Concern in Champagne as Sales Collapse
A few months earlier (February 11, to be precise), we found out that, for the first time since 2009, the total amounts of bottles sold dropped under 300 million, even if the turnover broke another record: €5 billion for 297.6 million bottles sold. Compared with 2018, the total volume decreased by 1.6 percent (down from 301.9 million bottles), while the value of the Champagne market increased by 2 percent (up from €4.b).
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The boost in revenue was predominantly due to the increase of prestige cuvée export sales, up by 15.3 percent in volume and 18.1 percent in value. With 8.6m bottles out of a total of 156m bottles exported, the prestige cuvée category is almost 6 percent of the export volume. In contrast, the non-vintage category lost market share for the third year in a row – 0.8 percent in volume and 1.5 percent in value compared to 2018.
Both the 2019 value and volume numbers are impacted by political uncertainties in the UK and the USA, the top two export markets. The fear of tax increases (post-Brexit and the Trump administration 100 percent tariff on sparkling wine proposal) prompted widespread panic buying in both countries during the last two months of the year. Fabrice Pouillon, owner of Champagne Pouillon, told Wine-Searcher he doubled his annual revenue in December because of the extra US and UK orders. Both his US and UK importer stocked up, especially on his more expensive cuvées. The official CIVC figures tell the same story – prestige cuvée sales increased by 32.8 percent in volume in US, accounting for 9.1 percent of the total US Champagne volume (or in absolute figures 2.1m out of a total 25.7 million bottles). A similar trend, though on a much smaller scale, can be observed in the UK, where the prestige cuvée category increased by 7.5 percent year on year, to reach 810,000 bottles, and take up a 3 percent market share.
If total UK exports increased slightly (0.8 percent) compared to 2018, they remain 3 percent lower than the 2017 UK sales, and 31 percent below the 2007 record (27m bottles in 2019 compared to 39.1m bottles in 2007). This illustrates the gradual sales decline in Champagne's largest export market since the 2008 recession. Yet, according to statista.com, the total UK sparkling wine sales increased by almost 60 percent between 2010 and 2019.
US importers disproportionally stocking up at the end of the year, was always going to distort the 2020 US sales figures. The coronavirus pandemic only exacerbated the situation, in the US as well as just about every other Champagne market.
Jean-Marie Barillère, president of the Union des Maisons de Champagne (UMC) and co-president of the CIVC revealed in an interview with the local Champenois newspaper that Champagne sales since the beginning of the crisis were down 75 percent year on year. Maxime Toubart, president of the Syndicat Général des Vignerons (SGV), and the other CIVC co-president, confirmed to Wine-Searcher that the sales situation is dire. "With restaurants and bars closed in all our major markets, and no tourists visiting the region, Champagne sales have just about ground to a standstill. What makes it worse is that this situation will not revert any time soon. Just like for the hospitality and tourism industry, the impact on the wine industry will be long term. There will be casualties in all three Champenois families [growers, cooperatives and houses]."
However, so far, the impact is not felt equally by everyone. Grapegrowers selling their harvest by the kilo are still on last harvest payment scale, and thus have not been impacted yet. In contrast, Champagne producers have seen their income dry up while costs continue to accumulate. At the beginning of the lockdown, Charles Philipponnat, of Champagne Philipponat, admitted to Wine-Searcher that sales could be summarized in one word: zero; and Jérôme Bourgeois, from Champagne Bourgeois-Diaz, said that in the last few months he has shipped less than 10 percent of his usual orders. "Luckily, we still have the Nordic countries and French independent wine stores continuing to sell. But even there, sales have decreased significantly. People are thriftier in these uncertain economic times, and less likely to splurge on a bottle of Champagne," he said.
The lack of income has severely stretched the already tight cash-flow situation of many Champagne houses. In fact, the situation is so grim that the UMC and SGV agreed a potential grape payment delay. Houses and grape growers can negotiate a four-month delay of 75 percent of the June and September instalments of the 2019 grape payments, subject to an interest rate of 1.5 percent. Toubart was quick to say this arrangement was a win-win situation for both parties in these difficult times. He added: "We applied the same principle after the 2008 market crash, we therefore know this system works."
To protect the average bottle price, the UMC and SGV further agreed on May 7 to halt all "sur latte" sales – Champagne’s equivalent of bulk sales – for one month. The sur latte sales have long been a contested subject in the region, as they have regularly been the culprit for deep Champagne promotions. However, up till now they have never been suspended. Toubart justifies the reason it happened now: "We decided to pause the sur-latte sales, while we prepare a price and promotion protection dossier for the European Union. The EU disposes of an emergency measure to control promotions in times of crisis, to protect the product, and we would like to evoke this emergency procedure. It will allow us to protect the Champagne value."
Toubart did not comment on the possibility of extending the sur-latte sales ban in case the price protection demand faces difficulties and/or delays on European level. Instead he was quick to point out that other viticultural regions in France received the green light to distill their surplus stock to protect their value. He further pointed out that the French government allocated €60m to pay for the distillation and that negotiations with the EU for further compensation were underway. "In light of the above we are confident that our request will be accepted" is all he said on the topic of a potential extension period.
Toubart and Barillère are also negotiating further social security payment waivers and changes. During the lockdown, the government already waived the social security payments, yet since the payments are calculated on last year's revenue they are disproportionally high in today's economic climate. "We would like the government to waive last year's charges and instead calculate the charges on our current revenue, for the next two years. The two-year period will protect everyone in the appellation; people producing and selling Champagne are struggling now, while grapegrowers will feel the burn next year seeing the harvest will be smaller," explains Toubart. He does not want to entertain any harvest forecasts just yet, as he believed "this would only be pernicious for everyone".
While Toubart and Barillère seem set on delaying the appellation yield decisions until as close as possible to harvest, rumors in the vines are rife on the potential size, ranging from 3000kg/ha to a status quo of last year's yield (10,200kg/ha). However, since the yield is predominantly determined by sales projections, and today's most positive sales projections for 2020 are between 200 and 220m bottles (a 25-33 [ercent decrease compared to 2019), logic tells us the yield will reflect a similar drop. Even if Toubart is hoping that prolonging the deferred grape payments will help him push the yields upwards, it's very unlikely the maximum yield will surpass 8000kg/ha, especially since Champagne already sits on roughly four years of stock.
Whatever the decision will be this summer, it will undoubtable debilitate most of Champagne’s grape growers and winemakers. It is eerie how in just a few months’ time, my prediction of Champagne's risk of following Cognac’s demise in the 1990s has started to play out. Hopefully there will be fewer casualties.
Origin information: Wine-Searcher
Comentario de / Comment of / Comentari de Wines Inform Assessors:
Es interesante ver la situación de sectores similares al propio. Pienso que el primer cambio de actitud del sector cava debiera ser primar el consumo nacional y local. Las ventas al exterior debieran basarse en la calidad antes que en el precio.
Wines Inform Assessors
It is interesting to see the situation of sectors similar to its own. I think that the first change in attitude of the cava sector should be to give priority to local and national consumption. Foreign sales should be based on quality rather than price.
Wines Inform Assessors
És interessant veure la situació de sectors similars a el mateix. Penso que el primer canvi d'actitud de el sector cava hauria de ser primar el consum local i nacional. Les vendes a l'exterior haurien de basar-se en la qualitat abans que en el preu.
Wines Inform Assessors
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