Why is English sparkling wine so much more expensive than Prosecco?

The average price of a bottle of Prosecco is around £6 or £7 (The Grocer), and this accounted for about 70% of all bottles of sparkling wine sold in the UK in 2018 according to WSTA figures (Decanter, Guardian). Whereas English sparkling wines are typically around the £30 price point - more comparable to Champagne, and perhaps correspondingly only about 2% of sparkling wine bottles sold in the UK are English.

This huge gulf in pricing is usually explained away by the fact that English sparkling wine, like Champagne, is more labour intensive and time consuming to produce. Therefore, we hope, the end result is a better quality wine. For the average consumer though, that alone probably doesn't justify why the price of one is about five times (!) the price of the other.

Moreover, if you look at the cut of these retail prices the producers are actually getting (see section on tax and retail margins below), for an average bottle of Prosecco it is just £1! Whereas for the ESW it is ten times that. Again, these are very big differences.

I wanted to really get under the skin of this massive price difference, so have attempted to explore all of the contributing factors below.

Traditional Method vs Charmat Method

This is the most obvious difference between English sparkling wine (or indeed Champagne) and Prosecco. ESW is made to the traditional method, where a secondary fermentation takes place in the bottle, and depending on the level of automation in the winery various aspects of this secondary fermentation can introduce additional manual labour - including riddling and disgorging. Although larger wineries will likely have machinery to assist with both of these tasks.

Prosecco on the other hand is made according to the Charmat method, wherein the fermentation happens in large pressurised stainless steel tanks. It is generally regarded as being more automated, cheaper and quicker.

Aging

Somewhat related to the above, Champagne's AOC requires requires a minimum of 15 months aging on the lees (the dead yeast cells after secondary fermentation completes). Whereas the PDO/PGI for English sparkling wine requires only 9 months. Of course, producers of sparkling wine in England are not compelled to adhere to either of these schemes, but if they choose not to they legally cannot write "English sparkling wine" on their labels, just "Wine of England". However, in practice, lees aging times of less than a year in English sparkling are rare, and two to three years are not uncommon. Following that aging "on the cork", post disgorgement, is also commonplace in English sparkling. As I write this, in June 2019, taking a look at recent releases of vintage English sparkling wines they are typically from 2014 or perhaps 2015, with 2016 vintages (already with over 2 years of combined lees / cork aging) being quite unusual.

On some level, it's not immediately obvious why longer aging should correspond to higher costs. It's a cash flow issue of course, and to some extent is in the same bucket as establishment costs (see below) - it adds potentially several years onto the time it takes to actually start generating any revenue for a new vineyard / winery. If the money to cover that period had to be borrowed then there's interest to pay on the loan. There's also a knock on effect in terms of paying for storage space, and that in turn probably affects things like insurance.

Most Prosecco is not aged for more than a few months, although higher quality Prosecco may be. The Charmat method allows the winemaker to go from grapes to the finished product in typically 3 to 6 months (Wine Guy).

Bottles

One side effect of the traditional method rather than the Charmat method is that the pressure in the bottle is higher - about 6 bars for ESW/Champagne vs around 3 for Prosecco (Wine Folly). Champagne/ESW bottles are made with slightly stronger, thicker glass to withhold this higher pressure, and are correspondingly slightly more expensive to produce. I couldn't find specific prices but I'm guessing the difference is of the order of a few pence, so probably not a significant contributor.

Tax and Retail Margins

UK excise duty is a flat rate of £2.86 per 75 cl bottle for sparkling wines between 8.5% and 15% ABV. So in that sense English sparkling and Prosecco are on a level playing field. Although of course VAT, at 20%, is a percentage of the total sale price.

It is worth taking a moment to note what a big slice of the cake from that £6 bottle of supermarket Prosecco taxes represent - after tax the producer and retailer combined take about £2.15. The retailer (and distributor's) margins typically exceed the actual purchase price (Gavin Quinney) so the producer is probably getting about £1 per bottle. Whereas with a £30 bottle of English sparkling wine (£22 before tax) the producer is probably getting about £10 per bottle.

