine industry.
Optimism about the sector's prospects has increased over the past year following a bumper harvest and a slight increase in international property acquisitions. But as wine farms struggle to attract buyers, deal with a weak 2024 crop and a scathing UK budget, the luster has faded.
“It's unfortunate because it could have been a very good benchmark for benchmark valuations,” Ed Mansell Lewis, head of viticulture at property consultancy Knight Frank, said of the Chapel Down sale. “There hasn't been that critical test yet that appraisers can point to.”
Prospective wine investors are heading into 2025 with more caution than in previous years, land agents have told the Financial Times.
Many of the country's prominent vineyards are either making losses or taking on huge debts, and are now looking for investors in order to stay afloat or for buyers willing to bear the capital expenditures needed to increase production.
Along with Chapel Down, two of England's leading wine estates, Gosborne and Rathfinney, are looking for buyers or partners, with several for sale privately, according to wine estate agents.
Real estate founders who are now established in the sector have reached a point in their lives where they need to either commit to a new investment cycle, sell the company or transfer the business to a relative, agents said.
“It's not about giving up, it's about passing the baton. If you're going to commit to further investment, you have to be able to put in the time. It's ultimately a farming operation,” said Chris Spofforth, farm and estate director at Savills.
Lord Ashcroft, Gosbourne's majority shareholder, said in July this year that he was considering selling his stake, and Rathfinney said she was looking for a partner or buyer in April last year. No buyer has publicly appeared for either property.
“When buying an existing business, buyers scrutinize the economics more than they used to, so it can take longer,” Spofforth said.
“In certain parts of the sector, the economic situation has become much more difficult, and the budget has not helped with that.”
Agents said the rise in the minimum wage and National Insurance contributions had hurt viticulture businesses in the same way they had affected many sectors in the UK. Nick Watson, head of viticulture at Strutt & Parker, said the wine industry was particularly vulnerable because of its reliance on low-paid staff, particularly in vineyard operations.
“There was a lot of uncertainty,” he said, pointing to rising interest rates and a rebound in inflation. “No market is immune to these macro pressures, so we should not be surprised that viticulture is not exempt.”
Hattingley Valley, a well-known Hampshire sparkling wine producer, made a loss of around £8m in the year to September 2023, according to accounts filed at Companies House. Meanwhile, its payments to creditors due in more than a year stand at £5.6m, compared to £4.6m the previous year.
Another award-winning property, Ridge View in Sussex, made a loss of £1.5m in the year to December 2023.
“There are companies within the industry that took on debt when interest rates were much lower, and are now struggling to service interest,” Mansell-Lewis said.
“I think we will likely see mergers as fitter companies with less debt and good ways to go to market start to expand and buy up those that are struggling to achieve economies of scale.”
The challenges are exacerbated by the poor 2024 harvest.
According to trade group Wine GB, the 2024 vintage is expected to produce between six and seven million bottles, which represents a 30 to 40 percent decline on the 10-year average. In the 2024 harvest survey, 70 percent of respondents said they had lost yield due to disease in the vines.
Agents said that despite the difficulties, they are still seeing a lot of interest from existing players looking to expand, from new entrants, and from foreign investors.
While previous entrants wanted to grow a property from scratch, buyers now prefer “off-the-shelf” businesses with a brand and infrastructure in place, Savills' Spofforth said.
Agents said the consolidation process was likely to accelerate within the local market, with major English producers buying up struggling players.
“You will inevitably go through a cycle of consolidation, but it won't happen overnight,” said Strutt & Parker's Watson.
