The pandemic created real problems for the Champagne industry, but the past 18 months has seen the sector’s resilience come to the fore, and the French fizz ever more cemented in the hearts of aficionados. Patrick Schmitt MW picks out five ways in which the pandemic has affected the world’s finest fizz.
ONE COULD hardly pick a tougher test for Champagne than an invisible threat that prompts a societal shutdown. After all, the sparkling wine is the default upmarket option for good times – and it’s consumed socially. Fear, financial uncertainty and physical distancing – all aspects of our prolonged Covid era – have provided three powerful reasons to eschew Champagne. And initially, that’s what happened. As has been well documented, the spring of 2020 – when Covid-19 began to spread across Europe and the US – saw Champagne suffer the biggest decline in shipments and sales probably ever seen by the region, and certainly as dramatic as the fall-off in consumption during World War II, and then it was from a much smaller base. Since early 2020, Champagne has been through a number of changes, but, in general terms, except for the Japanese market, the French fizz has enjoyed a rebound in sales remarkable enough to ensure it is now on track to return to its pre-Covid global size.
Considering the IWSR projected it to reach 2019 levels by late 2023 at the earliest, Champagne’s comeback has surprised everyone, particularly as tourism is yet to recover, with a knock-on effect for the troubled travel retail market. Indeed, the rapidity of the Champagne recovery has rather caught out producers, who are now running bottling lines at full capacity to meet the demand. But with a delay of at least three months between disgorging Champagne and shipping the product, or at least retailing it, concerns about short-term shortages have been raised. Or rather, it’s believed that there won’t be enough Champagne to fuel discount-driven spikes in demand in the run-up to Christmas.
PREDICTED DECLINE
How times have changed from summer 2020, when the region was forecasting a 100 million bottle decline, and, as a result, an oversupply if it kept production quantities at their present level. It’s why the region’s governing body, the Comité Champagne, capped yields for Champagne growers gearing up for the 2020 harvest at a dramatically reduced level – enough to produce 230 million bottles when the average vintage of that decade had been limited to around 315m. In contrast, for 2021, those yields have been set at one of the highest levels seen this century: 13,100kg/hectare. This is enough to produce 382m bottles for a fully productive area of 35,000ha, although the equivalent of 291.7m can be used for this year ’s output (the rest must be put towards a store of wine for future needs, otherwise known as a réserve).
Nevertheless, nature has interfered with this plan to replenish stock levels, with a combination of frost and mildew affecting output for the growers in 2021, taking yields down by almost 60%.
The pandemic may have made a shortterm, if deep, dent in sales, but it has not diverted the region from its long-term drive to protect and augment its premium status, while augmenting its green credentials. Nevertheless, Covid-19 has brought about changes to Champagne other than affecting sales. With this in mind, I have picked out five ways in which the pandemic has affected the world’s finest fizz.
1. CHAMPAGNE’S RESILIENCE HAS BEEN PROVED
One should remember that around June 2020, the Champagne region was braced for a year-end decline in shipments of 100m bottles – one third of its annual output. The actual fall-off was around half that – with a drop of 18%, representing a decline of 52.5m bottles to total 245m, and a loss of €1 billion (£854m) in turnover (from a record of €5bn in 2019).
For a year when much of normal life was restricted, it’s a remarkable performance, and proves the resilience of Champagne. After all, much of the restaurant sector was severely curtailed, along with the travel retail market, while the night-time economy was mostly closed, meaning that around 50% of Champagne’s usual route to consumers was drastically curbed, if not shut off altogether.
As Michel Drappier of Champagne Drappier says: “I see the glass half full – Champagne as a region was down by 20%, so it sold 80% of its potential last year; this is enormous when you think that Champagne is a product of meetings, celebrations, nightlife and everything that is contrary to a pandemic.” Indeed, it shows that this product, which has built up a global following over decades, is not one to be dropped when times look bleak. If anything, such is Champagne’s appeal it has become a tipple to turn to as life becomes sour, not just when everything’s sweet. In other words, this fine French fizz is a mood enhancer, as well as a tool for adding sparkle to celebratory times. This is why sales failed to decline as severely as feared – people may not have been willing or able to share Champagne face to face, but they chose to enjoy it at home instead, be it with their closest family or partners, or a wider circle of friends via electronic means – the gifting of Champagne boomed during lockdowns, with toasting taking place over Zoom. And without big events to buy for, people opted for established brands and pricier cuvées – no-one wanted to risk a disappointing glass. Furthermore, having had a taste of the top stuff, it seems that consumers are unwilling to trade down. So, as Champagne recovers its sales volumes, it’s not losing out in terms of turnover. The pandemic has accelerated an existing trend of trading up in Champagne to the benefit of upmarket brands, established growers, and fine cuvées, whoever has crafted them. As Rémi Vervier, managing director of Champagne Palmer & Co observes: “The image of Champagne is better than before the pandemic.”
