The UK’s largest wine producer Chapel Down returned to growth in the first half of the year as strong demand for English sparkling wine, the reopening of the on-trade and strong off-trade sales boosted performance.

Net sales revenues (which excludes duty) were up 4% to £6.9m in the six months to 30 June, with traditional sparkling wine performance up 35% year-on-year, offsetting the anticipated decline in lower-margin still wine availability.

Average selling prices increased 21% due to a combination of the increased share of sparkling wines in its sales mix and price increases on both sparkling and still wines in April 2022.

CEO Andrew Carter told The Grocer that around two thirds of that overall price growth was driven by sales mix and a third that was due to customer price increases, with Chapel Down Brut rising from around £25 to £27/£28.

Price increases had no negative impact on volume “demonstrating the strength of the Chapel Down brand”.

Sparkling now represents 72% of wine sales by value, compared with 61% last year.

He suggested that wider inflation and pressure on consumer spending would not derail the group’s premiumisation strategy.

“We believe that our English sparkling wine is an affordable luxury,” he said. “It is a special treat and consumers need that in tough times and we continue to hold a price advantage versus champagne.

“The drinks industry over the decades has been resilient to harder economic times.”

In the first half, on-trade sales rebounded strongly from 2021 and were up 109%, underpinned by a significant increase in outlet numbers from 420 at the start of the year to 1,230 as at 30 June 2022

The group has also significantly grown its off-trade penetration, with the channel accounting for 56% of sales in the period and sold in 2,600 outlets including major supermarkets.

Carter said the group remained on course to double the size of its business by 2026, with growth opportunities in on-trade, off-trade, DTC and international sales.

Currently the group is largely focused on the domestic market, with international sales accounting for around 2% of sales but with aims to grow that to 5%.

The portfolio weighting towards higher margin sparkling wines will continue, despite expecting increased still wine availability next year due to a better harvest. Long-term expectations are for sparkling to make up 70% of portfolio sales.

Overall group gross sales revenue from continuing operations was up 1% to £7.9m after the divestment of its beer and cider business in April 2021.

Gross margin increased by 5ppts to 51% primarily as a result of changes to the sales mix.

Adjusted EBITDA, excluding share-based payments, was up 14% to £913k, with pre-tax profits up 6.4% to £489k.

Carter said the group remained confident of a positive second half and expected to deliver net sales revenue growth and sustained margins for the full year.

In particular, the crucial fourth quarter would be supported by increased stock availability of traditional sparkling wine in comparison to 2021.

Speaking on the wider opportunity, he commented: “The English wine market is becoming an established and established win region of the world.

“We have 897 vineyards and 10,000 acres planted, which is nearly a third of the size of the champagne region, and in 2021 there were 9.3 million bottles of English wine sold with a growth rate of 31%.

“The growth momentum is there from a point of view of both a UK and international consumer perspective, and industry customers are very keen to work with us on what they see is a highly expanding and premiumised sector of the of the drinks fixture.”

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