Importance Score: 52 / 100 🔵
English Winemaker Chapel Down Aims for Profitability After Challenging Harvest
Chapel Down, a prominent English winemaker, anticipates a return to profitability this year, buoyed by robust Christmas trading followed by a promising start to 2025. Despite facing headwinds from a diminished 2024 harvest and fluctuating market conditions, the company is projecting strong sales growth and a positive financial outlook.
Impact of 2024 Harvest and Sales Performance
The 2024 harvest was significantly impacted by adverse summer weather, leading to a £750,000 setback for the winemaker in October. Furthermore, net sales revenue experienced a slight decrease of 5 per cent, totaling £16.35million for the year. This downturn was partly attributed to one-off elements within the off-trade sector, including inventory reductions by retailers.
Chapel Down‘s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) witnessed a considerable drop of 58 per cent to £2.42million. This decline was primarily driven by reduced gross profit margins and a non-cash fair value adjustment on biological assets.
Projected Return to Profitability in 2025
However, the business is optimistic about its financial recovery and expects to return to profit in the current year. This projection is underpinned by a strong commencement to 2025, indicating positive momentum for the English wine producer.
The Kent-based company stated that it is ‘currently trading well ahead of the prior year’ and foresees ‘strong sales growth for the year, with a return to full profitability.’
Expansion into the US Market
Chapel Down has also revealed a new agreement focused on the distribution of its sparkling wine in the US market. This strategic move signifies the company’s ambition to expand its global footprint and capitalize on international opportunities.
Challenges Faced by English Winemakers
Last year proved to be exceptionally challenging for winemakers in England, who endured the second-worst harvest on record. Unfavorable weather conditions and disease outbreaks significantly affected yields across the region.
Chapel Down’s net debt saw a substantial increase of 641 per cent, reaching £9.2million. This rise is associated with investments in new vine plantings and elevated stock levels from the 2023 harvest.
Financial Results: Chapel Down reported a decrease in net sales revenue and EBITDA for the year ending 31 December.
Analysis of Gross Margin and Sales Mix
The company’s gross margin for the year reached 48.4 per cent, a decrease from 51.8 per cent in the preceding year. This contraction was partially attributed to ‘a higher proportion of still wines in the sales composition.’
The newly announced agreement with Jackson Family Wines aims to facilitate the distribution of sparkling wines within the United States, identified by the group as ‘our largest potential export market.’
Chapel Down clarified that this agreement is part of a broader ‘range of options to further optimize distribution‘ in international markets.
The potential impact of tariffs, such as the speculated 10 per cent tariff on goods entering the US, on this agreement remains uncertain.
Future Outlook and Strategic Direction
Looking forward, Chapel Down stated: ‘The consumer landscape remains unpredictable, but Chapel Down is presently trading considerably ahead of last year and anticipates robust sales growth for the year, alongside a return to full profitability.’
Chairman Martin Glenn commented: ‘While 2024 presented a more demanding year for Chapel Down following the exceptional performance of the previous year, the business performed commendably, achieving ongoing strategic and operational advancement.’
‘As part of our renewed emphasis on wine, we significantly transformed our operations to establish a base for future expansion, encompassing organizational structures and culture, as well as our core business systems, processes, and data.’
‘These actions were challenging, and at times difficult, yet we greatly benefited from their successful implementation.’
James Pennefather, chief executive of Chapel Down, remarked: ‘I am pleased to join Chapel Down at a crucial juncture in the evolution of the English wine market.’
‘As the global reputation of England as a wine-producing region strengthens, particularly in sparkling wine, we possess a unique opportunity to establish Chapel Down as a distinguished wine brand with international recognition.’
‘With our experienced team, range of exceptional wines, and a clear strategic direction, we are well-positioned for growth both domestically and internationally.’