2. CHAMPAGNE HAS THE RIGHT TOOLS FOR TOUGH TIMES
If there’s one effective way to ruin an upmarket positioning, it’s an oversupply, and the resulting impact on price. It’s why products of finite production – and quality – sit at the top of the market when it comes to reputation and expense. But it was surplus stock that threatened Champagne’s image when the pandemic took hold. After all, the region’s producers were already sitting on the equivalent of around four years’ stock on average, making a total of 1.2bn bottles, and, should yields in the region remain at their usual level, Champagne was on course to make another 315m bottles in 2020, when shipments were forecast to fall to 200m.
However, the region is regulated, with the amount of Champagne made each year governed by the Comité Champagne. Crucially, this organisation comprises the growers (who farm the land) and the houses (which sell the product) – and both their views must be represented.
Although it took longer than usual for these actors to reach a decision, by mid-August 2020, just ahead of last year ’s harvest, the two sides of Champagne had agreed to reduce the number of berries picked to make the fizz by almost 30% compared with the average of that decade.
So with the yield for 2020 capped at 8,000kg/ha for Champagne that could be made from that vintage, the output would total around 230m bottles, compared with a more normal 300m-315m.
In the end, this level turned out to be less than shipments of 245m for 2020, although that 8,000kg/ha cap was later revised upwards to 8,400kg/ha.
An artificial yield reduction was not just important for avoiding an oversupply situation, it also saved a lot of businesses from potential bankruptcy. For the makers of Champagne, the biggest annual cost is buying grapes, and with a fall in sales of Champagne, cash flow was curtailed. But, with fewer grapes harvested per hectare, along with a small drop in grape prices (4%-6% vs 2019), those businesses who rely on growers to supply their needs, had reduced outgoings at a time when they had less money to spare.
In contrast, now it’s clear that Champagne is back on track to reach its pre-pandemic size, the region has authorised a higher-than-average yield to help replenish stocks. As the CEO of Champagne Gosset, Jean-Pierre Cointreau, says: “Of all the wine regions of France, Champagne is governed the best; we have the tools to adapt to every situation – it’s a region that benefits from having a strong governing body, and strong brands.”
3. CHAMPAGNE HAS FOUND AN IDEAL SIZE
OK, so last year ’s sales and production of Champagne was a blip. Making and selling less than 250m bottles in 2020 was an anomaly but, and looked at in the context of the global situation, it was far from a disastrous outcome, proving the resilience of Champagne. But over the longer term, Champagne seems to have found an ideal size – it’s a total that’s a bit smaller than in the recent past, but one that’s more profitable. And it’s a figure of around 300m bottles in terms of annual shipments. This was the total before the pandemic, and it’s hoped that it will be the total after it – regained as soon as the end of this year.
So, when I ask the new director of the Comité Champagne, Charles Goemaere, what he believed was the ideal size for the region, he says: “If we look at the average of the past 20 years then it is roughly 300m bottles, and if we can reach this level in the near future, it would be a great achievement. At 300m-310m bottles we would represent less than 10% of the sparkling wine drunk in the world, so we are still limited, and in 2007, we reached 338m bottles, which is around 100m bottles more than we sold last year, but I don’t think such a figure is in the collective mind anymore.”
Around 300m is also a total that fits with the current level of yield for the region, as set by the Comité, which generally sits somewhere between 10,000kg- 11,000kg/ha – or the equivalent of 291.7m to 320.8m bottles. Such a total is big enough to allow producers enough wine to meet current demand, while making up for any supply shortfalls due to climatic conditions – yields are generally around 10,000kg/ha for immediate use, with another 500kg-800kg/ha for putting aside as a reserve, which can be released when natural yields fall below artificial limits.
Key to this 300m total is the type of Champagne that’s being sold. As Lanson chairman Franç ois Van Aal says: “Champagne is coming back stronger… there are bright days ahead, but it won’t necessarily mean more shipments; it’s not about getting above 300m bottles, but about a better product mix.”
Looking over the longer term, Laurent d’Harcourt, CEO of Champagne Pol Roger, adds: “Champagne was 25m bottles after the war and grew to more than 300m bottles over 65 years, and while it went down last year, I think it will come back to normal levels.” Stressing that producers are not seeking to push much beyond that – even with a revision of the appellation boundaries an ongoing option – he says that the aim today is to sell a better product, not more bottles. “People realise now that Champagne has to create value – and that is for the growers, the maisons, the co-operatives.”
