Up next in 10
The Chief Executive of Chapel Down has warned that a sustained increase to fuel costs due to the war in the Middle East could damage profitability. James Pennefather told City AM's retail reporter, Felix Armstrong that his vineyards have faced higher petrol bills.
He also said Americans are flocking to English wine and snubbing champagne.
The boss of England’s biggest winemaker said consumers across the Atlantic are fuelling record demand for English sparkling wine, as the AIM-listed firm bets big on the US market.
Get more of City AM 👇
🌐 http://www.cityam.com
X(formerly Twitter): http://twitter.com/CityAM
Facebook: http://www.facebook.com/cityam
Instagram: http://www.instagram.com/city_am
LinkedIn: http://www.linkedin.com/company/cityam
Show More Show Less View Video Transcript
0:00
As spiraling inflation and cost of
0:01
living crunch bears down on the UK,
0:04
Brits may be feeling a need of a stiff
0:05
drink. Hoping to provide that respite
0:07
this year is Chapel Down, England's
0:09
biggest wine maker. After a management
0:12
overhaul in the past year, the
0:13
AIM-listed company is hoping to rival
0:15
the legacy champagne producers as the
0:17
go-to for sparkling wine. I'm joined by
0:20
new chief executive James Pennefather.
0:22
First of all, why should we choose
0:24
English wine? English wine is a category
0:26
that's in really strong growth at the
0:27
moment. That's because over the past 50
0:31
years we have learned where to plant
0:34
vines and also we've learned that
0:36
England has a climate, which is a cooler
0:39
climate, is now the perfect place to
0:41
grow the vines that produce
0:44
sparkling wine. So, Chardonnay, Pinot
0:47
Noir, Pinot Meunier, which historically
0:49
has been used for for champagne, now we
0:52
are making sparkling wines that stand
0:54
shoulder to shoulder with the very best
0:57
from around the world. Our wines are
0:59
fresher, crisper, a bit more zestiness,
1:02
a bit more intensity, as well as
1:05
elegance and finesse. Last year the
1:07
category grew by 12%. Today Chapel Down
1:11
is announcing its results. We grew by
1:13
19% at the top line, but our traditional
1:16
method sparkling grew by 28% with our
1:19
profit adjusted EBITDA up 25%.
1:22
And as the climate in England,
1:24
particularly the south of England, gets
1:25
warmer, we have seen French wine makers
1:28
start to buy up land
1:30
in areas around England. Do you Is that
1:32
upping the competition for for English
1:34
wine?
1:35
I think the
1:36
It's It's It's certainly great that the
1:39
champagne houses are coming into UK as
1:42
well. If you look at the total
1:44
consumption of
1:46
sparkling wine here in UK alone, the 200
1:49
million bottles of sparkling wine drunk
1:51
every year. English sparkling only
1:53
represents 4% of that. So, there's a
1:56
huge amount of opportunity and potential
1:59
for all of us, whoever the owners are,
2:01
to grow the size of that pie. Mhm.
2:04
And are you hoping to
2:06
grow your market in Europe on the
2:08
continent? And how are you finding
2:11
importing over there? And And would you
2:13
like to see it to become kind of easier
2:15
to to export your wine across to the
2:17
continent? Well, yeah.
2:20
International sales for Chapel Down at
2:21
the moment are quite a small part of our
2:23
business. They're under 5%, but last
2:26
year they grew by 49%. So, international
2:29
expansion is is a key value creation
2:31
priority for us.
2:33
The market that is doing best for us is
2:36
the USA, in fact, which is the largest
2:38
champagne export market in the world.
2:41
And that we have a new distribution
2:44
partner called Jackson Family Wines for
2:45
the past year. And we found that the
2:48
Americans are really embracing Chapel
2:51
Down because it's it's a new
2:54
wine region, which is exciting to them,
2:56
but also that fresher, crisper style is
2:58
working well. We We took Fred Sirieix
3:01
out to New York just before Christmas.
3:04
He ran a blind taste test. 67%
3:07
of Americans preferred Chapel Down to a
3:09
leading champagne brand.
3:11
So, I think that the big opportunity for
3:14
us from an export point of view is going
3:15
to be the US market.
3:17
And do you feel that the kind of tax and
3:19
policy
3:20
conditions in the UK are they positive
3:23
for Chapel Down? What are your
3:24
difficulties in in managing those? And
3:27
how are you doing that? I think the key
3:29
thing about any taxation is certainty.
