To begin to understand the complex workings of the Champagne market you need always to bear in mind one important fact. It colours everything else. Although the large négociant houses that own the major international brands dominate sales of Champagne, particularly those outside France, collectively they own only a tenth of Champagne’s total vineyard area. The bulk of Champagne’s grapes come from the 15,628 growers who between them farm 29,910 hectares, the negociants only own the remaining 3,167 out of the appellation’s 33,077 hectares that are in active production (2009 harvest figures).
Although some of these growers (récoltant manipulants), just 2,034 at the last count, make champagne themselves and market it under their own name, the vast majority – 10,852 –just sell their grapes. They either sell them directly to the négociant houses or else to their local co-op which may in turn have an agreement to supply grapes or grape must (known in Champagne as vins clairs) to a number of different négociant firms. Some 2,742 growers belong to co-ops.
The fact that the merchant houses are responsible for at least two-thirds of all Champagne sales, and over 85% of all exports, while the growers own 90% of the grapes produced in the appellation leads to a certain dynamic tension. To fuel their brands, most of the big producers have to buy in the majority of the grapes they need from literally dozens of different growers and co-ops. Houses like Louis Roederer and Bollinger which both own enough vineyards to supply about two-thirds of their grape requirements are rarities.
Although Champagne’s largest group, Louis Vuitton Moët Hennessy, has the biggest total vineyard holding among the négoce with some 1,684 hectares, this area provides less than a third of the grapes they’d need to produce their six brands of Champagne — Moët & Chandon, Dom Pérignon, Mercier, Ruinart, Veuve Clicquot Ponsardin and Krug – over 55m bottles of which in total are sold each year. To make up the difference they need to buy in the production of around another 4,000 hectares from across the appellation. And this is usually done through a series of supply contracts, some of which may only be for a couple of hectares of vineyard from which barely more than 20,000 bottles of champagne may be produced each harvest.
Managing this large annual purchase of grapes has always been one of the biggest headaches for the négoce, and it’s something that has become a good deal more problematic over the past decade and a half of strong consumer demand for Champagne. The price paid for grapes is clearly very important to both sides of the equation. For the growers the price per kilo they receive and area of vineyard they are own will precisely define their annual income — if they are just grape farmers who don’t make or sell their own champagne as the majority are. For the négociant houses the price they pay for grapes accounts for a significant percentage of their overall production costs.
We can clearly see this is you consider that you need around 1.2 kilos of grapes to produce a single 75cl bottle of Champagne (or 1.5kg if the wine is only made from the first pressing, or cuvée) and the best quality grapes from the top vineyard sites (grands crus) cost around 6Euros a kilo while the selling price on entry point Champagne is barely over 10Euros a bottle, although for the top wines it may be ten times this amount.
Buying the grapes they need would however be an even trickier and more time consuming task if the houses had to deal with all the individual growers to get this material – grapes or vins clairs (still wine that hasn’t undergone secondary fermentation) – for the average vineyard holding of each grower is well under two hectares. Fortunately for the négoce, most of these individual growers belong to or sell to some sort of local co-operative, and many of these co-ops have banded together to form larger groups, which means the houses can buy significant volumes of wine from one player.
The co-operatives thus play a vital go-between role in helping to keep the relationship between grape growers and the négociant houses working. Many were actually formed specifically to take on this role of negotiating a deal between the growers and the négoce, the idea being a larger organisation selling bigger volumes would be in a better position to command higher price for the grapes or vins clairs.
However in recent years the picture has been complicated by the co-ops generally marketing and selling some of their production under their own brands — some of which offer terrific value and quality – and the two largest co-operative groupings now own significant marques of their own in the shape of Nicolas Feuillatte and Jacquart, the former recently becoming the fifth largest selling champagne on the market.