CHAMPAGNE: EXPORTS: The bubbles that won’t burst

Considering the woeful state of global economies, is the writing on the wall for Champagne exports? No, finds Jane Parkinson, who sees the category reaching ever-greater heights all over the world

In an economically tumultuous climate, you might think Champagne houses would focus on consumption in their home nation.

Apparently this isn’t the case. Despite the precarious nature of countries’ economies, Champagne houses stand firm in their determination not to rely on domestic markets and insist on braving the rocky waters of the export market instead.

Houses’ aspirations to increase export share is not a minor ambition, either, as Jonathan Saxby, managing director of  Champagne Moutardier, explains: “We want to diversify from the French market, currently we export 40% but if it could be 60% that would be great.” Fabrice Rosset, president of Champagne Deutz, agrees that increasing exports is the way forward. “We’re ambitious and want to gain 15% on export levels as it adds another dimension to our brand.”

A 15% to 20% export market increase may sound ambitious in today’s market, but it’s looking increasingly plausible over the next few years. While established markets appear cautious but active, a number of emerging markets are proving dedicated to importing more and more Champagne.

Established markets
The US has suffered a severe decrease in Champagne exports in the last year with its import volume decreasing by more than 26%. This is only to be expected, according to Stephen Leroux, sales and marketing director of Champagne Bollinger. “The US is a very reactive market. It is quick to fall on its knees and quick to get back on its feet. Generally, shipments to the US fluctuate more than other countries whether it’s for the good or for the worse. Either way, we’re all watching the global economies like milk in a pan.”

Indeed, with the US economy’s performance often leading other nation’s economies, its currency fluctuations make for a troublesome export market for the Champenois. Paul Bamberger, managing director of Champagne Pommery, is feeling the strain. “The US was, and still is, a problem. Look at the peak [in currency] earlier this year when we started to see a major increase against the dollar in the past year. The price of a NV bottle went from around US$25 to US$45 a bottle.” Between the end of 2005 and April 2008, the euro strengthened by 35% against the US dollar and it is only in the last few months that the currencies have turned in favour of the Champagne exporters, helping to bring the cost of Champagne down for the US market.

However, despite the currency issues, Bamberger doesn’t believe Pommery will redistribute its US export share to other countries. In fact, it plans to do the complete opposite. “We have a long-term strategy and have decided to stay there even though it’s more difficult and there’s a problem with price. We believe, well, we hope, that in the longer term, say 2009-2012 and beyond, the US market will increase because there are still a lot of people who enjoy it there.” Meanwhile, in an effort to overcome any avoidable costs, Pommery has taken back the distribution of the brand itself.

Champagne Nicolas Feuillatte is also a believer in the recovery of the US Champagne exports. Kattrin Thauer, commercial, marketing & communications deputy director for Nicolas Feuillatte, says: “The US remains one of the key markets with high potential growth. We believe in  the US recovery. Recent facts and figures confirm this trend, like the dollar  improvement, the decrease  in oil  price and the economy registering a slight growth. We are confident that a new consumption trend could start just after the US election leading to more sales around Christmas time.”

Moreover, while the woes of the US dollar versus the euro has spelt trouble for certain houses up until spring of this year, canny houses have spotted a window of opportunity. Non-Grande Marque houses are one example. Saxby of Moutardier (a non-Grande Marque house) continues: “As a smaller house we are an intriguing alternative in the US and are able to revive the American market through value for money. I have persevered with America and spent two weeks in March and April over there so that I could find a distributor and now I have one, for the Eastern Seaboard.”

While cheaper-priced Champagne could be one method of penetrating the US market, at the opposite end of the scale, Americans’ sophistication and appreciation of Champagne is key in helping to support export volumes, particularly when it comes to higher-priced Champagnes. Rosset adds: “The mix of producers on the US market means the consumer spend is much higher as they buy Champagnes of a much higher value such as the prestige cuvées.”

It’s a similar story in the UK. Armed with a long tradition, history and loyalty of drinking Champagne, it’s still the most Champagne thirsty nation in the world. The dip in export volumes is easily explained, says Françoise Peretti from the Champagne Information Bureau in London, who believes the figures in the chart need to be put into perspective. “Traditionally, shipments to the UK and US etc are down at the beginning of the year due to retailers stocking for Christmas and year-end period. We need to wait until September and October to have a more accurate picture on year trend.” However, the dip in the UK is not regarded as a problem by the confident Champenois, who, much like the US market, see the fall in exports as a minor blip. Pierre-Aymeric Du Cray, sales director of Champagnes Mumm and Perrier-Jouët, says: “In countries like the UK, we want to have a long-term vision, we want to build a brand with loyal and faithful consumers.”

Emerging markets
The Champenois’ faith in established markets is no surprise. However, new export markets are also coming to the fore. Although none of them rival the likes of the UK and US in terms of export volumes yet, there is plenty of scope for them to do so in the future.

