Giles Fallowfield explains the background to the extraordinarily difficult decision these two warring officials in Champagne are expected to announce later today.
My copy as it appeared on JancisRobinson.com on the morning of 22 July 2020 (https://www.jancisrobinson.com/articles/champagne-turmoil ) Guest contributor 22 Jul 2020
Champagne shipments slumped in April and May as the fallout from the COVID-19 pandemic has hit worldwide sales. Champagne’s governing body the CIVC (the Comité Interprofessionnel du Vin de Champagne or just the Comité Champagne) has estimated that the overall loss in sales volume in 2020 may be as high as 100 million bottles with turnover down by more than €1.7 billion (£1.54/$1.96 billion). In 2019, 297 million bottles of champagne were shipped worldwide and their value reached a record €5.05 billion.
As many countries went into lockdown, total champagne shipments fell by 68% overall in April 2020 compared with April 2019, the monthly volume dropping by 13.23 million bottles. In France, which still accounts for around half (47.5% in 2019) the worldwide champagne market by volume, shipments in April were down by 74.6%, or close to 7 million bottles, while shipments to the wider European market excluding France dropped by 65.2%, or 2.82 million bottles, and exports outside Europe fell by 59.7%, some 3.5 million bottles.
In May, the position only marginally improved in France, and although the month-onmonth percentage decline is lower at 55.4%, it’s still a drop of another 5.2 million bottles. In the rest of Europe, the decline also slowed with May 2020 shipments down 50% on May 2019 (2.4 million bottles), while outside Europe, the picture remained grim with the decline increasing to 62.6%, or 3.29 million bottles.
In the first five months of the year, overall shipments dropped 32% to 61.37 million bottles compared with 90.3 million bottles in the first five months of 2019. (And the total volume of sales in 2019 was the first in the past decade below 300 million bottles and the lowest since 2009 when, in the year following the global financial crisis, shipments fell to 293.3 million bottles).
While the moving annual total for the 12 months to the end of May 2020 suggests the pain is fairly equally shared between the houses, the growers and the co-ops with their respective shipments down 11%, 10.9% and 8.4% respectively, in the first five months of 2020, it’s the growers who have taken by far the biggest hit. Their shipments are down 42.5% in that period, dropping from 15.29 million bottles in the first five months of 2019, to 8.8 million bottles in January–May 2020, while the houses and co-ops have lost ‘only’ 29.9% and 30%, respectively.
The growers’ cash flow has also been hit by the drastic measures announced by the CIVC on 5 May this year aimed at maintaining a stable market. As well as temporarily suspending the sur-lattes market, where unbranded champagne bottles are bought and sold, in an effort to prevent dumping at greatly reduced prices, a ban that ran until the end of June, the CIVC decreed that the last two payments for the 2019 harvest could be delayed.
Grape growers are usually paid for their grapes by the houses in four quarterly tranches: on 5 December after the harvest, on 5 March the year following the harvest, and then 5 June and 5 September. However, the CIVC announced that these last two, the third and fourth payments for the 2019 harvest, could be delayed until 5 October 2020 and 5 January 2021 respectively, thus helping the cash flow of many of the houses whose sales have slumped.
It is against this difficult background that the Champenois await, with considerable trepidation, the decision of the CIVC on the level of yield to be allowed for the 2020 harvest, due to be announced later today (22 July). On the one hand, the houses whose major brands dominate overall sales of champagne want yields to be reduced broadly in line with the drop in shipments. The growers, however, whose income largely depends on the volume of grapes they sell to the houses – they are paid a price per kilo, on average (in 2019) €6.3/kg – don’t want the level of yield to drop below the already reduced maximum level of 10,200 kg/ha allowed last year.
The decision will be announced jointly by the two presidents of the CIVC, Jean-Marie Barillère, president of the Union des Maisons de Champagne (UMC), which represents the interests of the major houses, and Maxime Toubart, president of the Syndicat Général des Vignerons de la Champagne (SGV), the main growers’ union. They are pictured above. Toubart on the left.
