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Champagne deals push prices below cost
Such is the depth of discounting on Champagne in UK and French supermarkets in the run up to Christmas, Nicolas Feuillatte commercial director Julie Campos believes certain producers must be selling below cost.
Deals on Champagne in the run-up to Christmas are pushing prices below cost believes Nicolas Feuillatte’s commercial director
“There are a lot of inexplicably low prices from certain sources, with which we all have to live,” she told the drinks business yesterday during a discussion on the Champagne market in Europe.
Continuing she said, “I say inexplicable because the pricing doesn’t add up to the cost bearing in mind what a replacement bottle of Champagne would cost these days… it’s obvious there are offers around that are below cost.”
Although Campos declined to mention any names, Asda’s exclusive Pierre Darcys label, which is supplied by cooperative Union Vinicole des Coteaux de Bethon (UVCB), is currently on offer for £10 a bottle, making it the cheapest on the UK market following the Champagne’s near £15 price drop from its off-promotion price of £24.25.
Bearing in mind a kilo of grapes in Champagne cost €5.60 (£4.70) in 2012, and approximately 1.2 kilograms of grapes are needed for a bottle, while duty in the UK for sparkling wine is £2.56, and VAT is 20%, once you factor in the costs of packaging and production too, as well as retailer margins, it seems hard to believe £10 a bottle on the shelf is enough for all parts of the supply chain to make any profit.
Interestingly, during last year’s festive season, the Pierre Darcys label was also the cheapest Champagne in the UK and, as reported by db in January, Asda achieved a 25% increase in Champagne sales over December from an aggressive deal on its exclusive label.
Having slashed Pierre Darcys’s price from £23.98 to just below £10 a bottle, the supermarket reported sales of almost 250,000 bottles in a single week in the run up to New Year’s Eve.
Julie Campos, Nicolas Feuillatte sales director
Considering this year’s Christmas sales period, Asda is far from the only supermarket selling cheap Champagne, with Tesco selling its De Vallois label for £12.99, having cut its price from £25.99; Sainsbury’s is offering Ettienne Dumont for £15 (down from £26.99), while Morrisons is selling Louis Dubrince rosé for £14.98 – doubtless the cheapest pink Champagne in the UK market at present.
But it’s not just the UK – currently a flat market for off-trade Champagne sales – where the deals are compelling, with, for example, Carrefour in France selling the Charles de Courance rosé for €13.34 a bottle.
Campos also said that France would see “Champagne below €10 again this Christmas” referring to last year’s deals such as E Leclerc’s sub €10 offer on the Laurence D label, which was supplied by Nicolas Dubois of the now bankrupt Pressoirs de France.
Explaining the low prices in France specifically, she said, “You only have to look at the sales trends to see why [prices are so low at the moment] – France consumes around 180 million bottles and the market is down approximately 4%, which amounts to a lot of Champagne.”
Furthermore, she reminded db that Champagne producers must pay for grapes in three instalments at fixed times during the year, meaning, she said, “they are paying for grapes whether sales are good or bad, and grape prices are continuing to increase.”
Because grape prices have been rising faster than Champagne retail prices, Campos noted that the grapes alone now account for 42% of Champagne’s total production cost, and, she added, “it used to be 30% not very long ago”.
Nicolas Feuillatte has gained a listing in Tesco for its rosé with a new gift box in time for Valentine’s Day
As a consequence, she suggested that the current deep discounts were connected to an immediate need to convert stock into cash to pay for the cost of producing Champagne. “I think the promotions are linked to economic problems in Champagne, rather than an attempt to buy market share,” she commented.
And while some houses have suggested emerging markets in Asia, South America and Africa may compensate for slowing sales in Western Europe, Campos said the role of such regions was “overstated”, pointing out that the total market for Champagne outside Europe was only 20%.
Furthermore, if one ignores North America, Champagne’s third largest market, then Africa, Asia and South America account for less than 10% of sales according to Campos.
“We need huge gains in those markets to compensate for even a small percentage loss in France,” she explained.
Although Campos added that she does have high hopes for Champagne sales growth in Africa, picking out five key markets – Nigeria, South Africa, Morocco, Gabon and the Congo – she said that Nicolas Feuillate would continue its focus on the UK and French market.
In the latter, Nicolas Feuillatte is currently the largest Champagne brand, accounting for just over 8% of the French market (France is 55% of Nicolas Feuillatte’s total sales) while the UK makes up 15% of Nicolas Feuillate’s business.