3:31
And we're obviously delighted that
3:33
Rachel Reeves has recently said that
3:35
she's not looking to put more taxation
3:37
burden onto businesses in the upcoming
3:40
budget. And that for us, that certainty
3:42
is what we can plan towards. So, have
3:45
you struggled with some of that
3:46
uncertainty in previous in the lead-up
3:48
to previous budgets?
3:49
Not not so much struggles,
3:52
but there have been changes
3:54
and in particular around NI business
3:57
rates, which actually have have impacted
3:59
our customers probably more than us. If
4:01
you If you look well documented what's
4:04
happening in pubs and bars,
4:07
actually last year we grew by 5% in pubs
4:10
and bars. Our distribution grew by 12%,
4:13
but but certainly we're seeing,
4:14
especially in the more sort of
4:15
mainstream sector, that that that is
4:19
struggling a bit more. The premium
4:21
sector of the pubs and bars are holding
4:23
up still quite well. Mhm.
4:25
And obviously we hear a lot about
4:28
hospitality firms and pubs in particular
4:30
struggling, particularly to do with
4:32
business rate hikes that came up in the
4:33
last budget.
4:36
Is it Does it worry you that that this
4:38
industry that's, you know, so important
4:39
to
4:41
to the UK is is facing pressures like
4:43
that?
4:44
Yes, certainly. I mean, we're from
4:47
Chapel Down's side, we're we're we're
4:49
diversified in terms of our channel mix.
4:52
The that channel represents about 15% of
4:55
our business, but it's actually a really
4:57
important place for people trying the
4:59
brand for the first time. And so, we we
5:02
encourage bars to serve Chapel Down by
5:05
the glass so that people can can try it
5:08
for the first time. Last year we
5:10
increased the number of listings we have
5:12
by the glass by 28%. It's a big growth
5:15
driver for us. And we're certainly
5:16
working with a lot of operators to
5:19
promote English sparkling wine in in
5:21
those venues. So, yes, they're a really
5:22
important part not only of British
5:25
culture, but also of English sparkling
5:27
wine's future as well. Mhm. So, what
5:30
does that mean if if pubs and bars that
5:33
stock Chapel Down and other English wine
5:35
face further pressures as they're
5:37
warning they will?
5:38
>> as as we're seeing at the at that top
5:40
end, at the premium end, actually the
5:42
market is is holding up well. We're
5:44
finding that people are still going out
5:46
and finding reasons to to celebrate. And
5:48
we think that that will continue. Mhm.
5:50
And elsewhere, what does Chapel Down's
5:53
consumer profile look like? Do you have
5:55
a lot of interest from from younger
5:57
people, from Gen Z? Yes, I think this is
5:59
one of the most exciting parts of
6:01
English wine at the moment is that the
6:04
millennials have really embraced the the
6:06
category, especially English sparkling
6:08
wine. It's almost like a generational
6:10
shift. And And we think that they as
6:12
well as liking the fresher, crisper,
6:14
zestier style of wine, they also love
6:18
the the stories, the heritage, the
6:20
craft, the sustainability that English
6:22
wine offers. And they can come and visit
6:25
the vineyards as well, within only an
6:27
hour of of London. And at Chapel Down in
6:30
our brand home in Tenterden, we have
6:32
over 50,000 visitors a year.
6:34
Over 25,000 pay for tours every year.
6:38
They go away having learned a little bit
6:39
more about English wine, but hopefully
6:41
also as brand ambassadors for Chapel
6:43
Down. And how are you seeing these
6:44
younger consumers engaging Chapel Down?
6:47
Are they trying it at bars and
6:49
restaurants? Or are they favoring buying
6:51
it in for
6:53
dinner parties and things like that at
6:54
home as as some Gen Z tend to stay at
6:56
home more than going out as often? So,
6:59
50% of our sales are through what we
7:02
call the off-trade channel, which is the
7:04
the take-home channel. We also have a
7:06
further 20% of our sales through our own
7:09
direct-to-consumer e-commerce.
7:11
What we're What we're finding about the
7:14
sparkling wine category is that
7:16
champagne occasions were historically
7:18
those more formal celebration occasions.
