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Posted: Monday, September 14 2009. 17:10

Champagne running out of Fizz

Unknown to most people the harvest in Champagne began last Thursday with the yield being limited to 9,700 kilos per hectare, 6% below last year’s level and 30% below the maximum permitted by CIVC to protect quality and indirectly the prices.

Earlier, the industry had debated at the annual meeting in the Champagne region to determine the cap on the harvest this year. Usually set at between 10,000 and 14,000 kilos per hectare, this year it opted for 9,700 kilos per hectare. Last year the level had been set at 10,000 kg. The figure of 9,700 has been arrived at through a compromise reached between the growers who wanted to cap it at 10,400 per kg, but the negociants and champagne houses insisting on 7,500 kg per hA.

The decision has been motivated largely by falling sales in the UK, the number one export market for champagne. Trade rumours earlier this year had suggested that sales in this largest export market were about 40% down due to recession. The on-trade sales dropped by 16%, according to a Nielson survey. The global sales this year are estimated to come down to 260m Bottles compared to the record 339m bottles sold in 2007. The fall is expected to continue into 2010.

Producers normally keep a three- year stock in the vaults and the peak demand of 2007 might have helped some big houses to bring down those levels and they might be pleased with the idea of replenishing stocks to the previous levels. But many already have a stock for four years and it would be a financial strain for the smaller producers to survive, besides finding the extra storage place, even though extra ageing in the bottle may be generally good for the quality.

There are 1.2 billion bottles of champagne in the region’s cellars, according to Bernard Beaulieu, a local mayor and grower, enough to satisfy global demand for four years.

The excess wines are to be placed into reserve until the authorities are convinced that the demand has increased to a level justifying their release.

The recent news that the French Prime Minister Francois Fillon has promised the French wine industry during the crisis is not likely to help Champagne- the government will at the most help the Bordeaux producers get export guarantee credits, taking some financial pressure off. But the government attitude is clear from the statement of the Agriculture Minister Bruno le Maire when he reportedly said, ‘This is not a subject that we can make decisions on quickly. It’s not a priority."

It is interesting to see the name of India being bandied around as one of the BRIC countries responsible for fall in consumption after increased demand during recent years. According to a survey done by delWine last year and validated by CIVC, the consumption of champagne was estimated at about 20,000 cases only- this  included the bottlefuls that are consumed as unlimited Champagne is available with many Sunday brunches in the 5-star hotels at extremely attractive packages. Perhaps, there is more to statistics than what is available in the public domain! 

Grapes of the current harvest will actually be used in the production of champagne coming to the market in two years or more, but the decision is meant to reflect the recessionary trends in the market today. Despite some media reports suggesting a possible shortage in 2 years due to the current decision, it is unlikely to happen because of the current over-supply and also because it will be at least 3 -4 years before the previous level of consumption are reached.

Smaller growers are extremely worried about the threat of takeover from the big houses. Most feared is LVMH, which has just over 18% of the global champagne market. It may seize the chance to add to its holdings of vines if growers go bankrupt, or it could buy up struggling small champagne houses. Late last year it reportedly snapped up Montaudon, a family house founded in 1891. “LVMH behaves in a paternalistic and charming way in Champagne,” says Mr Beaulieu, “but behind that they want to take over our business.”

In the meantime, if newspaper reports are to be believed a cut-throat price on Champagne will be available, at least in the UK supermarkets as a run-up to Christmas because of the glut. The consumers never had it so good- a great way of celebrating the recession and bearing the pain.

An interesting article posted on the website of Jancis Robinson clarifies many doubts and mis-reporting by the media which has taken a lot of interest reporting about the capping of the crop.

       

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