Champagne shipments decline

The French are drinking less Champagne, causing sales to fall. Richard Woodard looks at the consequences.

Piper-Heidsieck headquarters, Reims
Piper-Heidsieck headquarters, Reims

for the first time in a decade, Champagne shipments fell below 300m bottles in 2019, thanks largely to continued declines in the huge French market, which more than offset gains in the US, Japan, Italy and elsewhere. 

According to figures from the trade association Comité Champagne, 297.6m bottles of Champagne left the region’s cellars in 2019, down 1.6% on 2018; value rose 3.4% to break through the €5bn ($5.47bn) barrier for the first time.

“The year 2019 emphasised even more what we’ve seen previously: a growth in the export markets mostly outside the EU, challenged in 2019 by some contextual factors, especially in Asia,” says Benoît Collard, general manager of  Piper-Heidsieck and Rare Champagne.

Quentin Meurisse, vice-president of marketing Champagne at Pernod Ricard, owner of G.H. Mumm and Perrier-Jouët, agrees. “It’s an acceleration of the trend we knew in previous years: traditional markets suffering, developing markets improving. It’s the premiumisation of Champagne consumption, with positive price and negative volumes in some countries.”

The EGalim effect

As recently as 2016, France accounted for more than half of global Champagne shipments; in 2019, the ninth consecutive year of volume decline, the country’s share dropped to 47.6%.

Producers cite a succession of blows to the market in recent years: the gilets jaunes social unrest of late 2018, then the strikes linked to changes in retirement and pension laws in late 2019.

The biggest impact in 2019, however, came from the new EGalim law, which came into force in November 2018. It was a response to price wars between French retailers, which forced farmers and food producers to agree to extremely low prices. The goal of the legislation was to ensure fairer prices, but it also limited the ability of retailers to offer deep discounts on Champagne. It has had a severe effect on the volume end of the market.

“The decline of the French market in 2019 is totally due to EGalim,” says Stanislas Thiénot, managing director of Champagne Thiénot. “For a few years, hypermarkets and supermarkets were selling Champagne at an indecent price below our production costs, because they use Champagne as a call product – which is heresy when you look at the price of grapes, the processing work and the stock we need to have.”
Thiénot says in his opinion, the decline is no bad thing, and “anyway we should lose these buyers at €12 (including VAT) for a bottle of Champagne, because we cannot produce at this price. We are in a difficult transition period from an economic point of view, but essential for the future of Champagne.”

According to Clovis Taittinger, managing director of Champagne Taittinger, the process is a “natural self-transformation” of Champagne which is hitting volume brands and cheap grower Champagnes hard in the short term.

It has little or no impact, however, on well-known international brands. “For us, it’s painless,” says Stephen Leroux, managing director of Charles Heidsieck. “We just don’t have the stock available, and anyway we sell through independent wine merchants, hotels, restaurants and some corporate sales.”

The hope is that,  in time, France will become a more value-focused market. “We do see a great performance of added-value Champagne,” says Meurisse. “People are increasing their consumption of higher-end cuvées.” He said that in 2019, value grew at Mumm and both volume and value at Perrier-Jouët.

The figures offer evidence of this, as Thiénot points out: total volumes down 6m bottles, but hypermarket/supermarket volumes down 8m bottles – so sales through wine merchants, the on-trade and e-commerce have risen by 2m bottles, with average prices up two to three percent as well.
International markets

The UK, Champagne’s largest export market by volume (the US leads in value), offers a glimpse of what could be the future for France. Volumes were up a fraction in 2019, ending three consecutive years of decline, and value rose 6.2%.

“We are at the point of rebalancing here,” says Andrew Hawes, chairman of the UK Champagne Agents Association and managing director of Mentzendorff & Co Ltd, the importer for Bollinger and Ayala in the UK. “The last two or three years have not been as bad for Champagne as the numbers have looked.”

According to Hawes, the role of tertiary brands – Champagne marques invented by multiple retailers and deeply discounted to drive footfall – has been highly influential, artificially bracing the market when volumes should have fallen further in the years following the global economic crisis.

But now these exclusive brands with their high-low pricing are increasingly rare in the marketplace due to rising costs, the decline of the pound, and the influence of the EDLP (everyday low price) model used by discounters such as Aldi and Lidl.

The result in 2019 was good growth for international brands – Hawes reckons about 5% on average, but much higher in some cases – with the price rises necessitated by shifting exchange rates now digested by the market. The price-fighting tertiary brands, meanwhile, are falling in double digits.

