Chapel Down excited about future growth prospects after reporting half-year sales increase

Chapel Down has reported 15% year-on-year sales growth for the six months to June 30, 2018, as demand for its wine and spirits has soared.

Sales reached £5.71 million in the first half of 2018, compared to £4.98 million in the same period in 2017.

That was driven by a 19% growth in wine and spirits sales, while beer and cider grew 6% to £1.74 million.

Gross profit on wine sales rose 24% to £1.57 million, but gross profit on its Curious Drinks beer and cider portfolio dipped 2% to £545,000.

Chief executive Frazer Thompson said: “The first half of 2018 has seen considerable change in the drinks industry. We have seen the collapse of Conviviality and subsequent re-birth of Matthew Clark and Bibendum at C&C.

“We saw a surprisingly long football World Cup and the best summer weather for decades. We have seen considerable change in grocery retail and challenges on the High Street and in casual dining. We continue to see pubs closing. We can see there is more change to come. Yet at Chapel Down we also see more innovation and excitement and opportunity than ever before.

“Whilst we have been affected by all of the market challenges in different ways, we remain completely focused on delivering solid top line growth at good margins whilst we continue to invest strongly to ensure we continue to build strong and sustainable brands that our consumers and customers love.

“It is encouraging that interest in English wines – and Chapel Down in particular – has never been higher. The wine world has seen us grow the sparkling wine market and innovate and surprise with our still wines.

“That has enabled us to continue to improve our pricing and improve our margins, with sales up 19% and gross profit up 24%. And interest is not just from the UK, but increasingly in sophisticated wine markets internationally as news of the excellence of our wines spreads.

“We have taken our first significant steps to grow our international business through a partnership in our most important export market, the USA. We believe we have a distinctive and compelling proposition to offer Champagne’s export markets. This year, depletions in the US have grown by 17%.

“With demand for our wines continuing to exceed our ability to supply, we are greatly encouraged by the prospect of this years outstanding harvest with record yields and excellent quality fruit.

“Whilst all the fruit is not yet harvested, we can expect 40%-60% more fruit than we have ever received at quality levels to match the best vintages ever in England.

“We are planting more vines on truly exceptional land to help meet future demand. We planted 102 acres of new vineyards in May and were delighted to secure a further 388 acres of prime land earlier this month, which will be planted over the next three years to take our total supply acreage to 950 acres. This will be fully productive by 2024/2025. In an average year it should be producing some 2.4 million bottles of wine.

“And that wine needs to be better than good. It needs to be great. So we have been busy improving our winemaking and equipment and systems and were delighted to scoop five golds, ten silvers and seven bronze medals in the three major international wine awards competitions, a testament to our people, our investment and our relentless pursuit of excellence. We will be investing further over the coming years.

“We have also been very encouraged by the results of our Chapel Down gin and vodka launch. In a crowded marketplace, we have a distinctive product, beautifully packaged) and well priced. We have seen success not only in top end London bars and restaurants such as All Bar One, Mr. Foggs and Mark Hix but also in Majestic and more recently, Tesco.

“Although sales reached £300,000 in the first half, we are seeing further opportunities for growth in the second half and we will be building on the success of Chapel Down’s spirits through the creation of an exciting experiential bar, restaurant and Gin Works at Kings Cross, London just 38 minutes by train from our new brewery in Ashford.

“In the beer market, Curious beers and cider have maintained the highest standards of quality and we have continued to invest in our people and marketing as we build out our new brewery at a highly visible site in the centre of Ashford. The new brewery will give us greater control over our growth and also bring improved margins and a highly visible point of difference.

“Gareth Bath joined last October as managing director for beer and cider, and his energy and enthusiasm have been crucial to developing the brand and ensuring our positioning has not been compromised as we carefully manage our growth.

“Sales growth of 6% in a very competitive beer market, despite the disruption caused by the hiatus at Matthew Clark and Bibendum will improve as we continue to invest in getting the brand message and sampling extended.

“The new brewery will be a big and highly visible step forward in the brand’s journey. We have blue chip listings in Majestic, Waitrose and Tesco and high class on trade business with M&B and others supported by Matthew Clark.

“It is important that we continue to invest in the highest quality consumer marketing to ensure that the beer and cider are vital brands for our retail partners. It’s a differentiated product that tastes great. We are confident of its future success.  

“I am privileged to work with fantastic people – curious, fearless and relentless – but more importantly a great team. It’s the quality of those people, the excellence of our brands, the excitement of operating in growth markets and the support of an outstanding board that makes us especially motivated about Chapel Down’s prospects for the future. The company is changing gear as we build our brands and invest for the future. 

“We will continue to work to build a better business that excites consumers and investors.”

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