Chapel Down’s real advantage

Following a strategic review by Chapel Down’s board, they have announced they will consider a sale of the company alongside other fundraising options, including investment from new or existing shareholders.

The investment will be used to fund the creation of a new winery, planting of new vineyards and investing in their brand home in Tenterden, which are key projects that form part of their growth strategy.

It is the first investment opportunity of its kind in the UK, and the speculation abounding it is palpable both within the industry and more widely.

Much of the press coverage has discussed the investment opportunity through a detailed, financial lens. This article seeks to provide my viewpoint, as a vineyard broker.

During any transaction, the first thing you must do is try and build an understanding of the opposite side’s alternatives. From where Chapel Down sit, they know that a prospective purchaser is looking for an English wine business that can produce over 1 million bottles of wine per year, which they can sell through their existing routes to market.

Chapel Down’s 2023 harvest produced 3.4m bottles of still and sparkling wine from grapes sourced from 750 acres of commercially matured vineyards held under leasehold and freehold interests.. There is only one other wine producer in the UK that is currently making more than 1m bottles of wine each year, which is Nyetimber. Other large, regional wine producers sit in a category below, from a production perspective, as follows:

• Gusbourne make approximately 500,000 bottles a year
• Balfour made 800,000 bottles in 2023 but have winery capacity for 1.1 million bottles
• Hattingley Valley make approximately 400,000 each year
• MDCV UK project they will make 500,000 bottles this year, and want to reach 1 million bottles in 2025

It enables me to input Chapel Down’s search criteria and it will highlight only those properties that meet their requirements.

Once you have discounted all the sites to be ignored, you have your shortlist of sites to focus on. In this article, I am going to show you how many sites a prospective purchaser would have in their shortlist if they pursued option 3 as an alternative to buying Chapel Down. 

So, the net area of farmland suitable for vines which the prospective purchaser has to go at is 949 acres, across 15 holdings. This total acreage is 8% less than Chapel Down’s total acreage. What’s more, it is incredibly unlikely that all 15 landowners will be receptive to an approach. I listed the reasons that deals fall out of bed further up in the article. I have been able to sieve out active farmers, land leased to long term agricultural tenants and sites which are earmarked for solar and residential development, but I guarantee some of these 15 owners would not want to proceed for reasons of internal family conflict, or concerns that renting or selling the land would undermine their capital taxation plans. In my experience, you need to allow for a 60% failure rate, so my estimate is that the true net acreage of suitable land that the prospective purchase may be able to acquire would be less than 500 acres.

Suddenly, you see Chapel Down from a different perspective. They are protected by a barrier to entry which puts them in a category of one, because the alternatives to buying the business are far from straight forward. This is Chapel Down’s real advantage.