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Chapel Down (LSE: CDGP) is England’s leading winemaker, with vineyards across the beautiful Kent countryside. It’s the only English wine company with a stock market listing, which makes this a unique penny stock.
Since listing at the end of 2023, Chapel Down has lost around a quarter of its market value. However, it’s up 34% from a February low and now sits at 43p.
After posting a loss last year, the sparkling wine specialist said it expects to generate strong sales this year and return to full profitability.
Longer term, it intends to not only dominate the English winemaking scene, but also export its bubbly globally, especially to America.
Needless to say, if it becomes an exporting powerhouse, its market cap of £75m could one day froth up to a much higher figure. Indeed, it might even become a millionaire-making penny stock, depending on how much one invested.
So, should I snap up some shares for my ISA, just in case? Here’s my take.
Our terroir shares many of the characteristics which have made Champagne so successful as a wine region.
Chapel Down Chair Martin Glenn
2024 results
Chapel Down has a 16% share of the English wine market. At the end of 2024, it had 1,024 planted acres of vineyards, around 10% of the UK’s total.
Last year, e-commerce (+22%) and on-trade (+16%) channels did well, but off-trade was weaker, as supermarkets and wine retailers reduced their stock levels. Stripping out its now-closed spirits business, revenue dropped 3% to £16.35m.
This resulted in a small £1.3m loss. As mentioned though, the firm expects to return to profitability this year, then build profits over the medium term.
Challenges
Now, there are a few risks to be aware of here. One is that inflation is creeping back up, which could heap more pressure on consumer spending.
The fourth quarter is the most important trading period for Chapel Down, as households stock up on wine. So a weak festive period would likely throw the full year’s results off-kilter.
Also, bad weather could result in challenging growing conditions and a lower harvest yield. Of course, this can work both ways, as there was an exceptional harvest in 2023.
And while global warming should benefit English wine-growers long term, it could also throw up more extreme weather patterns.
Finally, net debt stood at £9.16m at the end of 2024. That was up significantly year on year, and is worth monitoring moving forward.
My move
Chapel Down has signed a new agreement with Jackson Family Wines (a large drinks retailer) for the distribution of its sparkling wines in the US. Millions with English ancestry across the pond could take a special interest, which could be a big growth driver.
By 2035, the firm aims to win the equivalent of 1% of the 300m bottle global Champagne market. For context, it sold around 1.5m bottles of wine last year.
For the stock to really be a big winner, the company will probably need to exceed this target. But that’s far from guaranteed at this point.
Weighing things up, the stock is a bit too risky for me, so it won’t be making me a millionaire.
Of course, that doesn’t mean it can’t still do well. Adventurous investors might want to consider this penny stock at 43p.
