Prosecco drives sparkling profits to new heights

Henkell Freixenet, the world’s largest sparkling wine company, had a windfall year in 2019. Can this growth in the sparkling market continue in 2020? CEO Dr Andreas Brokemper talks to Felicity Carter.
 

Dr Andreas Brokemper, CEO, Henkell Freixenet
Dr Andreas Brokemper, CEO, Henkell Freixenet

Henkell Frexienet, the world’s biggest sparkling wine company, hit a turnover of more than €1bn ($1.12bn) in 2019, thanks in part by the unstoppable growth of Prosecco. 

Will 2020 look as bright? According to the company, the ongoing situation with the pandemic means it’s hard to make predictions – but some new trends are already emerging.

Henkell Freixenet has a portfolio that includes Champagne, cava, Prosecco, crémant and other traditional method wines, with wineries spread across 11 countries, making them highly aware of international trends.

Pandemic trends

CEO Dr Andreas Brokemper said that while it’s too early to tell if the pandemic has had a permanent effect on the wine market, it does seem to have accelerated some underlying trends. One is that Prosecco is moving out of the celebration category, becoming a wine that’s consumed on many different occasions. Second, the trend for both Prosecco and rosé is growing.

“Digitalisation is one point that has changed tremendously in a very short period of time,” added Dr Brokemper. “We can see it with our direct e-commerce platforms. In the UK, our platform is seeing growth of 300% to 500%. We can see it in Germany.”

Dr Brokemper does not, however, believe that ecommerce sales have made up for the loss in the on-trade. “All the on-premise consumption will take at least one or two years to come back,” he said. “This will be the last area to come back.”

While some categories are growing, those sparkling wines that are still associated with celebration are suffering. Dr Brokemper believes that Champagne has a tough time ahead of it – and that consumption may fall by as much as 20% to 30%. “We expect a decline of 15% in overall sparkling wine consumption, as many celebrations can’t take place until at least the end of the year.”

Still wines, on the other hand, are buoyant, because people are cooking more at home and want a meal accompanied by wine.

The sparkling wine market at a glance

Last year was a game changing one for the company, because it was when the merger of the German company Henkell with the Spanish cava giant Freixenet was finalised; Henkell bought a 50.67% stake in Freixenet in 2018, as part of its strategy to internationalise by acquiring important local brands.

“The globally diversified portfolio helped in the current situation,” said Dr Andreas Brokemper, CEO of Henkell Freixenet. “We can diversify risks in the group and we are very happy that in 2019 we saw how successful this merger is. We’re happy this didn’t happen a year ago.”

The biggest market for the company is Western Europe, accounting for 34% of sales and €359.3m, an increase of 30%. The biggest single market is the UK, where Freixenet Prosecco and Italian rosé, as well as the I Heart Wines portfolio hit double digit growth last year.

Things weren’t so rosy in Eastern Europe, where sales dropped by -0.4% to €174.3m, which the company says is “due to the closure of production in Ukraine as a result of the war-related slump in demand”.

However, says Dr Brokemper, Eastern Europe generally is becoming a bigger market for Prosecco, including in the Baltics.

The American markets performed strongly, closing the financial year at €167.1m, which represents a whopping 50% growth. One of the drivers was the growth of Mionetto Prosecco, whose sales were up in the US by 25%.

Henkell Freixenet, based in Wiesbaden, Germany, is owned by the Oetker Group. The 2019 turnover of €1.065bn represents 422.3m bottles, of which 262m were sparkling. Last year also saw the company sell some of its assets: the Henri Abelé Champagne House, the Deakin vineyard in Australia and the sparkling winery in Ukraine. Spanish vineyards were sold to co-shareholders.

Felicity Carter

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