Positive highlights beyond the UK and France include the US, with volumes up 8.3% and value rising 15.3%, and Japan, a strong market for prestige cuvées such as Dom Pérignon. South Korea consolidated its position as a 1m-bottle market with another solid year.

“Champagne players have been aware of what’s happening in the French market for a while, and they have invested for quite a long time in these markets,” says Thiénot. “So what’s happening is, I think, a consequence of this investment and, on the other hand – especially for the US – the economy was very good.”

The Asian exception

A notable exception was what the Champenois call the “Monde Chinoise”, comprising China, Hong Kong and Taiwan. Although shipments to Taiwan grew by double digits, China and Hong Kong saw shipments slump.

Thiénot cites a number of causes for this: the completion of free trade agreements between China and rival wine-producing countries such as Australia and Chile, eroding France’s market share; the impact on the Chinese economy of the trade war with the US; and social unrest in Hong Kong, which he says “deeply affected” the on-trade there.

But most seem quite sanguine about the situation, pointing to the relatively small volumes and a strategy predicated on long-term growth. “We always keep talking about China, but it’s a very small part of Champagne consumption – maybe four million bottles with Hong Kong,” and Taiwan, says Leroux.

Visiting China for the first time in six years in late 2019, Leroux saw “a huge change” in the level of interest in Champagne, with groups of up to 40 attending winemaker dinners and displaying a great depth of knowledge. “It’s reminiscent of Japan 25 to 30 years ago,” he says. “They’re starting to learn and be very scientific in their approach. That will generate more value in the future.”

Taittinger agrees, pointing out that Champagne lacks the trendy image or cultural resonance of Cognac in China, aside from some isolated pockets in Hong Kong and Taiwan, adding: “I think the time will come when China, Taiwan and Hong Kong will turn to Champagne.”
Pandemic pandemonium

While 2019 may have been a far better year for Champagne than the headline figures suggest, the Champenois are bracing themselves for a severe impact on trade in the coming year, from the coronavirus pandemic.

“This is unchartered territory,” says Hawes, reporting in early March that there had been a “dramatic” impact on the London on-trade. He was, at the time of interview, unsure of the counter-balancing effect of increasing off-trade sales. Collard, meanwhile, is consoled by the fact that the outbreak has occurred (so far) at the weakest time of year for Champagne sales.

Beyond the immediate impact of the pandemic, Champagne is sure to be severely affected by the economic slump that may follow – something which is a greater concern for Meurisse, who says, “We know Champagne is always impacted by economic crises.”

More immediately, Pernod Ricard is working to try to service an anticipated rebound in trade in China – no easy task when bottling lines and factories are shuttered because of the lockdown.

“There is hope because China is resuming business; Korea is going to resume business,” says Meurisse. “There will be a rebound – and all consumers will desperately want to celebrate a new beginning when it comes.”

Richard Woodard

Does shipping less matter in Champagne?

In 2019, global Champagne shipments fell below 300m bottles for the first time since the global economic crisis a decade ago. Does it matter?

“The overall economics of Champagne is driven by value, not volume. The cost of grapes is the highest in the world. Champagne should focus on being at the top.”  Benoît Collard, general manager, Piper-Heidsieck and Rare Champagne

“What is the real number for Champagne? The aim is not to represent a fixed percentage of the world’s sparkling wine. That’s 3.5 to 4bn bottles, whereas total Champagne is only about 300m. Whether we should be 350m or 280m is not going to make a great change. I think the future of Champagne is definitely about great quality and differentiation.” 
Stephen Leroux, managing director, Charles Heidsieck

“For our houses of Champagne, we’ve never been fighting for huge volume, but for some in the region it might be an issue. In the longer term our agricultural production might lower because of climate change, reducing global quantities, but creating value.” 
Quentin Meurisse, vice president marketing Champagne, Pernod Ricard (Mumm, Perrier-Jouët)

“Yes, it’s significant, not for the figure itself, but more for wine growers. Below 300m bottles means yields below 10 tonnes per hectare (t/ha), if we don’t want to over-produce, which is not so far from loss-making farming, especially for farmers who don’t own the vineyards and pay rent. The break-even for a farmer is around 9.5t/ha.” 
Stanislas Thiénot, managing director, Champagne Thiénot

This article first appeared in Issue 2, 2020 of Meininger's Wine Business International magazine, available in print or online by subscription.

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