Wednesday, 4 May 2011

ENGLISH WINE: Growing pains

English wine is undergoing a planting boom, especially in the sparkling segment. But will demand keep pace with supply? Graham Holter reports. 
 
emglish_wine.jpg Mark Driver surveys the East Sussex hillside he has bought, with its uninterrupted view of the Cuckmere estuary and the English Channel beyond. Soon, this quiet patch of chalk downland will be the site of the biggest single vineyard in Britain. The £1m winery, currently just a drawing, will be producing 1m bottles a year of Rathfinny Estate sparkling wine.

The former hedge fund manager paid a reported £3.5m for the 600-acre farm and will plant the first vines there next spring. Most of the vines will be Champagne varieties – Chardonnay, Pinot Noir and Pinot Meunier.

“We’re going in relatively slowly,” Driver says. “We’re planting up 50 acres, which gives us immediately the right sort of scale, and then we’ll build that up to 150 acres over the following two years, so by 2014 we’ll have 150 acres under vine. By 2015 we’ll be harvesting 150 acres and that’ll satisfy the first part of the winery.

"The following year we’ll see what’s working so that we can then adapt our plantings to make sure we’re planting the right clones for the following three years.

“It’s quite interesting: a lot of people say there’s a big oversupply of English wine, and yet we’ve already had one of the major supermarkets come and knock on the door and say: ‘Can we come and have a look at what you’re doing? We’re really interested – we cannot get enough English sparkling wine at the moment’.”
For the English wine industry, there’s something of a boom going on. Julia Trustram Eve, marketing manager of English Wine Producers, says the total area under vine has increased by more than 40% in five years.

Steady increase
“During that time we’ve seen a steady increase in planting of over 100ha per year,” she adds. “The kinds of people investing come from all walks of life. From landowners to businessmen; backgrounds ranging from law to banking and others. They are coming into this business with their eyes open – they realise that they have to make the business work.

“I would say that vineyard sites are getting larger now. The official data shows that the average size of a vineyard is bigger, although really there’s no such thing as an average-sized English vineyard. Individual vineyard sites are now starting more from 4ha upwards.”

Data compiled by wine consultant Stephen Skelton MW shows that, by and large, viticulture in the UK still happens on a small scale.

There are 180 vineyards less than 1ha in size, and the vast majority – 386 – are smaller than 5ha. Thirty-seven are between 5ha and 10ha, and just 18 are bigger than this. But there is clear evidence that English wine producers are thinking bigger.

“There are already several quite large concerns,” Skelton says, “and for the overall size of the industry, which is around 1,500ha, I think we have more than our fair share. Something like 70% of the production is controlled by 17% of vineyards.”

Bacchus and Seyval Blanc are still widely planted, but in recent times the “vast majority” of new planting has involved Champagne varieties, according to Trustram Eve. These now account for something between 45% and 50% of the total, EWP estimates.

Is English wine a profitable venture – do producers get a return on their investments? “Ask an Australian or Californian the same question,” shrugs Skelton. “Some do, some don’t, some don’t have to, some don’t care – it’s the same the world over. You can make money out of making and selling English wine, but you need to build up a good fan base and sell a lot direct. Chapel Down is a plc and they make money after a fashion. I am sure that Camel Valley makes money. I have several clients that think grape growing is better than many other crops.”

Anthony Rendall, who is currently planning a new vineyard and winery near Glyndebourne in East Sussex (see box), argues that English wine production is cheaper than in Champagne: “The sales price of English sparkling wine varies between 60% and 100% of the price of benchmark Champagne. Production costs, on the other hand, are significantly lower. For instance, the cost of grapes in Sussex during the October 2010 harvest was £1.20 per kilo, which is 20% of the price of comparable grapes in Champagne.

“In these conditions, it is now feasible to develop a highly profitable business by creating a prestigious brand and making an early claim on this relatively new and extremely promising market. Rather than compete on price and volume, we will concentrate on limited volumes of the highest quality product.”
His future near neighbour, Mark Driver at Rathfinny, argues that economies of scale are a key factor. “In order to make something a commercial venture as a vineyard you need a minimum of 50 acres; really it’s 150 acres and then it becomes a proper commercial venture,” he says. “Below that the economies just aren’t there.

“If you’re going to make your own wine, the investment in the winery itself is just so expensive and the cost of expanding that to accommodate extra acreage is so minimal, because it’s just tanks.”
Few, if any, now doubt that English wine can compete on quality, because producers like Nyetimber, RidgeView and Camel Valley have proved it can be world-class. But the longer-term question is whether supply will ever outstrip demand.

Stephen Spurrier, whose Bride Valley Vineyard is preparing to enter the fray (see box), says: “I don’t see supply getting too big for the moment, as the local demand is very strong. However, people like Nyetimber are looking at a million bottles in a few years, and that means exporting at least 50%. Not a business I would like to be in.”

Skelton adds: “My estimate is that the 500,000 bottles available now will rise to possibly 5m bottles by 2020. This is based upon current planted areas and if this continues to rise then so, eventually, will the production.”
This estimate would potentially give English producers 40% of the sparkling wine market in the UK, compared to the 4% they enjoy now. “A big ask,” he admits, “although in my view not an impossible one.” More wines priced below £20 would certainly stimulate sales, he argues, but simply making products more visible – a natural by-product of increased supply – would also play a big role.

“The demand is unknown,” he says. “What was the demand for Baileys, Red Bull, flavoured vodkas etc before they were invented? The demand will come when the supply arrives – until people see it on shelves, they cannot buy it."

Graham Holter, April 2011

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