Chapel Down reports strong revenue growth

Chapel Down has reported 10% growth in turnover during 2018 as sales broke through the £13 million barrier for the first time.

The Kent-based firm now produces wine, beer, cider and spirits and it is enjoying surging demand for its drinks.

Gross profit increased 9% to £4.9 million and that amounts to 37% of turnover, down slightly on the 38% it achieved in 2017.

It has £12.8 million in cash as of December 31, 2018, and it continues to invest in marketing, branding, infrastructure and supply chain efficiencies.

Chapel Down is listed on the NEX Exchange and its share price has been stable throughout 2019.

Recent highlights within retail include listings for its Curious Brew range at Tesco and the Co-op.

Chief executive Frazer Thompson said: “With eight years of strong compound revenue growth of 22% per annum, Chapel Down is now developing to become a player with serious potential in growth markets.

“We are seeing good demand for English sparkling wines in sophisticated international markets and we enjoyed our second full year in the USA and growth at present is limited only by our production.

“Nevertheless, our key market remains the UK and managing and servicing our customers better to ensure we turn awareness and desire for Chapel Down and Curious into profitable sales remains our key challenge.”

Chapel Down noted that business was slightly affected by the collapse of Conviviality, but it still performed well and it is confident about its chances of future success.

The group is buoyed by an “extraordinary” harvest in 2018, a result of a prolonged summer heatwave that led to high yields and excellent quality. It saw Chapel Down pick more than twice as many grapes as it ever had in previous harvests.

Thompson added: “Our average yields per acre were up some 97% and with the addition of new plantings starting to produce, our heroic vineyard and winemaking team were able to secure well over double the volume of fruit in good condition to enable us to build our stocks and to start to satisfy the excess demand for our wines.

“With a further five international gold medals in 2018, we are surprising and delighting more wine lovers than ever. Our brand home at Tenterden saw sales increase by 17% as visitor numbers improved thanks to excellent weather, improved awareness and better facilities and range at the vineyard.”

Its wines are listed in Waitrose, Sainsbury’s, Marks & Spencer and Majestic, plus various smaller retailers and on-trade sites. It also saw sales increase 17% to £1.7 million at its cellar door shop in Kent.

Thompson sees no reason to feel concerned about the impact Brexit will have on Chapel Down in future. “Brexit has had no significant impact on our business to date” he said. “In an area of full employment, we may be affected if we were not able to continue to access EU or other foreign workers for our viticulture and to mitigate that risk we will be looking at trialling the latest mechanical picking technology in 2019. However, we believe that maintaining and developing a strong brand and building a team of very high quality people are our best defence and we will continue to invest wisely to ensure we are best placed and risk is minimised.”

Regarding other business risks, he added: “There is a risk of a poor grape harvest through extreme weather events which we mitigate through maintaining the highest standards of viticulture, choosing the very best sites and utilising the latest proven advances in technology and agriculture.

“We source from a wide geographic area to minimise micro-climatic variations that can blight individual sites. The diversification into beer and spirits also further protects our ability to continue to grow. The risk of a poor hop harvest also exists and the group mitigates this risk by buying forward contracts on its key hops.

“Competition continues to grow but we continue to invest in our people, brands and distribution to ensure that the business can continue to thrive.

“We know we are lucky to work in a great British industry and an exciting business. Our drinks tell a story. They are delicious. They are a reason to get together.

We are passionate about growing that congregation – introducing uniquely delicious  products to enlightened consumers everywhere. We are on a pilgrimage to get drinkers to fall in love with our brands so we can share their most special moments with them.”

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