Bling-Bling Bubbles

06 June 2005 By db staff writer

“standfirst”>There aren’t too many sectors of the wine market where consumers actively seek out the most expensive option, but then there aren’t many sectors like “prestige Champagne,” says Giles Fallowfield

ACCURATELY DEFINING the prestige cuvée sector of the Champagne market is not completely straightforward. While most producers make at least one wine that you might reasonably include in this category, they are all likely to have a slightly different spin on what makes a cuvée really special.

Although most are singlevintage Champagnes, some are multi-harvest blends. Others may mix two or three fine vintages. There are also highly prized and premium priced single vineyard Champagnes. Confusingly, Bollinger which, in the shape of RD (recently disgorged) and the vintaged Vieilles Vignes Françaises, already has two products you might reasonably include in this rarefied category, has suggested its vintage Champagne Grande Année should be seen as the company’s prestige cuvée and has begun to push the price up accordingly – more of which later.

In general you can expect cuvées spéciales to command a top of the range price and often they come with glitzy packaging, although this is no longer de rigueur. Understated labels have become more popular, possibly as a reaction to the pre-millennium excess. It was in 1999 that this market sector was blurred by the shipment of a whole raft of pretenders, mostly rather ordinary wines packaged in flashy bottles, launched by unscrupulous producers and retailers seeking to take shortterm advantage of the expected boom in sales.

Self-elected

Even the Comité Interprofessionnel du Vin de Champagne (CIVC), the appellation’s governing body, finds defining “cuvées spéciales” problematic. It rather ducks the issue by letting the producers – growers, cooperatives and houses alike – self-elect the cuvées they deem appropriate. As a direct result of this approach, in 1999 a sector that has statistically always been less than 6% of the total volume of Champagne sold outside France, briefly doubled in size to over 17m bottles, accounting for an eighth of all exports.

The fact that over 60% of these, some 10.47 million bottles, were unvintaged wines, suggested something strange was going on, and it’s been demonstrated since 2000 that the vast majority of these were one-offs. Last year export shipments of genuine unvintaged prestige cuvées fell back to around 650,000 bottles and as this is close to Krug’s annual production of its non-vintage Grande Cuvée, it’s safe to assume there weren’t many other players in the market, although Laurent Perrier’s Grand Siècle La Cuvée, a blend of three fine vintages, currently 1990, 1993 and 1995 is another notable example of the genre.

Total export shipments of prestige cuvées reached 5.77m bottles in 2004, up 14.1% on the previous year. While no figures are compiled for overall domestic sales in France, Nielsen says prestige cuvées account for 1% of sales through Grande Distribution (hypermarkets and supermarkets) and this amounts to 467,000 bottles. So, as around a third of French Champagne sales go through this channel, if we estimate the total at 1.7m this puts the whole prestige cuvée sector at about 7.5m bottles, or less than 3% of total average production.

While this might seem insignificant in volume it certainly isn’t in terms of image and, for the few that sell thousands of cases, profitability. The flurry of activity in this sector over the past couple of years confirms the attraction. It is true that just three brands – Moët & Chandon’s Dom Pérignon, Krug and Louis Roederer’s Cristal, particularly DP – account for a disproportionately high percentage of total sales. But as the big Champagne houses strive to improve returns to help meet the high cost of grapes, the importance of the prestige cuvée increases.

Image enhancement

The prestige cuvée also plays a significant role in helping to preserve the distance between Champagne and the world’s best sparkling wines and in justifying the price premium paid for the former. As new world sparkling wines get better and better the importance of this image enhancement for Champagne generically should not be underestimated.

To illustrate the problem in defining the sector, it is worth exploring briefly the differences between the three leading players. The most obvious is that while most of Krug’s production is non-vintage (or “multi-vintage” as Rémi Krug always likes to refer to Grande Cuvée), both Dom Pérignon and Louis Roederer’s Cristal are vintage Champagnes positioned at the top of a range of products.