While the two CIVC presidents sent out a joint letter on 24 June to all houses and growers calling for calm and a united front, just six days later on 30 June, Barillère, representing the houses, took the unusual step of publicly calling for a maximum permitted yield of just 7,000 kg/ha, which is 3,200 kg/ha below the level of the 2019 harvest. ‘Champagne is going through a serious crisis of a scale unprecedented since the second world war’, he warned. ‘The loss in sales is estimated between 20 and 40% and could reach 100 million bottles (representing a value of €1.7 billion) in the event of a possible rebound of the pandemic after the summer.’
In a message squarely aimed at the growers, he added, ‘the houses and their Union (the UMC) are ready to go beyond this figure, if and only if, part of this 2020 yield is considered as an advance on the 2021 harvest, to be used in blends of base wines in 2022, and also paid for in 2022′.
What the reaction of the main growers’ union, the SGV, will be to this is unclear. The situation is complicated by an acrimonious split between different growers’ unions which has led to the Vignerons Indépendants de Champagne (VIC) organisation, which represents 393 growers who own 7.5% of the vineyard (2,600 ha/6,425 acres) and account for 25% of growers’ sales of champagne, ending its affiliation to the SGV, because it does not think the SGV properly represents the views of these 393 growers, some of the most successful in the region. Their pre sident, Yves Couvreur, argues that the yield has been suppressed for the past three years and in a survey of these growers, more than 50% ask for a yield of 10,000 kg/ha or more, rising to 80% who want more than 9,000 kg/ha.
While the SGV is considerably larger than the VIC, and sits at the table when the yield discussions take place, the smaller organisation represents many who make and sell their own champagne – 23% of which is exported. They don’t want their own potential volume of sales reduced by a reduction in yield imposed on all champagne producers, which means they will physically have less wine to sell.
Grape growers, whose income has already been shrunk by the officially permitted delay in payments for the 2019 harvest, are now faced with the prospect of seeing their income in 2021 reduced by as much as a third. If the 2020 yield is capped at 7,000 kg/ha, those growers who sell their own wines (récoltants-manipulants) will have far fewer bottles to sell from mid 2022 – by which time the market may have recovered.
Two other factors make the situation even more difficult. On average the amount of champagne held in reserve across the appellation sits at 7,700 kg/ha, only 300 kg/ha below the official maximum reserve allowed at any one time. (This still wine does not have the appellation until it is released from the reserve.)
So this takes away most of the wriggle room that allowing producers to put a large amount into their reserves might give the CIVC. (If there is a large, high-quality crop, rather than send any excess above the maximum permitted yield to be distilled, it could be put into the reserve for future use in years when the yield is low.)
Also, early reports of the 2020 harvest also suggest that, without any external intervention, average yield throughout the region is likely to be well above 10,000 kg/ha of potentially high-quality champagne. A difficult decision indeed…
After the CIVC Comité met on 22 July 2020 these two paragraphs were added:
Champenois fail to reach agreement of level of yield for 2020
At the meeting today (22 July) in Epernay the Champagne Comité failed to reach agreement on the level of the 2020 harvest. It seems the two sides were too far apart even to come up with a compromise, although with another August start date expected, the sixth since 2003, time is rapidly running out. With the growers wanting to stay close to the recent level at around 10,000kgs/ha while the merchant houses were calling for something around 7,000kgs/ha, and some even as low as 3,500kgs/ha, it was always going to be a problematic discussion.
The CIVC has confirmed another meeting has been scheduled to try to resolve the issue on 18 August. But with the harvest in Champagne already close to veraison and running about two weeks ahead of the average start date, that will be very close to when picking actually begins in the earliest ripening crus. Picking began in Ambonnay on 17 August in 2018. If agreement is not reached at this meeting the decision will be made by INAO.