Comité tries to predict demand in difficult market

Yield for 2019 harvest set at 10,200kgs/ha

Champagne producers agreed to set the maximum yield level for the 2019 harvest at 10,200kilos per hectare, 600kgs/ha down on the base level of 10,800kgs/ha originally* announced for the 2018 harvest. If this level of yield is achieved in 2019, it will produce around 300m bottles. The CIVC Comité that represents the two sides of the champagne business — the (grape) growers and the merchant houses (négociants) – see this as the appropriate level to provide a suitable supply of champagne to meet future predicted demand. Or as the Comité put it: “This volume ensures a supply consistent with the needs of operators and maintains a balanced stock level for the sector.”

When they make this decision on the yield level in late July, with the harvest start typically six to eight weeks away, as well as considering the approaching harvest’s potential in terms of quality, health and size, plus the level of stocks and reserves currently held by producers, they look at current and future worldwide demand for champagne. It’s this last element that’s the trickiest; predicting demand. With issues at home, French domestic sales still account for nearly half of all champagne consumed (48.7% or 147.1m bottles in 2018) and in the two major export markets, the UK which is the largest by volume and the USA, the most valuable, this decision was particularly difficult this time.

As the Comité commented in its 24 July statement: “In the first half of the year [2019], Champagne sales increased further thanks to exports. It [value] is close to 5 billion euros over 12 rolling months despite decreasing shipments pronounced on a French market affected, including the consequences of an increased legislative framework of promotions in supermarkets. The resumption of shipments to the UK is only related to the precautionary measures taken on the assumption of a hard Brexit. The dynamism of most third countries, subject to uncertainties on world trade, will probably not fully offset the decline in volumes on the French market.”

This statement needs some interpretation. Worldwide demand for champagne is currently flat with shipments down 1.5% to the end of May 2019, while the MAT year-end figure is predicted to be around the 300m bottle mark. In the French domestic market — where 48.7% of champagne was sold in 2018 by volume but only 41.7% by value – it appears that French legislation banning the sale of champagne at under cost is being more rigorously applied. This is accelerating the overall decline in sales in France.

Shipments to the UK, which went up in the first half year only did so because of producers and retailers stockpiling in advance of the previous Brexit deadline of 29 March. Something it was fairly easy and relatively risk-free to do as at that time, just after the important year-end sales peak, as warehouses were fairly empty. The Champenois don’t believe this is sign of the UK market recovering any time soon. The Comité statement doesn’t even mention anything about President Trump’s threat to impose increased import duties on French wine into the USA, which would also be likely to have a negative impact on sales there.

What the important last quarter of 2019 will bring in terms of sales – it’s in these three months a disproportionately large percentage of champagne is purchased — is therefore very hard to predict. If there is an unexpected surge in sales, there is plenty of supply, however. Stocks are relatively high and after the bumper and high quality 2018 harvest, the average reserve held across the appellation sits at 7,750 kg/ha, very close to the maximum level of 8,000kgs/ha, and equivalent to around 230m bottles.
*While the yield for the 2018 was originally set at 10,800kgs/ha, partly because of its high quality, the Institut National de l’Origine et de la Qualité (INAO) later agreed to allow producers to add 4,700 kg/ha to the reserve (providing their reserves did not exceed the maximum of 8,000 kgs/ha) so producers could harvest up to 15,500kgs/ha.