A County Durham drinks and gifts group has seen record results despite a “perfect storm” of challenges outside of its control.

The Lanchester Group, which is based at Annfield Plain, says revenues have grown for a 10th consecutive year, but that earnings have dropped as a result of ongoing challenges across all sectors. The group – which encompasses companies Lanchester Wines, Greencroft Bottling, The Wine Fusion, Spicers of Hythe, Bon Bon’s Wholesale, Lanchester Properties, Spirit & Co and Full Circle Brew Co – saw turnover for the year ended June 2023 rise to £143m from £127m last financial year.

But Ebitda (earnings before interest, taxes, depreciation, and amortisation) dipped from £9.6m to £8.95m, largely due to increased interested rates, demurrage fees – when charges are made for the failure to load or unload ships within agreed time frames – and the ongoing impact of a volatile labour market.

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The business, which was started by Veronica and Tony Cleary in 1980, remains in family ownership with the husband-and-wife team still at the helm. Mr Cleary said: “We seem to say this each year, but these last 12 months have really been a challenge. It’s been a perfect storm of elements outside of our control, so while our teams have worked tirelessly to grow each of our businesses, we’re hit with mounting costs from all angles, which have reduced our core commercial profitability.

“Labour costs have increased because we maintain our stance on the importance of investing in our people. We’re a family business and regard our team as part of this family, and so we continue to implement annual wage increases.

“Last year we also gave every member of our staff two standalone cost-of-living payments. It’s important we retain great people and remain a competitive employer, we’ve maintained our group staffing numbers at 550 and are still the largest employer in the area.”

The group is continuing to make investments and its main focus is the creation of the Greencroft Two building, which is more than 240,000sqft and will more than double the potential capacity at Greencroft Bottling to up to 400m litres per year. The building will be powered by its own solar array. The project launched two years ago with a budget of £15m.

Mr Cleary said: “We’re now at £21m – and we’re not yet finished – which is at least 30% more than we anticipated mainly due to increasing cost of materials. We’re building a sustainable building so we’re somewhat restricted to which materials we can use, which also bumps up the cost.”

Once Greencroft Two is complete, it is estimated the firm’s solar power and wind turbines could generate a combined 8 million KiloWatt hours per year of clean, renewable energy. The Greencroft Bottling team will start to move into Greencroft Two in 2024 and its first line – capable of filling up to 20,000 bottles an hour – will start production in spring.

The move means Cushman & Wakefield has been appointed to market its existing warehouse, which has its own on-site renewable heat source, in a bid to find a tenant. Meanwhile, the group’s Lanchester Wines and The Wine Fusion businesses have continued to grow and import wines, both bulk and bottled.

Hoults Yard-based Full Circle Brew Co has also grown and its beers are now exported to 12 countries. Investments have also been made at confectioner Bon Bon’s and gifting business Spicers of Hythe, which has invested in new digital systems and processes to automate online orders, putting it on course for record turnover this Christmas.

Mr Cleary added: “The next 12 months will be focused on consolidation; the completion of Greencroft Two provides the opportunity to sell some of our satellite warehouses and consolidate Lanchester Wines back to our Durham HQ.

“We’re an asset-rich business and we’ve not previously sold off any of our portfolio. While we continue to mitigate a difficult global climate with rising inflation and ongoing challenges, we are in a solid, sustainable situation, and we step into our next financial year in a strong position.

“We are a diverse group of businesses spanning different sectors and various customer bases. This was a strategic development plan to ensure that, as a group, we remain strong with each business supporting the others as needed. This has particularly worked to our advantage over these challenges in recent years.”