With the 2015 harvest in Champagne expected to start generally around 10 September, the CIVC (Comité interprofessionnel du vin de Champagne) set the maximum allowed yield at 10,500 kilos per hectare at its meeting in mid-July, with a further 500kgs/ha to be released from the ‘reserve’. This is the same level of yield as was set for the 2014 harvest and is in line with expectations that champagne shipments worldwide will be around 307m bottles in 2015, close to the level reached in 2014 when 307.12m bottles were shipped.
With the current level of vineyard in active production of just under 33,700 hectares a yield of 10,500kgs/ha would produce about 306.5m bottles and the additional 500kgs/ha could potentially add just under 15m further bottles.
Britain continues to lead the way in champagne consumption with imports rising by 6.1% to 32,675,232 bottles in 2014, that’s more the next two markets, the USA and Germany, can muster together. Value was up slightly more by 6.7% to just over 477m€ giving an average price per bottle of 14.6€. The British consume more than seven times the combined volume of champagne imported by the much vaunted BRIC countries with consumption flat in China and Russia, up 10.2% in Brazil and down 16.2% in India. Britain takes 22.4% of all champagne exports.
The five leading export brands account for 38.45% of the market in Britain or 12,562,721 bottles. Compare that with the USA where the top five brands between them take a massive 70.25% of the whole market. Some 31,470, 047 bottles or 96.3% are non-vintage styles, with only 1,205,185 bottles of vintage champagne imported into Britain in 2014.
The basic yield in for the 2014 harvest was set at 10,500kilos per hectare by Champagne’s governing body the Comité interprofessionel du vin de Champagne (CIVC) which regulates champagne production at its meeting just before the August holiday break. This level of yield will to produce around 305.7m bottles of champagne. This is the volume of champagne the CIVC committee charged with analysing the market believes will be needed given the relatively high levels of stocks held by producers that amounts to nearly four years supply.
It is not a particularly optimistic assessment of the current situation which is partly based on the shipment figures for the first half of 2014 that show a very slight rise of 1.4% on the first half of 2013 to 110m bottles. But of course the majority of champagne sales are made in the second half of the year — particularly the last quarter — and predicting the level of demand in the run-up to the year end is always problematic. The MAT figure for the 12 months to the end of June 2014 helps a little, that is up 0.3% to 306.5m bottles on the same 12 months to the end of June 2013. But it is a still a difficult market to read.
The calculation about what a certain yield will produce is easy enough, you just need to know the current area of productive vineyard and that is 33,600 hectares. Because predicting consumption accurately is so difficult, the Champenois have devised a system by which they can make later adjustments to allow for fluctuations in demand by releasing more of the wine held in the Réserve to boost production.
This is quite a complicated system to explain. For 2014, in fact 400kgs/ha of the 10,500kgs/ha allowed will come out of the current reserves held and not the 2014 harvest. And if shipments look like rising above 307m bottles, the CIVC will raise this to 500kgs/ha. In addition vineyard owners can also put up to 3,100 kg/ha into their own reserve stocks, providing that reserve does not exceed the limit prescribed by regulations.
Champagne shipments were down just 1.53% in 2013 to 303,870,438 bottles, according to figures just released by the CIVC, Champagne’s governing body. The French domestic market was down by 2.43% to 167,093,159 bottles but total export shipments only fell 0.42% to 136,776,979 bottles. Shipments to the UK market were down by 5.13% to 30,786,727 bottles, dropping from 32,445,352 in 2012, the lowest level they have been at, bar 2009 when the financial slump hit sales, since 2001.
The UK is still by far the most significant export market in terms of volume, shipments to the number two market the USA which rose by just 0.93% are still over 12.9m bottles lower. In general, as expected, it is the mature European markets that fared worse with Germany and Spain down 1.57 and 1.92% respectively and Italy falling back further again – by 14.18% to 5,359,536 bottles, after a drop of over 18% in 2012. Belgium bucks the European trend with a 14.15% rise to 9,525,304 bottles.
Outside Europe the market for champagne in Japan and Australia remains buoyant with shipments to the latter, the sixth most important export market now, up 11.4% following on from 11.2% growth in 2012 and a 31.9% spurt in 2011. The Japanese market also continued to grow with shipments up 6.75% to 9,674,446 bottles.