However, although this is demonstrably true in the case of Roederer, many consumers of Cristal see only an iconic status brand and do not make the Roederer connection, just as Dom Pérignon’s customers do not appreciate that there is a link with Moët & Chandon. Krug, on the other hand, also produces a small amount of vintage Champagne, plus the most expensive single-vineyard sparkling wine – the appellation in Clos du Mesnil – as well as a non-vintage rosé which sells for twice the price of its white counterpart.

All three brands also market some older vintage wines, an exclusive and even more expensive sub-section of the category that Dom Pérignon has made an important part of its marketing strategy. This has been done partly to address the top retailers’ concerns that a prestige cuvée brand selling nearly 3m bottles a year cannot be that special or exclusive, however good the quality in the bottle is. If this is an issue for the five-star hotels, Michelinstarred restaurants and top department stores such as Selfridges, Harrods, Harvey Nichols and Fortnums in the UK, then there is something perceptibly more exclusive in Dom Pérignon’s Oenothèque range of recently disgorged older vintages, which this year comprises 1966, 1976, 1983 and 1992. The further you go back the higher the price.

Strong values

At Roederer older vintages of Cristal have been released since April 2004, partly to underline the brand’s strong wine values in the higher echelons of the restaurant market at a time when the worry is that “bling-bling” pop stars, supermodels and footballers will drink it all, and very soon after release at that.

Jean-Claude Rouzaud, who runs this family-owned company, has decided that, with effect from the 2005 harvest, providing he can source suitable supplies from quality growers, he will gradually increase production across the Roederer range from the current 2.8m to 2.9m bottles to 3.4m to 3.5m. This represents a change of heart by Rouzaud who had previously vowed that this famous house would never buy in more than a third of its grape supplies.

New supplies

Rouzaud says, “I have agreed that my son Frédéric and Jean- Baptiste Lecaillion (chef de cave and director of vineyards at Roederer) can look for new grape supplies with private growers that have the right quality vineyards in good crus. Providing the quality is there, we will increase bought in grapes – we don’t buy juice – up to 50% of total production.” Although this will happen from the 2005 harvest it won’t have an immediate dramatic effect, Rouzaud says. “First we have to fill the gap created by the small 2003 harvest.”

Although production of Cristal will be increased so the level of annual sales can be raised above 400,000 bottles, one of Rouzaud’s main reasons for changing policy is that he believes that Cristal is currently released onto the market too early. “Not just from the point of view of the quality of the wine, but also from a marketing perspective. We are very often the first to launch a vintage and I’d like to see Cristal on the market at more or less the same time as its competitors. The 1999 vintage will be out later this year and I’d like to have kept it six months to a year longer. It’s going to be fantastic in a year or two.”

Increasing the amount of bought-in supplies to be used only in making the non-vintage Brut Premier (Cristal and the other vintage styles come only from grapes grown in the company’s own vineyards) is not going to affect sales, even for non-vintage, for a further four years, and for Cristal it will be at least six. In addition, Rouzaud says, “We can only increase sales in the longer term if we get more contracts from the next harvest. But thanks to the huge crop put in our cellars last year (2004) and hopefully the next harvest, we can increase the ageing that Cristal gets by six months.”

Escalating demand

To an extent, both Cristal and Dom Pérignon, which launches its 1998 vintage later this year, have been victims of their own success. Because they are single-vintage wines, they have both been affected to a degree by the lack of real quality harvests between 1990 and 1995. Dom Pérignon made vintage wine in 1992 and 1993 and Cristal in 1993 and 1994, but both brands have had a better run of good vintages in the second half of the nineties. Dom Pérignon was made in every vintage from 1995-2000 bar 1997 and Cristal only omitted 1998. However, driven by escalating demand, wines that really need a decade to show their true class have been released slightly younger and, sadly, in markets where they have mostly been consumed immediately.