Yields

The English climate is a marginal one for viticulture, and yields tend to be lower accordingly compared to Northern Italy. Indeed Champagne also has notably lower yields than Prosecco.

In 2018, the regions producing Prosecco in Italy produced 600 million bottles (The Drinks Business) from 28,000 hectares. So that's about 21,000 bottles per hectare.

Meanwhile WineGB reported the UK produced around 15.6 million bottles of wine in total (69% of which is sparkling) with 3578 hectares under vine. A straightforward calculation there would suggest yields of around 4300 bottles per hectare across sparkling and still. I'll just assume for now that yields for sparkling and still are roughly the same.

However, the UK is in the grip of a period of rapid expansion in its area under vine, and vineyards typically take 2 to 3 years to establish, so it may actually make sense to go back to an earlier year's figure to get a real sense of the actively producing hectarage for 2018's harvest. In 2015 area under vine was closer to 2000 hectares, which would suggest yields of 7800 bottles per hectare.

So it seems yields in the Prosecco region are probably around 3 times higher than in England.

Scale

According to WineGB, the UK has 522 commercial vineyards (as of 2017) and 164 wineries (as of 2018). Again there are moving targets in these figures but as a rough guide that's an average of about 6 or 7 hectares per vineyard.

According to The Circular in Prosecco's DOCG denomination there are 3387 growers covering 8880 hectares - so that's an average of just a couple of hectares per grower, whereas in the DOC there are 10242 growers covering 24,450 hectares - so again around 2 hectares per grower. In terms of wineries, the DOCG has 181 making sparkling wines and 348 in the DOC.

It's not exactly clear how to translate the UK figure of vineyards to the Prosecco region's figure of growers, given that multiple vineyards may be owned by the same owner, or grow grapes by contract for other producers. 

However, the number of wineries is telling - the UK has 164 wineries producing 15.6 million bottles (in a bumper year at that, and that includes still as well as sparkling) - so that's fewer than 100,000 bottles per winery. Although it's important to point out that's a mean average which likely gives a distorted sense of the typical case - only a handful of ESW producers churn out volumes in excess of 100,000 annually, and Nyetimber alone reportedly accounted for a whole million toward that total for 2018, so the median is likely much lower.

In Prosecco 529 wineries produce 600 million bottles, that's over a million each. That is an order of magnitude of difference, and the economies of scale in Prosecco production start to become clear.

Given the number of wineries vs the number of growers in the Prosecco region, each producer must buy from a large number of growers (on average 25 per winery), so it seems likely there is a standardised market for the grapes - and after all they are only using a single variety - Glera - for making Prosecco. 

Establishment Costs

The Veneto is a long established wine producing region. English sparkling wine however is still a fairly new and rapidly growing industry, which only really started to gather momentum at the turn of the 21st Century. The area under vine nearly doubled between 2015 and 2018, and there have been a large number of new producers establishing vineyards and wineries in the past 5 or 10 years. Vineyards take about three years to establish, and traditional method sparkling wines typically takes at least two years to produce, so that's at least a five year window at the start for these new businesses before any revenue, and this is also the period when capital expenditure will be at its highest.

Even the more established producers like Nyetimber, Chapel Down and Ridgeview are currently undergoing significant expansion. Many of these businesses are not currently profitable - Gusbourne currently runs at a loss (LSE) and Nyetimber hopes to turn a profit around 2022 (The Drinks Business). Although Chapel Down is profitable, perhaps aided in parts by its more diverse product portfolio.