In terms of value because of the higher average bottle price — consumers there favour more expensive rosé champagne and prestige cuvées — Japan may well have overtaken Germany as the third most important export market in terms of value. Those detailed figures are not available yet but with average shipment prices at €19.19 in Japan versus Germany’s €14.83 in 2012, the gap in terms of Euros between the two was less than €14m though over 3.5m more bottles went to Germany.
You can see why the Champenois like the Japanese market and that’s the reason Perrier-Jouët has just chosen to launch its new 2007 Belle Époque Edition Première there (a wine I tasted with winemaker Hervé Deschamps last Thursday in London of which more soon) in time for the Spring blossom. A few years ago Veuve Clicquot launched its non-vintage rosé in the Japanese market before releasing it anywhere else and the PJ has hint of pink from macerated Pinot Noir.
The feeling that the biggest houses are concentrating their efforts on the emerging markets like the BRIC countries and that this is where the growth is all going to come from in the short term took a blow. Shipments to China were down 18.35%, exports to Russia only up 4%, Brazil fell 0.46% and while India was up 5.36% shipments there still only reached a paltry 367,020 bottles.
When I spoke to Moët’s CEO Stéphane Baschiera on the telephone last month he mentioned that Mexico was a ‘priority market’ for the largest champagne brand. Perhaps therefore unsurprisingly the highest percentage growth achieved by any top 30 countries came in Mexico where shipments rose 31.18% to 1,137,845 bottles. That’s more than India and Brazil put together, though sitting together in 15th and 16th position in the top 30, China and Russia are still slightly larger at 1.63m and 1.54m bottles respectively. Shipments to the UK are however still more than five times larger than all five of these markets put together.
Champagne shipments in 2013 fell back by 1.5% to 304m bottles, “a satisfactory result in a difficult economic environment in Champagne’s main European markets,” says the Comité Interprofessionnel du Vin de Champagne (CIVC) in a statement accompanying the estimated figures, which were released over a month earlier than usual this year. This volume is nearly 5m down on 2012 and nearly 19m below the 2011 figure of 322.95m bottles but while shipments to both the French domestic market and Europe outside France are down by 2.3 and 3.4% respectively, shipments to countries outside Europe reached a new record level of 63m bottles, up another 3.2% on the 2012 figure.
The markets outside Europe now account for only 11m fewer bottles than Europe, the closest the two have been and in value terms they are neck and neck. Countries outside Europe, a group still dominated by the USA and Japan, respectively the second and fourth ranked export markets for champagne in terms of volume, now account for over 25% of total shipments in value terms and just over 20% in volume. In fact while Japan was still 3.5m bottles smaller than Germany in volume terms in 2012 (12.5m vs 9m bottles), as a very high value market where average bottle price was €19.10 versus Germany’s €14.8 in 2012, in overall value terms Japan is now very close to Germany with shipments there in 2012 worth €173.64m against shipments to Germany of €186.22m.
In 2012 average shipment prices in the three areas were:
France: €12.44 a bottle
Europe: €14.96 a bottle
Outside Europe: €18.18 a bottle
The overall year-end shipment figures in 2013 are better than was expected after a difficult November when shipments were down 13.5% in Europe compared with November 2012 and the total figure looked like being under 300m bottles. A general recovery in December saw shipments increase to around 42m bottles, an 8% rise on December 2012. Total value of shipments for 2013 was only fractionally down on 2012 at around €4.3bn.
New president of the Union des Maisons de Champagne (UMC) Jean-Marie Barillère says that export markets like the UK are “not where growth will be found tomorrow and the houses must anticipate this change by investing in distant markets, especially in America and Asia. It is a long-term job, requiring considerable human and financial resources,” he says.
Speaking as he takes over from Ghislain de Montgolfier, with whom he has worked as UMC vice-president since 2007, Barillère says : « In terms of markets, Champagne must undergo a profound transformation. France, England, Germany and Europe in general, which accounted for 80% of champagne shipments in the past, are not tomorrow’s growth markets.”
“In 2013 and the following years the challenges are well known. We must adapt to changing circumstances revising the Champagne model to create more value. Champagne has had several decades of growth but mainly in volume terms, while there has been little increase in value. This growth model cannot be pursued any longer because of the appellation rules, production and yield restrictions [the currently defined vineyard area is more than 95% planted]. We cannot double the production of grapes in the next twenty years.”
