English Wine - a healthy long term future?

Bob Tarr at a vineyard considered during his quest for 'the perfect English vineyard'

(sadly, this one's no longer there - it's been grubbed up)

Many English people don't even realise that there are vineyards in England and, although most supermarkets stock at least one or two English wines, most English people have never even tried them. Of course, growing grapes in open vineyards as far north as England is not easy - but over 400 vineyards are doing so commercially and many other amateurs also grow vines and make wine from their grapes. Blind tastings have proved that the best English wines bear favourable comparison with the best wines of any other wine growing country. Typical prices are £5 to £7 per bottle.

Most English wines are white, though there are some good reds and some really excellent sparkling wines made by the 'methode champenoise'. Many English vineyards are marginal financially - if more people knew how good their wines are they would have a more certain future. There are a few large vineyards and quite a few smaller 'boutique' vineyards which are healthily viable, but many vineyard owners are surviving more on the romance of the vine than its profitability. Some can afford this as they are semi-retired or have other sources of income to keep the wolves from the door.

My own quest for a viable vineyard threw up some issues which I though were worth sharing with other members of the United Kingdom Vineyards Association and the article below appeared in the Autumn 1997 edition of 'the Grape Press' and generated some comment from members in the following edition - none of those commenting disagreed with my analysis or conclusions, though some obviously think I am insufficiently imbued with "The Romance of the Vine" - my wife would tell you different - she reckons that, if anything, I am over-flowing with it!

Are "financial viability" four letter words?

For the last four years I have been in search of an English vineyard. You may remember the ad? - "Wanted - the perfect house with the perfect vineyard" We've come close but we haven't found it - yet.

Seyval

One of the first things I did when I set off on my quest was to ask Geoff Bond to send me copies of all the back-numbers of the Grape Press he'd still got in stock. He did, and they took me back several years (I'm still looking for more if anyone has them). I found them good reading and learnt a lot from them and all the usual text books.

I've learnt even more from going to look at vineyards and talking to owners, including going to quite a few which have been on the market. I've also discovered that quite a few owners whose vineyards aren't on the market would put them on the market if they felt they'd get a decent price. Finally, I've learned quite a bit from my own mini-vineyard here in Godiva's city.

But slowly I have realised there is a subject which seems never to feature in the pages of "The Grape Press" and which seems not to be a proper subject for discussion, but which I am certain exercises the minds of most viticulturists and which underlies the decision to sell in many cases.

What is this verboten topic? Financial viability. Yes, it is true that there have been any number of articles and letters about some of the (usually adverse) factors which affect financial viability (site orientation, soil, height, micro-climate, weather, varieties of vine, trellising systems, disease control, pests, Customs & Excise, Duty, VAT, cross-channel purchasing etc, etc) but nothing, as far as I can see, about financial viability itself. It is as if it is not quite nice to talk about it.

It is true that it is inevitably a difficult area for practitioners to discuss. Commercial confidentiality might be one at least partially understandable reason. Another reason, not uncommon I think, might be embarrassment at not ever having thought about it, or perhaps, it not being the sort of thing which should exercise the mind of an English viticulturist or winemaker.

Many, if not most, of the first wave of English viticulturists understandably were most interested to test whether or not it was possible to grow vines and make, and sell, wine in England on a commercial scale. Often they, and probably, to a greater or lesser extent, every English viticulturist have been smitten with the Romance of the Vine. And why not?

So what is financial viability and why is it important? In the absence of a better definition from the UKVA (if there is one which I have over-looked I'll be happy to accept it) it seems to me that a viable vineyard/winery is one which can pay its owner a living wage/salary for his or her effort and pay a sensible rate of return on the capital invested in it. It goes without saying that this means that it must make a significant net profit in order to achieve this.

What do I mean by "living wage/salary" and "sensible rate of return"? Well, it is for you to decide - I would say that the economist's idea of opportunity cost is relevant - in other words what could you get by way of wage or salary by doing something else with the same amount of time you spend on running your vineyard/winery? What is a "sensible" rate of return depends whether you are a merchant banker - in which case you'll say that for risk capital (which capital invested in a vineyard/winery certainly is) you'd expect an annual return on capital of a minimum of 25% and preferably much more. As a Romantic who has no aspiration to emulate City folk you might settle for less, but less than 10% is pretty un-demanding - you'd do better sticking your capital in a reasonable unit trust, less than 6% and you'd do better in a building society - and have no risk!

No problems with the crop at this English vineyard - and an organic one at that - showing what can be done.

What constitutes the capital investment on which the rate of return is to be calculated? Well, if the vineyard/winery is a free-standing enterprise with no house it should be the cost or value of the land, what it cost to establish the vineyard and the value of the machinery and equipment, money tied up in stock of wine etc.

If there is a house as part of the property then I think it can be argued that the value of the house, gardens and amenity land could well be left out of the calculation, because the house and gardens are not strictly part of the business - as many houses with vineyards are undoubtedly worth less than the same houses with land instead of vineyards this means that the "net capital invested" on which the rate of return is calculated is likely to be quite a modest sum (The evidence of the property market certainly seems to be that a house + small to medium vineyard may be worth less than the same house + land for horses or what have you - this suggests that an established vineyard can actually have a negative value - probably because there is a bigger market for land than for vineyards + the fact that it costs money to grub up a vineyard. However, I wouldn't suggest you should find a negative return on capital employed to be acceptable - not least because if you developed the vineyard it certainly cost you time and money to do so!).

So, on these criteria, is your vineyard/winery financially viable? Few of those that I have looked at with a view to purchase could in my view meet even the more un-demanding of these tests.

All of those vineyards I have looked at in detail have been less than 20 acres in extent, but then nearly all English vineyards are. It may be that the biggest English vineyards are financially viable in the terms I describe. They certainly should have a better chance of being so due to economies of scale. However when I find my local Co-op selling Denbies' wine at £2.93 a bottle, as it has been now for many months and which must be practically a "dumping" price, I question whether even the largest English vineyards are passing my viability tests.

So, if your vineyard/winery is not financially viable by these tests, why are you doing it? The reality is you are subsidising the eventual purchasers of your wine with your capital and your labour and depriving yourself and your family of your time and income and/or return on capital. Yes, I can understand you saying that you like the life - it's a good fresh open air existence with no commuting and less hassle than working in an office. Yes, it's challenging intellectually and practically to produce good wines which people will like and buy. But does it make sense to be subsidising your customers? Why not just grow a quarter acre to prove your capabilities and for the family and friends to drink? Why not indeed!

(I look forward to the response!). Bob Tarr

© text and photos, Robert J. Tarr, 1997. Article (but not pictures) first published in "The Grape Press" the journal of the United Kingdom Vineyards Association - Autumn 1997 edition.

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