4. TOP CHAMPAGNE NOW BEHAVES LIKE A FINE WINE
Another surprise to many in the trade, as well as those outside, has been the performance of the highest-priced end of the Champagne market during the pandemic. When the nightclubs have been closed, and restaurant trading has been restricted, the sales of prestige cuvées such as Dom Pérignon, Cristal, Krug and Pol Roger ’s Cuvée Sir Winston Churchill have surged. One reason could be the fact that, somewhat ironically for a sparkling product associated with parties and celebration, it is a steady investment, a market without bubbles, and therefore a safe place to store your money, should you buy it to sell on in the future. So, unlike some fine wines, Champagne offers reliable returns –a particularly attractive trait during times of such uncertainty.
But Champagne has also been helped by a run of recent critically acclaimed vintage releases – from 2008 to 2012 – as well as, to a lesser extent, Champagne’s exemption for the US trade tariffs on European wine, which have now been removed.
But whatever the exact cause, top-end Champagne has enjoyed a remarkable pandemic, with the investment-grade labels collectively being the bestperforming area of the fine wine market over the past year. This reflects something bigger: the perception of Champagne has shifted from something to be quaffed quickly to a fine wine worthy of collection and investment. Notably, such a change is benefitting the famous names, but also the top growers, and more esoteric cuvées, as the market for fine Champagne expands and broadens. Such a trend may also be fuelling a further development in the region –a rising demand for organic grapes, as top-end producers require high-quality bunches with sustainable credentials in line with what their consumers increasingly expect for other fine wines. For the growers, now yields in Champagne are newly lower, particularly during the 2020 vintage, the switch to organics is less of a step – the lower output from this farming philosophy is little different from the conventional approach, while the price paid for certified grapes is higher.
5. THE PANDEMIC HAS MADE CHAMPAGNE EVEN MORE PREMIUM
It seems counterintuitive, but the uncertain Covid-era has actually moved Champagne upmarket – that is, in terms of what’s been consumed and what’s been made. To deal with the latter first, the pandemic has augmented an existing trend towards bottling more added-value cuvées, as some houses took the decision to reduce the amount of Brut NV Champagne they made last year due to the fall in demand, while increasing the quantities of longer-aged expressions, which will reach the market in the future. This follows a longer-term development of storing more wine for release as vintage Champagne, following several fine harvests in a row.
During the pandemic, consumers have been drinking less Champagne, but when they do, the quality has been higher, with sales of rosé fizz and prestige cuvées outstripping that of Brut NV, although these more specialist expressions are made on a much smaller scale. Among the Brut NV Champagnes, the bedrock of the region’s global sales with around 80% of volume, Covid-related restrictions have speeded up a shift towards consumers buying brands with a strong reputation, and away from generic Champagne.
“Non-brands have suffered more,” says Champagne Philipponnat’s Charles Philipponnat, talking about sales during the pandemic-induced downturn, before adding: “And special cuvées and vintage Champagne have not suffered at all, so the quality of Champagne has increased.” This has a longer-term affect on the region, because it frees up grapes that were being sold to supply cheaper Champagnes to fuel the growth of better expressions. “Covid has accelerated the demise of cheap and bad Champagne; the crisis has brought forward this transition,” he says. “I’m happy about this, because eliminating the weak points is Champagne’s strength.”
He and others believe the pandemic has brought growers and producers closer together – at least in terms of outlook. “They are more united; their points of view are converging,” he says. “Now the growers understand better the economics of Champagne, they have started looking over the wall of Champagne and into the wild nature of where we sell the grapes. They now realise that the economics of Champagne do not happen in Champagne; the price of grapes and the size of yields are not the result of what we do in Champagne, but what we sell outside of Champagne.”
This is encouraging more growerproducers to revert to just producing grapes for brand owners, who have the reach and cash to reach consumers in a broad swathe of markets.
This is accelerating the demise in the number of grower Champagnes. This doesn’t mean this is a weaker category, just less diverse, as the ailing names withdraw.
Meanwhile, the established growers are becoming strong Champagne brands with an increasingly broad distribution, and a different and complementary positioning to the maisons. A diminishing grower-Champagne sector is an existing trend that’s been accelerated by the pandemic. In keeping with the other changes mentioned above, it’s one that supports an ongoing aim in Champagne –a desire to be the source of nothing but the finest fizz.
Feature findings
• The spring of 2020 – when Covid-19 began to spread across Europe and the US – saw Champagne suffer the biggest decline in shipments and sales probably ever seen by the region.
• But the fall-off in shipments was less than had been feared, with a drop of 18%, representing a decline of 52.5 million bottles.
• An artificial yield reduction by the Comité Champagne was not just important for avoiding an oversupply situation, it also saved many businesses from potential bankruptcy.
• Established grower-producers are becoming strong Champagne brands with an increasingly broad distribution, and a different positioning to the maisons.