This is certainly true if you compare these wines to the prestige cuvées made by other quality producers. Pol Roger’s current Winston Churchill cuvée is from 1995, having just recently moved on from 1993. Jacquesson’s Signature is also from 1995, as are Taittinger’s Comtes de Champagnes Blanc de Blancs, Gosset’s Celebris, Pommery’s Louise and Duval Leroy’s Femme – an impressive wine even among Duval Leroy’s generally classy vintage offering.

Henriot’s delicious but virtually unknown Cuvée des Enchanteleurs is currently the ‘89 vintage with the 1990 yet to be released. While Charles Heidsieck’s Blanc Des Millénaires continues to dazzle with the fabulous 1990 vintage to be followed by 1995. By releasing the more forward 1997 first, Billecart-Salmon’s two prestige lines Cuvée Elisabeth Salmon rosé and Cuvée Nicolas François Billecart are both currently from the great 1996 vintage.

Despite boosting volume dramatically in 2004 in the US, where sales for the whole Perrier-Joüet brand rose by 22,000 9-litre cases, and in Japan where the 6,000 case improvement represents a fourfold increase in volume, Perrier-Joüet Belle Époque, the number two player in the US behind Dom Pérignon, is also still on the high quality 1996 vintage, as is Veuve Clicquot’s La Grande Dame.

Krug has the advantage here over Dom Pérignon and Cristal, because thanks to its nonvintage Grande Cuvée accounting for the majority of sales, its higher priced, much smaller volume, vintage style can be more easily held back for later release, as demonstrated by the fact it is currently the 1990 on the market. Krug also has the seriously impressive 1979 and 1981 vintages available in the exclusive Krug Collection of older vintage Champagnes.

Meeting demand

Many top producers, including Pol Roger and Billecart Salmon, would like to slightly increase production of their prestige wines to meet demand, and for Billecart this is now immediately feasible, thanks to the 90 hectares of prime vineyards Groupe Frey has put at François Rolland-Billecart’s disposal since it took over the 45% stake in the company previously held by BEH of Luxembourg. Patrice Noyelle, PDG at Pol Roger, would like to slightly expand production generally and has recently bought a small amount of grand cru vineyard that should be suitable for future Winston Churchill cuvées.

One other way the major players can try to cool demand is by putting prices up. But this policy does not seem to work that well in this rarefied sector, particularly in the US, Japan and Italy. In the UK, the third largest importer of prestige cuvées, many smaller brands compete for share, although the same larger players dominate sales. The other three markets are all very strongly brand orientated and the term prestige cuvée is pretty well meaningless. They know and recognise the name of the individual brands, particularly Dom Pérignon. What the Americans in particular tend to follow, and the Japanese to a lesser extent, is price.

In the US, the biggest market for these wines, price appears to be what impresses consumers most, if the experience of Joseph Perrier’s PDG, Jean-Claude Fourmon, is anything to go by. Last autumn in Chicago, at a big tasting of sparkling wines from around the world, not just Champagnes, he found himself wedged on a table between Krug and Veuve Clicquot. In the catalogue detailing the prices of wines to be tasted there was a mistake and his top cuvée, 1989 Josephine, was listed with an inflated price of $320 above all others. No one, it seems, asked to taste Krug or La Grande Dame.

Best materials

While Joseph Perrier’s Cuvée Joséphine actually stacks up very well in terms of what is in the bottle, Fourmon would readily admit it is not a major player in this sector. Rather like other less well-known, subtle but delightful wines – Deutz Cuvée William and Henriot’s Cuvée des Enchanteleurs spring to mind – it shows what quality houses can do with the best materials available.

For Formon, Joséphine “finalises the pyramid of our range. It’s not all made from grands crus villages, but rather from the best parcels we own in places like Cumières where, unlike anyone else, we have two hectares of Chardonnay planted. [Cumières is predominantly black grape territory.] It is not the hardest wine to make, because we use the best grapes and only produce it in the finest vintages, but the style is important, it’s based on our supplies.”

