Samstag, 5. März 2016

Financial Times: Sparkling prospects

“Champagne sales are going to decline here, and English sparkling wine will eventually take half of the champagne's share.“ So predicts Ian Kellett, once managing director of the investment bank Dresdner Kleinwort Benson and now owner of Hambledon Vineyard in Hampshire. He's convinced that England's advantage in its lower land costs (Champagne's are €900,000 to € 2,1m a hectare). And he maintains there is no shortage of suitable land in England - “if the farmers will sell it“. He also expects champagne prices to continue to rise along with the debt burden of maturing stock.

England's burgeoning army of vigenerous are certainly bullish, so much so that Frazer Thompson, chief executive of Chapel Down, one of the biggest producers of English fizz, cites “a gold rush on the North and South Downs“. The total area of Britain under vine has doubled in the past seven years: there are now more than 5,000 acres of vineyard, farmed by 470 vine growers, with grapes vinified in 133 vineries.

This flood of new players is largely made up of people with successful careers in other fields - and considerable funds to invest. Simon Robinson was a senior partner at the law firm Slaughter and May before planting his first vines at Hattingley in Hampshire in 2008. Both Hambledon and Hattingley Valley have proved they can mahe excellent sparkling vine - using same grapes and methods as in Champagne but with often crisper results in a distinctively English style.

Mark and Sarah Driver of Rathfinny Estate, ex-hedge fund manager and lawyer respectively, are partners in 600 acres of the South Downs. They plan to plant 400 acres with vines, which they hope will produce 1m bottles of sparkling wine a year by the early 2020s. They admit to having spent more than £10m so far.

Twp-thirds of English wine (British wine refers to much less delicious stuff made from imported grape concentrate), and all of England's best wine is sparkling. In Britain's cooler climate, the challenge is ripening grapes that tend to cling to their to their initial high acidity - but at least high acid is a positive attribute in sparkling vine. Some in Champagne are beginning to worry about falling acid levels as climate change takes effect.

The longstanding rumours of Champenois investment in English wine came to fruition at the end of last year when Taittinger announced a joint venture in Kent with its UK importers Hatch Mansfield. The first of their vines will go into the chalky ground in May next year and more investment from Champagne is rumoured. Kellett is keen to encourage this, on the basis that it will feed English fizz into the global distribution networks built up by the Champenois.

Chalk, common in Champagne, is closely associated with good quality sparkling wine from the Champagne grapes Chardonnay, Pinot Noir and Pinot Meunier and can be found in parts of Kent, Sussex, Hampshire and Dorset. But according to Emma Rice, UK-trained winemaker at Hattingly, they are constantly being approached by wannabe vignerons with no clue about the realities. Thanks to the capricious climate, English grape harvests vary enormously.

The nightmare year was cool, wet 2012 when Hattingly expected to pick 200 tons of grapes and ended up with 11. Nyetimber, the pioneer producer of top quality English sparkling wine, made no wine at all in 2012.

Site selection is critical to success in English wine. Many a potential vineyard has been planted somewhere too high or too windy to ripen grapes reliably. This is where English wine specialist since 1973 and Master of Wine Stephen Skelton steps in to advise. But, according to Rice, the price of land tends to double from a basic £10,000 an acre for regular agricultural land, “once they get a sniff that Stephen's involved“. Farmers know that would-be vignerons tend to have deep pockets. But, as Thompson observes, “Wine is patience and people with capital tend not to have it.“ Wine production, and particulary sparkling wine production, is an extremely long-term business. It takes at least three years before vines produce a crop, then another three while the wine ages in bottle. Patrick McGrath MW of Hatch Mansfield says: “It's easy to lose lots of money very quickly, particularly if you build a winery.“ Hattingly expects to move into profit this year, eight years in, but then its cash flow is bolstered by contract winemaking for other growers.

One man enjoying the spectacle of all these tyros moving into its business - and throwing large amounts at it - is Frazer Thompson of Chapel Down. He has been there for 15 years and says: “Margins are extremely good at the end of thez cycle, and mature businesses like ours took the pain many years ago, but you've got the likes of Lord Ashcroft at Gusbourne who's seven years behind us and is burning cash furiously“.

Unusually for an English wine producer, Chapel Down is a public company (though Gusbourne is too); investors include City financier Nigel Wray. But the company needed to invest, inter alia, in a new chalky vineyard and was successful with crowdfunding: 2,250 new investors were attracted by a 33 per cent discount on their Chapel Down wine purchases. Of course, the crucial question is the selling price of all that fizz.

Total production of English wine reached 6,3m bottles in 2014. In the same year, we imported 32,7m bottles of champagne. As production volumes increase, will English producers be able to maintain the current average price of £25 to £30 a bottle?

Rice of Hattingly Valley has no qualms. She says they cannot satisfy demand for their top, barrel-fermented wine at £65. But Thompson points out that the average selling price of champagne is much lower than we think, given supermarket special offers. He reckons the future of Chapel Down lies in selling 200,000 bottles of a non-vintage blend a year by £15 to £20. “I keep hearing about new producers whose aim is 'to be the best'. That's not a business plan.“

Kernaussage: Of course, the crucial question is the selling price of all that fizz.