Take China, for example. The general appreciation of wine in China has extended to Champagne where many houses talk of a growth in exports and many a new working relationship being formed. Jean-Marc Pottiez, managing director of Champagne Jacquart, sees China as an important export prospect for the future: “We’re happy to have the opportunity to work with a Chinese company who is very established in the off-trade.” And Saxby agrees: “China is a market that everybody is keeping an eye on.”

However, there are drawbacks. China lacks a basic understanding and appreciation of Champagne. Educating a country with a population of more than one billion requires serious capital, something which only the larger houses can afford to invest in at the moment. As Rosset adds: “I applaud the bigger names who are the only ones able to go there. They can change things. Once the Chinese have that level of knowledge, they can appreciate what they like and can then discover new brands.” Peretti agrees: “The challenge [in emerging export markets] is great in terms of consumers who are not traditional wine drinkers and so education is very important.”

Education aside, the appeal of China is strengthened by Hong Kong, where the removal of duty on wine and spirit imports has made it a much more lucrative and, consequently, attractive prospect.

Paradoxically, not all emerging Champagne export markets are ignorant of Champagne. Certain countries, in particular those who produce their own sparkling wine, are seeing an increase in Champagne imports too.

One surprising growth has come from a fiercely proud wine-producing nation – Australia. As an example of its growing importance, Australia has not been a priority for some houses until now. Deutz is one such house, Rosset explains: “Australia is a weakness for us at the moment but it’s in the [export] plans for 2009. Australia is important because there’s already a wine culture there and its own production elevates consumers’ knowledge, which is healthy.” Nicolas Feuillatte’s Thauer believes Australia’s “emphasis on lifestyle coupled with a powerful economy in recent years has led to a growing interest beyond the traditionally strong cities of Sydney and Melbourne with growth now being witnessed in Perth and Brisbane especially.”

Back in Europe, Spain’s consumption of Champagne has also seen an increase in recent years (despite the slight dip in the last year). Even more so than Australia, Spain has a thriving sparkling wine production industry in cava, and thanks to this, its appreciation of Champagne is rising.

But why, as a producer of cava and a neighbour of France is this only a recent trend? Bollinger’s Leroux explains: “Spain went through an agricultural revolution at a later stage than certain other European countries.” The consequent improvement in standards of living there, with the appreciation of sparkling wine as a style, has amplified this country’s love of Champagne. Moreover, the attraction of Spain for the Champenois doesn’t end there. The potential of Spain is all the more attractive because of the Spanish population’s love of eating out, opening up a lucrative market for supplying Champagne to the on-trade.

Moving further north, the European country with the greatest export growth in the last year is Russia. Despite its spirits-drinking culture, Champagne has seen a resurgence in popularity that harks back to the days of the tsars in the 19th century. The Champenois believe this Champagne drinking history has been the catalyst for growth which has outstripped every other country. As well as history, the Russian market holds many attractions to the Champagne exporter. Rosset adds: “Consumption habits are closer to us than other export markets.” And Pommery’s Bamberger is in no doubt as to the reason behind Russia’s phenomenal 46% growth in exports over the last year. “Russia has this history and has a market of high-end products, it’s selling more of them than any other country and it’s because it knows what Champagne is.”

Strategic approaches
It would appear that different strategic approaches are not so much advisable as imperative considering each export market’s intricacies and uniquenesses. The UK, for example, has a longstanding appreciation and thirst for Champagne that shows no signs of abating even in the current economic climate.

Russia, on the other hand, has lapsed in its appreciation of Champagne but is quickly turning the corner with unparalleled import growth over the last year, a growth that Peretti believes mimics that of the US 50 years ago.

The US of today may be experiencing currency difficulties, but even as I write this, the euro is weakening against the US dollar with exchange rates turning in favour of the Champagne exporters, releasing them of the currency stranglehold they have experienced over the last few years.

Aside from the difficulties being experienced from established markets, there is now a plethora of exciting new markets. These countries have some of the largest populations in the world; however, they are also lacking in knowledge of Champagne. China and Brazil fit this mould in particular and are showing a serious interest in consuming Champagne, something that will only continue to increase as education improves.

It appears as though no matter which way you look at it, Champagne is more than riding the storm, it’s cruising through it at a rate of knots. Perhaps it’s because of this the Champenois don’t need to tweak strategies or tailor their route-to-export-market tactics. The only battle Champagne exporters of the future face is the consumers’ psychological battle. Rosset seems to think this hypothetical scenario could one day become a reality. “Although Champagne consumption is buoyant, what is extremely dangerous is when the psychological environment changes, the image you project of yourself.”

In other words, it could become socially unacceptable to drink Champagne for fear of looking decadent and uncaring in today’s poverty-stricken world.

Although the export levels of the big players do look gloomy, when we look at what is happening in each individual market, it becomes clear that Champagne exports continue to diversify and grow. 

  db © October 2008