“Champagne must adopt another growth model, one based on creating value. Easy to say but hard to achieve as such a policy requires lots of different skills. Fortunately in Champagne we have the people with exactly the right skill set in our ‘grandes maisons’.
Barillère has given up his position in charge of Moët Hennessy Champagne Services, the administrative arm of Champagne’s largest player that buys grapes for all the groups’ brands, to « separate the two functions in the interests of transparency », but his views that priority markets are outside Europe reflect those of Moët Hennessy’s managers.
The detailed year-end figures from the Comité Interprofessionnel du vin de Champagne (CIVC) show that in 2012 countries outside Europe accounted for 19.74% (60.95m bottles) of total champagne shipments, the highest level since 2007 when they took 17.5% of shipments (59.44m bottles). The most important market outside Europe remains the USA. Although shipments there fell 8.7% in 2012 to 17.69m bottles, value of just over €371m gives an average bottle price of €20.98, the highest among the top ten. The only top ten export markets in growth are Japan, up 13.8% to 9.06m bottles and Australia which rose by a hardly less impressive 11.2% to 5.4m bottles.
Shipments to Japan have risen over two and a half times over the past ten years while value has risen in the same period from €80.74m to €173.64m less than €15m behind Germany, although 3.5m more bottles were shipped there in 2012. After the USA, Japan and Italy remain the two top ten markets with the highest average bottle price at €19.16 and €19.11 respectively, but volume in Italy fell back 18.4% to 6.25m bottles in 2012.
Growth in the Chinese market where shipments rose 19.4% in 2011 accelerated jumping 51.8% to cross the 2m bottle mark, although the average price at €13.85 is lower than the price in the UK which is €14.5 a bottle. India rose 20% to 348,358 bottles, while Russia grew by 10.3% to 1.48m bottles, but Brazilian shipments dropped slightly by 6.7% to 980,378 bottles.
Champagne shipments are expected to fall by around 3% to between 312 and 314m bottles in 2012, back to the level of 2005/6, after a poor November saw sales drop between 6 and 7% on the same month in 2011. Last year, when 42m bottles were sold in December it was the lowest figure for that month since 2004, says Michel Letter, managing director of GH Mumm and Perrier-Jouët at Pernod Ricard. “If we do the same this December, that will make 312m bottles for the whole year.”
With “a lot of promotion on the French market recently” where prices in hypermarkets have regularly dropped below €10 a bottle, he expects that level at least to be reached. “This compares with 323m bottles last year,” says Letter “and while a lot of people will complain, it only takes us back to the shipment level in 2005/6 and is not too bad [given the widespread economic recession]. The problem is we have no idea of how things will develop next year making forecasting difficult.
“The French economy is not likely to recover next year and while the US and Asia are doing well, with a 1% downturn in France [where 56% of all champagne sales were made last year] you need a 10% increase in Asia to compensate. The difficult markets are in Old Europe where France, down 4.9% to the end of October, the UK, Spain and Italy have all fallen. All the growth for the category is coming in markets outside Europe with Japan, Australia and China all doing well,” says Letter.
“For the second year running Japan, where exports were up 26% in the first half year, has been our leading market for Belle Epoch [Perrier-Jouët’s prestige cuvée]. In Australia, where shipments were up 16.2% in the first half, we have also done very well, partly because of the Pernod Ricard wine connection and through taking over [from Moët] sponsorship of the Melbourne Cup.”
The Champenois are relieved to hear that champagne shipments rose very slightly in 2011, despite a fall in the important French domestic market that accounts for around 60% of all sales. Or as Michel Letter head of G.H. Mumm and Perrier-Jouët put it: “2011 was the third best year ever after 1999 and 2007 with total shipments reaching 323m bottles, up 1.09% on 2010, not bad considering the worldwide economic situation”.
Among the top ten export destinations only Britain, down 2.7% to 34.4m bottles and Spain (-0.3%) had a drop in shipments while Belgium and Germany both saw 8.5% growth. Although consumption in France was down nearly 2%, overall exports were up just over 5% to slightly above 141m bottles with the strongest performances coming outside Europe, notably in Australia, up nearly a third, and the USA ahead by 14.4% to 19.4m bottles.
The best performers in the emerging markets were Russia, China and Hong Kong with respective increases of 24.5, 19.4 and 15.1%, although the rate of growth slowed in the second half of 2011 and these three markets between them still only account for 4.1m bottles.