Does the future of UK vineyards involve increasing International Trade?

Published by Adrian Pearce on 30 June 2020

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Production of sparkling wine in the UK continues to increase at a steady rate as landowners take advantage of soil, particularly in the South of England, that mirrors the soil in the champagne region of France and a seemingly warmer climate to grow grapes.

There is real diversity in UK vineyards from large producers farming hundreds of acres of vines to much smaller businesses producing wine from a few acres of land. The UK sparkling wine industry is producing more wine than ever before with volumes expected to continue to increase year on year.

As the number of bottles of sparkling wine coming onto the UK market increases, the question on many producers minds is “what is the size of the domestic market and will the level of demand for UK sparkling wine continue to match or exceed the increasing supply?”

The route to market historically has been one of direct sales to the public and trade sales to local restaurants and wine merchants. Some bigger producers have also been successful in winning contracts to supply supermarkets. All these routes have enabled a healthy average margin per bottle to be achieved as the price point for quality UK sparkling wine generally sits slightly below that of champagne.

If demand in the UK for home-produced sparkling wine continues to grow, the additional supply generated from increased production will have every chance of continuing to achieve a premium price. This will be helped as the quality continues to improve and the apparent historic stigma surrounding wines produced in the UK dissipates.

The issue, however, is what happens if there proves to be a ceiling in terms of domestic demand? Market behaviour generally dictates that when supply outstrips demand, the price comes under pressure. In a scenario where the UK sparkling wine supply exceeds its demand, producers will have to work hard to sell the volume of stock they hold and it is not inconceivable that some hefty price discounting could come into the market. Where this might end up is far from clear, but could we see a situation where the race to sell volume sees UK sparkling wine competing at a much lower price point alongside Italian Prosecco and Spanish Cava? With the number of acres now under vines in the UK, this is perhaps not as far fetched as it might sound.

It is likely that those producers who have worked hard on both the quality of their product and building a brand will continue to sell their wine at a premium. The other way of maintaining the current price point is to increase demand by expanding the size of the sales market. This naturally brings the prospect of trading internationally and exporting wine into focus.

International sales create a whole host of new challenges which many UK producers are not set up to handle. At Kreston Reeves we have a team of specialists who advise clients on international trade and it is likely they will be increasingly in demand as our vineyard clients search for new markets. Contact us here.

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