Campos was adamant that the brand would not attempt to match the very low prices being seen in Europe presently.
While admitting that “everyone is worried that their Christmas promotions are not going to function as well as hoped because there is so much inexpensive Champagne in the market,” she also stated, “We don’t want to be part of that trading down.”
“We don’t want to compete, we are building a brand,” she added, noting that Nicolas Feuillatte would focus on “adding value” with new gift boxes and range extensions.
In particular, she was pleased to report that the brand’s rosé, complete with a new gift box, has gained a listing in Tesco in time for Valentine’s Day (pictured above).
“All the major retailers are favourable to this type of solution,” she said of the UK’s multiples.
“We all feel trapped in an overly promoted market, and everyone would like to come back to more sensible pricing in Champagne, but in the middle of the current economic situation it’s difficult,” she remarked.
Meanwhile, db has compiled a selection of deals on Champagne in the UK at present, which can be viewed on the following pages.
Asda – £10
Pierre Darcys Champagne Brut NV is being sold for £10 in Asda having had almost £15 slashed from its headline price of £24.25.
Tesco – £12.99
Until 3 December, you can buy De Vallois Champagne Brut NV at Tesco for £12.99 a bottle, down from £25.99. However, should customers buy six bottles of the Champagne on or before 1 December, they will receive a further 25% off the discounted price.
Morrisons – £14.98
Morrisons must be offering the cheapest pink Champagne in the UK market with is Louis Dubrince Champagne rosé for £14.98 a bottle.
Sainsbury’s – £15
Sainsbury’s is currently offering an £11.99 saving on Ettienne Dumont Brut NV Champagne having cut its price from £26.99 to £15. However, there is a 36 bottle limit on any purchases.
I’m not sure that listing the latest supermarket deals following on from such an article is a good idea. This is just promoting those companies who sell champagne as a loss leader. Significant discounting of champagne is a huge problem and the people at the beginning of the chain are the farmers who spend hours and hours a day tending to the vines to produce champagne – only for it to be used shamelessly to win market share at peak times of the year. We shouldn’t be advocating it, we should be doing something about it. I personally do feel that minimum pricing should be brought in with regards to champagne otherwise there is no point in having a separate AOC. You may as well wrap all sparkling wines up under the same umbrella regardless of origin or quality. I doubt the English Sparkling producers would allow for such behaviour given the prices of some of their entry level cuvees!
Don’t waste your pity on the tragic fate of these “poor Champagne farmers who spend hours and hours a day”, etc. Champagne is, by far, the richest wine producing region in the world, as you can easily see from the figures quoted by Ms Campos. With a tiny vineyard, say 2 hectares,no winegrower could live anywhere. In Champagne you will produce regularly the authorized 2×13 000 =26 000kg that you sell 6.50€/kg , a gross income of exactly 169 000€ a year. Let’s allow very generously 19 000€ for viticultural costs (no other production costs to be provided for: you don’t even have to make champagne. You just sell the grapes at this guaranteed price.) Net Yearly income: 150 000€. And, believe me, tending a 2ha estate is a reasonably quite and peaceful occupation.
Although much of what Ms. Campos says seems to make economic sense, it may be worth pointing out that the local E Leclerc supermarket in the town I regularly visit in France is currently offering Nicolas Feuillatte Speciale Cuvee VINTAGE champagne with a -30% reduction down to €49.00 for three bottles (which works out cheaper per bottle than the majority of non-vintage champagnes on offer). Maybe a case of practise what you preach ?? There is no doubt that most champagne brands would love to be able to do away with the cheap offers Ms. Campos describes, as they probably make little if any money at all on these deals once the brands themselves have financed a large proportion of the discount. But in reality the loss of volume that would result if they were to step back from such activity would seriously damage their position with the major retailers, and so the producers have become slaves to the discount culture dictated by the supermarkets. As long as the retailers are allowed to call the shots and producers do not have the stomach to stand up to them, this distorted market will contine to exist.
thanks for your article about champagne. please advise miss Julie Campos that CHAMPAGNE NICOLAS FEUILLATTE brut in on Promo by Asda at 15£ ! she doesn’t want ot compete with cheap champagne, to built a brand like nicolas feuillate….please miss campos like we say in french : balayer devant votre porte avant de faire la morale aux autres…