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Posted: Monday, 03 August 2020 21:55

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Champagne Sales to nosedive to 200 million bottles this Year

Aug 03: The sales of the world famous celebratory fizz champagne have been coming down slowly from their peak of around 330 million bottles to 302 million bottles in 2018 and under 300 million in 2019 but are set to crash to around 200 million bottles in 2020 thanks to Covid-19, necessitating control of yields and promotional measures like free champagne to wine tourists in Reims to help the travel and champagne industry, writes Subhash Arora

Ask any champagne producer or avid champagne fans and they would assert that champagne is a drink for any occasion-in fact, it is a drink to celebrate life and a way of being thankful to be alive- a perfect drink during these troubled Corona Virus times. But for a vast majority, however, it is still a celebratory drink for special occasions. Thanks to Covid-19, these people have found nothing to be cheerful about and the sales have plummeted 325 so far this year. Of course, lockdowns have been a big factor too.

Lockdowns in most countries have made social occasions like weddings, dining out, parties and international travel practically impossible. The luxury product has thus taken even bigger hit than most of the alcohol industry some of which has even seen an increase in consumption in the off-trade. It has already resulted in a drop of about a third of the sales and if the trend continues, as feared by the industry, the sales drop would be a whopping 100-110 million bottles in 2020, bringing it to lower than 200 million with last year’s sales being 297.5 million bottles.

Record value in 2019

According to The Drinks Business, the value of shipments in 2019 was a record €5.05 billion, representing a rise of 3.4% in 2018 of under €4.9 billion which also had been a record, indicating that though the numbers were coming down slowly, values were going up because of its increased presence in high-value market like the U.S.

After peaking at around 330 million bottles, champagne saw a loss in sales from 307.4 million bottles in 2017, to 301.9m in 2018 and 297.5m last year, and is heading for a sale of around 200 million bottles in 2020. This compares to the low of 293 million bottles in 2009 after the global meltdown in 2008. An estimated sales loss of €1.7 billion ($2 billion) over the sale of €5 billion is feared worse than the Great Depression. According to Comité Champagne (CIVC), the sale of champagne was down 32% for the period January to May 2020 compared to the same period in 2019, according to Euronews.

"We are experiencing a crisis that we evaluate to be even worse than the Great Depression of 1929”, said Thibaut Le Mailloux of CIVC which represents about 16,000 winemakers. It monitors and regulates the size of the harvest each year to avoid excess production that would result in prices to plummet.

To manage the losses, the CIVC is launching unprecedented damage-limitation measures. A meeting is scheduled for Aug. 18 when a cap is expected to be imposed on production that might result in a record quantity of grapes to be destroyed or sold to distilleries at discounted prices to make hand sanitizers. This worries the smaller producers as it will affect them more than the big houses.

The coronavirus crisis has sparked a battle within the industry over current year’s harvest which commences this month on August 20. This meeting will have producers and growers decide on how much bubbly should be put into bottles. The main production houses are demanding a sharp reduction in harvest yields as sales plunge while growers are strongly opposed to the view as it would severely hurt their revenues. Traditionally, both sides negotiate how many grapes are harvested by the hundreds of champagne growers each year, many of whom sell to merchants including big-name brands.

Merchants say they are already loaded with stocks and with revenues hit hard by the crisis, they cannot afford to produce more bottles than they can sell. The growers want 8.5 tons/hA and the houses want just 6-7 tons/Ha of grapes that cost at around €6-6.50 a kilo. Interestingly, this is the first time after the World War II that the production cap has not been fixed with less 20 days away from the harvest. According to some growers, the crop is exceptionally good this year, capable of giving a yield of 16 Tons/hA, says a Report in AFP.

With over one billion bottles currently stored in champagne cellars, the dispute may not be sorted out at the August 18 meeting. If no deal is reached on yields, the decision will be left with France’s National Institute of Origin and Quality (INAO), which governs the country’s wine appellations.

A very small minority in the producers has also started expressing the view that the champagne industry could move away from effervescence and be able to produce all sorts of wine, as it did in the past- red, white or still wines and literally no fizz-which is of course highly unlikely, considering the special status enjoyed by the fizz for centuries.

Meanwhile, Champagne region initiated a campaign on July 15 to promote champagne by offering a free glass of Champagne for those visiting the region and staying for at least two nights at a stretch in or around Reims when they eat in a restaurant. 3,000 bottles of champagne from 68 houses costing a total of €50,000 have been set aside for the promotion.

Prosecco takes the slice

One of the main reasons for the drop in sale of champagne has been the cheaper Prosecco, Cava and other sparkling wines like Franciacorta and those from Argentina, made in the traditional method but costing a fraction of the price of champagne, cutting into its market share. Prosecco that reached a peak of almost 600 million bottles has also been under some pressure. Though sales estimate for this year are not available yet, an estimated 480-500 million bottles of Prosecco could be sold this year. The Consorzio of Conegliano Valdobbiadene Prosecco DOCG has already approved a decision by its members to reduce the yields for the 2020 harvest last week from 13.5 tons/hA to 12 tons/hA for Prosecco DOCG.

Consortium for Prosecco DOC which produces almost 85% of the total Prosecco should in all likelihood take similar steps.

Subhash Arora

 

 

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