Scale vs boutique
Why mid-sized wineries face the sharpest squeeze
16 June 2026
When I was at agricultural college, we were taken around a highly commercial dairy farm.
There was a software system that measured the nutrition needs of each of the cows daily, which determined the quantity of macro nutrients they received in their feed so they would be in peak physical condition.
The sensors also monitored the cows’ fertility cycles, so the farmer could identify the precise time that the cows were most likely to conceive. Good nutrition, high fertility success rates and good cow welfare were the key ingredients to achieving a high quantity and quality of milk.
Our lecturer explained that, in the dairy industry, there were two commercial models that worked financially. The first was the large-scale dairy business which sought to spread the fixed costs of the dairy farm over as large a milk output as possible. The price the dairy farm received for its milk was based on its commodity value, which they received from a single purchaser that went on to distribute the milk to supermarket buyers.
The second commercial model that worked was the much smaller dairy farm which sold their milk and other dairy products under a brand name, which allowed them to charge a premium price. Routes to market were either from a shop on the farm, milk rounds or milkshake vending machines.
In his opinion, milk producers had to commit to one model or the other. It was not possible to be somewhere in the middle; producing more own brand milk than you could sell directly to customers, but not enough to be at a scale where you were spreading the fixed costs as widely as possible. Those dairy farms occupying the mid-way point were vulnerable to running into financial distress and being bought by larger farms or having to sell off part of their farm and pivot down to adopt the boutique model.
This market segmentation is as true in the dairy industry as it is in any other industry with high capital and labour costs, like the wine sector. In fact, it is probably more likely to become true of the wine sector, because there are significant dry good costs associated with the sale of wine, like the bottles, corks, labels, wire hoods and foil, whereas milk sold on a commodity basis is collected by a tanker, so has no dry good costs whatsoever. Furthermore, milk is a 0% VAT rated product, due to it being an essential food item, whereas wine is a discretionary food item, so not only attracts 20% VAT, but also has an additional alcohol duty costing £2.67 per 75cl bottle.
These additional costs materially lower the gross margin per bottle of wine, which means that many more bottles need to be sold to reach break-even; the point at which the cumulative gross margin received from each bottle of wine sold are sufficient to cover the fixed costs of the business. The need for businesses to operate at scale is therefore ever greater, when you think about the sector’s break-even economics.
There is a nuance to what a large-scale business might look between the dairy sector and the wine sector. As milk is consumed daily within our western diet, it can be produced at a scale as a very undiversified item, and demand will remain at parity with production. On the other hand, traditional method sparkling wine is a celebration drink, and there are probably only a dozen occasions in the year when you might have reason to drink it. Therefore, businesses producing wine at scale are increasingly diversifying their SKUs and brand names to sell products at multiple price points.
A good example is MDCV, which makes charmat style wine under the Harlot and Silver Reign brands at around £18 per bottle, traditional method wine under the Silver Hand brand at around £29 per bottle, and their super premium Silverhand KYNG at £245 per bottle. They also make still wines under their Silverhand brand, with their chardonnay at £21 per bottle and their solaris at £19 per bottle. All these wines are sold by the same parent company, which has one management team, which allows them to spread that fixed costs over a very large number of bottles.
MDCV is relatively unique in that respect, and the reason why we have not seen the wine sector transition into the clear segmentation of boutique versus large scale, like the dairy industry yet, is because the UK wine sector is very nascent.
However, we are beginning to see consolidation activity within the industry. In 2024 Symington Family Estates, the owner of multiple fortified wine and port businesses based in Portugal, and Berry Brothers, the London based fine wine merchants, acquired Hambledon. A few years before that Freixenet, the largest producer of sparkling wine in the world, bought Bolney Wine Estate.
This is a trend that will continue, and Knight Frank are working for several drinks businesses that have access to international markets, who have tasked us with helping them to identify and acquire English wine businesses that have high levels of production capability and good brand penetration.
Whilst this is ongoing, we are seeing some medium sized wine business; those that are too large to be boutique, but too small to be large scale, run into the same issues that have shaped the dairy sector. In the past six months three medium-sized wine businesses (vineyards between 30-100 acres) have gone into administration.
Looking at the balance sheets of other wine businesses of a comparable size, the pattern unfortunately looks set to continue. Many businesses which were established with the founder’s own wealth are at a point where directors’ loans have reached a ceiling level, and the subsequent increase in long term creditors has been from interest bearing bank loans.
So, what?
This pattern suggests that there will be an increase in the sale of wine businesses led by creditors in the UK wine sector over the coming 12-18 months. Businesses with strong balance sheets will begin to consolidate the sector through strategic acquisitions, and the wine sector will begin to look more like the dairy sector.
If there are wine producers considering a pivot, the smart thing is to do it early. I expect we will see more wine businesses looking to divest themselves of ‘surplus’ vineyards, to pivot down to the boutique wine producer model. This will result in many established vineyards coming to the market. The early ones and the very well-regarded ones will sell, but it will not take long until there is little appetite amongst purchasers to buy established vineyards, at which point difficult decisions will need to be made about whether to grub the vines up.
Every story needs to end with a sense of hope. So, where’s the silver lining? The answer lies within the DNA of the ‘sort’ that find themselves in this sector.
We are an entrepreneurial, ambitious, and innovative bunch. It is often true that people’s best ideas come when their backs are against the wall. Richard Balfour-Lynn is rebounding from a period of adversity in the most spectacular style. In a recent meeting, he told me that their Nanette’s rose campaign, which they ran with several influencers on Instagram, to celebrate and give back to the earth that produced this beautiful wine, had been so successful that they have had to strictly schedule visits, because the number of people coming down from London on the Marden train was causing over-crowding in the cellar door.
If you would like to learn more about how our Viticulture Team can support your business, we’d be delighted to talk with you.