Buoyant markets

The two biggest markets for Champagne outside Europe, the US and Japan, which are also two of the most profitable in terms of the average value per bottle sold, were encouragingly buoyant in 2004. In the US, volume was up 6.86% to 20.26m bottles and value was up to e351.5m, an improvement of 9.5%, yielding an average bottle value of e17.35, up from e16.94 in 2003. Shipments to Japan increased by 18.13% to 5.92m bottles with overall value up from e98.05m to e114.1m, and average value per bottle fractionally down from e19.56 to e19.27. Thanks to the fact that over a fifth of all shipments there are prestige cuvées, this is still the highest average price.

In terms of value per bottle only Italy and Spain – which, significantly, both produce very large volumes of sparkling wine and thus do not have much truck with cheap Champagne, unlike the rest of Europe) come near to the US and Japan. Shipments to Spain again rose ahead of the average growth rate for export markets, moving up 6% to 2.29m bottles, with average value per bottle falling slightly from e15.98 in 2003 to e15.52 in 2004.

The Italians imported slightly less Champagne: volume was down by 3.58% to 8.2m bottles, but the Champenois will not mind this much as total value actually rose from e144.0m to e154.8m, with average price per bottle going up from e16.93 to e18.87, ahead of the US, and this in a market where there are no exchange rate problems diminishing their return.

The US also remains the leading market for the likes of Dom Pérignon, Cristal and Belle Époque, and while the volume of prestige cuvée Champagne shipped, like vintage, has not returned to the dizzy heights of 1999’s 4.32m bottles, it has grown steadily since 2001 and in 2004 represented 8.04% of shipments to the US and rather more in terms of value.

Strongly branded

The US is an even more strongly branded market than Japan. The top three brands in the US – Moët & Chandon, Veuve Clicquot and Perrier Jouët – between them accounted for 64.92% or 13.15m bottles of total shipments to the US in 2004, compared with 62.63% of total Champagne shipments in 2003, 11.88m in terms of bottles. The top eight brands in the US between them tie up over 81.45% of shipments, while in Japan the top eight players have three quarters of the market. Contrast this with the UK where the top eight had only slightly more than half the market (52.2%) in 2004.

Reinforced

Jean-Marie Barillère, CEO of Champagne Mumm and Perrier-Jouët says, “Perrier- Jouët has been reinforced in terms of its number three position in the US [behind Moët and Clicquot]. Demand for Champagne is growing strongly, particularly in California and Las Vegas, the fastest growing city in the US where demand is booming. We’ve seen 20% growth for Perrier-Jouët and Mumm in terms of volume and in value it’s more,” thanks in no small part to Belle Époque.

Bollinger’s decision to put forward La Grande Année, its vintage wine, as its prestige line has puzzled some in the business. In the arguably more sophisticated UK market, (where you might expect the concept of Bollinger’s RD – recently disgorged older vintage wines from great years – to be more readily understood), Andrew Willey, buyer at Selfridges, where the Champagne offering at the top end is impressive and sales represent a very significant portion of the whole wine department, sees RD as the more obvious choice.

Bollinger’s international export director, Stephen Leroux says the vintage sector is being squeezed and suggests that as Grande Année is arguably one of the best wines made in the Champagne region, the move is justified.

“In Asian markets we were encouraged to put the price up because locally it wasn’t thought to be high enough for such a top cuvée. It is now priced at a higher level in Japanese department stores than Dom Pérignon,” Leroux says, “and it sells better there because it is more expensive.”

Leroux also points out that when Bollinger made the decision to put its prices for La Grande Année up above Krug’s at Ascot last year it subsequently outsold Krug. Clearly in this part of the market pricing is a crucial signal for prospective customers, and having it too low may be sending all the wrong messages. While some of the lesser-known brands make distinguished wines and offer arguably far better value than the big names, this sector is not about value. Image is everything.