Wine News Champagne Shakes off the Dust of 2020

Champagne Shakes off the Dust of 2020

Champagne producers appear to have snatched victory from the jaws of defeat this year.
© iStock | Champagne producers appear to have snatched victory from the jaws of defeat this year.
After fearing the worst, Champagnes growers and producers are feeling cautiously optimistic as we enter a new year.
By Caroline Henry | Posted Saturday, 26-Dec-2020

As 2020 draws to a close, the Champagne industry looks back on one of the most difficult years since the Second World War. The economic losses inflicted by the Coronavirus crisis are significant, and have irreversibly changed the old normal. Still, the Champagne appellation is set to come out stronger than anyone could have anticipated at the beginning of the crisis, 10 months ago.

At the end of April, when most of the world was in lockdown, Champagne sales screeched to a halt. Year-on-year, the monthly Champagne shipment had fallen by 68 percent, and all markets were equally concerned. Jean-Marie Barillère, the president of the Union des Maisons de Champagne (UMC) and co-president of the Comité Champagne (CIVC) forecast the region would likely lose one-third of its volume (roughly 100 million bottles) and of its turnover (equaling about €1.5 billion, or $1.82b) by the end of the year. This set the tone for a morose year, fraught with bitter fights between the two factions. Moreover, year-on-year sales continued to dwindle by double figures month after month, with August being the only exception – only 0.6 percent down.

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The French market crashed hardest during the spring lockdown, but it recovered more rapidly than the export markets over the summer months, even registering a 15.3 percent increase in August compared to 2019. Export markets, on the other hand, were slow to pick up again, but hung on to their shipments in the fall, when French sales declined more rapidly. According to Barillère, exports have been driven by the US, UK and Australia, though it is likely that the UK increase can be attributed to Brexit panic buying.

By the end of October, the 2020 total Champagne shipments amounted to 173 million bottles, down 20.3 percent compared to 2019. November figures have not officially been released but Barillère confirmed that the second wave of lockdowns has done significantly less damage. He estimated November sales declined by 17 percent year on year, bringing the 2020 total volume close to 210 million bottles. Together with Maxime Toubart, president of the Syndicat General des Vignerons de Champagne (SGV) and the other co-president of the CIVC, he announced that the total 2020 sales will probably come in around 225 to 235 million bottles (a 12-15 percent improvement on the 200 million bottles forecast)

It is worth pointing out that the December sales are traditionally driven by French holiday purchases, which make up about 60 percent of the month's total. However, with the festivities severely restricted, a last-minute sales crash remains possible. Barillère evoked the severe December storm of 1999, which slashed sales by 20 million bottles.

Even so, it is more likely that the sales volume losses will be closer to 20 percent than 30 percent and, while this is a noteworthy decrease, it shows the region has been more resilient than it anticipated at the start of this crisis. However, Barillère believes the total turnover will be more impacted, and announced that "on average, houses and growers alike, will see their yearly income shrink by 25 percent".  He attributes this increased loss to a reduced average bottle price, driven by a sharper fall in prestige cuvée sales and the strong Euro value, stressing "overall the price per bottle has not decreased, but the sales mix has changed".

Not all bad news

The decreasing average bottle price also implies the average grape price per kilo is set to come down. This year already, several houses and co-operative, shaved a few cents of the 2019 price, and further reductions can be expected for the next few years. While this is a welcome breather for the houses, it implies growers will continue to see their income shrink, as it is unlikely larger appellation yields are on the horizon. Toubart explained: "The appellation maxima have always been linked to the sales." And with the total 2020 sales expected to come in around 230 million bottles, Barillère announced growers will be paid this year for the full 8000/ha.

This means the flexible appellation gamble pushed by Toubart paid off and is likely to become part and parcel of future appellation negotiations. Toubart would like to see the system expand, but he stresses that this does not imply appellation maxima will return to 10,000kg/ha. He expanded that it remains important not to add further to the heavy stock load, but implied that the current stock imbalance would only be addressed once sales had taken off again.

Both CIVC co-presidents stressed that they expected sales to bounce back very quickly after the Covid crisis. They pointed at the strong French August performance to underpin this statement. However, Toubart warned that closures in the on-trade would have a lasting impact, while Barillère alluded to the fact that many distributors and wholesalers may still be sitting on unsold stock. These comments suggest the co-presidents are well aware the sales landscape is evolving and Champagne will have to change with it. Both co-presidents spoke about the importance of diversifying one's sales channels, stressing online sales in particular.

Both also reiterated the need for the region to double down on its ecological commitments. "Now, more than ever, we need to continue our efforts to eradicate herbicides and further reduce our carbon foot print. It is what the customer expects and it is the only way forward," Barillère said. Toubart added that, while many producers may be tempted to cut costs (and thus stop their ecological investments), "the time has come to buckle down and focus on the future, to come out stronger rather than just survive". He also admitted that "the next few years will be hard, but that the status quo is not sustainable".

Innovation, creativity and ecology seem to be the new Champenois buzz words, though today they are not always easy to implement. There is still too much administrative red tape, which needs to be dealt with according to Barillère. However, for the first time in a long while, there seems to be plenty of goodwill to facilitate change and tackle future issues together.  Both families seem to have remembered that together they not only stand strong, they are invincible.

Yes, sales took a severe beating this year, but all in all the damage has been contained. Ongoing government subsidies have kept everyone afloat so far, and a temporary reduction in social charges, will help ease the cash flow in the months ahead. Moreover, sales are very likely to go up next year, when vaccines will boost renewed social interactions. Once again, Champagne withstood the storm, even if the boat took a bit of a beating.

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