7:21
And what's happening now is that people
7:24
are adopting English sparkling wine,
7:26
which is also a high-value sparkling
7:28
wine, for more
7:30
informal celebration occasions, such as
7:32
celebrating birthdays, wedding
7:34
anniversaries, promotions, graduation,
7:36
etc. And so, yes, people are finding
7:39
lots of reasons to to celebrate with
7:42
Chapel Down and English sparkling. We
7:44
call this big little moments. And that's
7:46
one of the reasons we think that the the
7:48
future is resilient for us because
7:51
people will, whatever's going on in the
7:54
wider economy, they're still going to
7:55
find reasons to come together and
7:57
celebrate. Mhm. And to to move on to
8:01
some of the economic factors at the
8:02
moment, have you found that rising
8:04
energy costs have impacted your
8:06
production in terms of the production of
8:07
glass bottles and things like that? So,
8:10
we're we're relatively
8:12
insulated against the cost of glass
8:15
bottles, certainly for for this year.
8:18
Um that we were impacted after the
8:20
Ukraine war in in 2022.
8:23
I think when Where we're seeing an
8:25
impact is on fuel costs. So, the tractor
8:30
fuel in our vineyards, we have 1,000
8:32
acres now planted.
8:34
Also our logistics costs clearly have
8:36
gone up. That's still quite a small part
8:38
of overall
8:41
cost base.
8:42
And
8:44
And those those those are manageable. In
8:46
terms of In terms of wider sales,
8:49
actually our sales into the Middle East
8:51
region at the moment are are relatively
8:52
small. So, we're not we're not
8:54
not seeing immediate impact from that.
8:57
And is there a fear that as
9:00
people brace for higher inflation and
9:02
cut back on discretionary spending, is
9:05
there a fear that those kind of
9:06
celebratory moments will become toned
9:08
down and spending on things like
9:10
champagne might get cut back? Yes, so
9:14
we've we've reported this morning that
9:16
we the strong momentum that we saw in
9:18
2025 has continued in Q1.
9:22
So, in terms of impact on our top line
9:24
sales from the Middle East war at the
9:26
moment, we saw really strong Easter
9:29
trading as well. But obviously, if there
9:32
is a significant
9:35
deterioration in consumer confidence,
9:37
and that that is something that we will
9:38
have to manage.
9:40
But we believe that we we exist in a
9:44
space where where people come together,
9:46
celebrate everyday
9:49
celebrations. And therefore, we're quite
9:52
resilient and almost have defensive
9:54
characteristics within Chapel Down.
9:56
We're We're certainly seeing those
9:58
continuing. At the start of this month,
10:00
I was Chapel Down sponsors the boat
10:03
race. I went down to the river and the
10:06
atmosphere and the attendance and the
10:08
buzz on and the spirit of celebration
10:12
was the same as it has ever been there.
10:14
And likewise,
10:15
London Marathon at the weekend, still a
10:18
huge sense of celebration. We believe
10:20
people will continue to celebrate. Mhm.
10:22
And as you say, as Chapel Down sponsors
10:24
the boat race,
10:26
one of your English wine rivals,
10:28
Nyetimber, sponsors the English rugby
10:31
and is carried on British Airways. Do
10:33
you feel that there's a kind of hotting
10:34
up rivalry in in English wine and how
10:36
are you managing that and trying to pick
10:38
up the pace there? Uh we we the the size
10:41
of the prize for English is for us to
10:44
get out into the the wider the market. I
10:47
suppose we've over the last 50 years,
10:50
we've created
10:52
in English wine as
10:53
a set of quality credentials that are
10:55
now world recognized. The the challenge
10:58
for Chapel Down now is to become
11:01
one of the leading
11:03
global sparkling wine brands. And that
11:06
is our next phase. We sponsor England
11:09
cricket. We sponsor where the exclusive
11:12
English sparkling wine served at Royal
11:13
Ascot where last year's sales were up
11:16
actually 13% and we've recently signed
11:18
with Royal Philharmonic Orchestra as
11:20
well. So, there is plenty of opportunity
11:24
for English sparkling wine, whatever
11:26
brand you are. Mhm.
11:28
And you mentioned earlier the cost of
11:29
fuel for your tractors is one of the
11:31
biggest concerns in terms of the current
11:33
economic environment. And obviously,
11:35
yours is a business that's relying on
11:37
land and on agriculture.
11:40
What your thoughts on the kind of tax
11:42
pressures and and the recent energy
11:44
pressures facing farmers and agriculture
11:46
in that part of the economy?
11:48
Well, yeah, for for us it's a a smaller
11:51
part
11:52
of our of our total cost base. Yeah,
11:55
we're we're certainly hoping that the
11:57
situation in the Middle East is going to
11:58
resolve itself soon.
12:01
Not only for Chapel Down, but for as you
12:02
say, for the wider agricultural sector.
12:05
Thanks James for joining me. And for
12:06
everything in English sparkling wine, go
12:08
to cityam.com.
News