Viticulture Practice

This is a hard thing to generalise about, as both in England and in the Veneto individual vineyards make their own decisions about viticulture practice, and there are producers both of ESW and of Prosecco spanning the full spectrum from conventional viticulture (with potentially heavy reliance on herbicides and pesticides), through organic and all the way to biodynamic. Moreover as we have learnt above there are a very large number of grape growers in the Prosecco region - over 13,000 of them

Earlier this year a report linked the Prosecco boom to soil erosion (Telegraph), and there are some strong opinions about levels of pesticide and herbicide use in Prosecco (Vincarta), and the implication in both cases is that the commercial pressures in the Prosecco region are causing corners to be cut in terms of environmental responsibility.

However, without specific figures it is hard to say empirically whether, for example, spray use is notably higher in the Prosecco region than any other wine producing region of the world. Viticulture is a significant user of herbicides and pesticides globally - there is that oft quoted fact that vineyards in France account for 3% of all the agricultural land but account for 20% of all the herbicide use. 

It's a complex subject, and it's not just a question of volumes - it's worth noting that different pesticides are approved for use in different countries, and different climates make some pests more of a challenge than others (downy mildew is particularly problematic in England because of the amount of rain, for example).

Labour and Machinery Costs

England is not (yet!) a major wine producing region, and both machinery, and in some cases labour (particularly for labour intensive tasks like pruning) often has to be imported, with raised costs accordingly.

Land Prices

Interestingly this article from Eurostat shows agricultural land prices are typically higher on in Italy than in the UK, with Italy averaging around €40,000 per hectare vs the UK average of around €25,000. Italy is however subject to very large regional variation in land prices, and some of the most prized parcels in the Prosecco region have theoretical valuations in excess of a million Euros per hectare (Wine Enthusiast), but actual sales of such parcels are extremely rare, so this is largely conjectural.

Although there are reports that estate agents in some parts of England are now wising up to the suitability of land for viticulture and in some cases doubling valuations accordingly, it still seems likely that overall land prices in ESW's heartland of Sussex, Kent and Hampshire are probably actually lower on average than in the Prosecco region, so this is likely not a contributing factor to the price difference of the end product.

Market Positioning

The pricing of English sparkling wine is in a similar bracket to that for Champagne, and this is no coincidence. There is a not unreasonable assumption that if people are prepared to pay that price for Champagne, they would also be prepared to pay the same for a product of comparable quality, made to the same method, and typically of the same grape varieties, with the potentially added appeal of being locally produced. Moreover to undercut Champagne with a wine which has so much in common - say by targeting the £20 price range - might send a message that the English version is somehow inferior.

The big Champagne houses have large marketing budgets to position their wines as luxury products. This is generally not the case with English sparkling, with the possible exception of some of the absolutely biggest names like Nyetimber (who in recent years have been seen at high profile sporting events like the Monaco Grand Prix, British Polo Day and Cheltenham Festival). So there does seem to be a certain amount of riding on the coat tails of Champagne here - and to a lesser extent the rest of the English industry riding on the coat tails of Nyetimber.

Summary

It seems likely the biggest factors in terms of the intrinsic costs of production are:

• Scale - the average Prosecco winery produces ten times as many bottles of wine as the average English sparkling winery, and the Charmat method lends itself better to large scale production.
• Yields - the climate in the Prosecco region (and possibly differences in viticulture practice?) allow for much higher grape yields per hectare of land - probably about three times higher.
• Time to market is typically 3 - 6 months for Prosecco, vs typically around 2 - 3 years for English sparkling wine, again a result of traditional vs Charmat method.
• Labour and machinery costs are likely lower in Prosecco, in part because it is a well established wine producing region.

It is still slightly hard to reconcile the above factors with the fact that the average wholesale price of a bottle of English sparkling wine is ten times that of a bottle of Prosecco! My guess is that the above intrinsic production costs probably mean that it typically costs somewhere in the region of £5 to produce a single bottle of ESW, once establishment costs have been taken out of the equation. The remainder of the £10 wholesale price is probably going to paying back the initial capital expenditure of establishing a vineyard and/or a winery, and some amount of market positioning.