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18/05/2010

First quarter sales give cause for optimism

(First appeared in La Journée Vinicole , edition 217, May 12, 2010.) That sales of Champagne provide a fairly accurate measure of consumer confidence and therefore the state of the economy, is beyond doubt as France slowly makes progress along the route to recovery. After a dramatic decline in 2009, recent sales data from the Champagne marketing bureau CIVC have revealed that things are picking up. The latest annual moving totals show that sales topped the 300-million-bottle mark, thereby returning to pre-recession levels. Last year, sales dropped to 293.3 million bottles, in sharp contrast to the previous year’s 322.4 million or 2007’s 338.7 million. “This is our sixth consecutive month of consignment growth, after particularly poor results in September at -19%,” says Daniel Lorson, head of press and public relations at the CIVC. Although Lorson warns that final data for March is not yet available, he believes that a pattern is definitely emerging. “The figures currently available are pretty positive with a first quarter increase of 17% though obviously they still have to be handled with care”. Currency shifts These first signs of an upturn are to be ascribed to restocking by the trade. After importers considerably downsized inventories last year, at the height of the recession, they are now beginning to replenish stocks as consumer confidence improves in many key markets. “There is a definite feeling that the US economy is improving,” Lorson said. “A trip to Great Britain confirms a similar impression. “Part of this is due to a decline in the euro which has dropped in comparison with both the pound and the dollar, enabling imports to resume to a certain degree.” Other non-EU countries such as Japan, Australia and Switzerland though also EU member states, especially the southern European nations, are boosting Champagne imports. Shipments to non-EU countries soared by 57% over the first quarter and +112% in March, while the increase is a very honourable +25% within the EU. Ironically, France, which proved to be a bedrock for Champagne sales last year, grew by just 5% this year. “The sales trend in the French market was totally atypical in 2009,” Lorson said. “With sales of 181 million bottles, there was virtually no change on the previous year. “This led to a shift in the balance of domestic sales and exports, with the French market cornering a 62% share compared with 55% the previous year”. Fears of a complete meltdown globally led the Champagne houses to reassess their domestic position and to devote more attention to it. “A 5% increase is actually fairly positive” believes Lorson. “Because sales in France remained steady, growth is obviously less spectacular”. Discounting a worry for the future But did the growth actually benefit the entire Champagne industry? Apparently not. The large Champagne houses posted a 26% rise in shipments over the first quarter of the year. “The Champagne houses are witnessing greater increases than the small growers,” Lorson said. “However, significantly, the large companies were also the ones that saw sales fall most dramatically. “They are also more established in export markets than in France”. Sales for the smaller wine growers dropped by 8%, primarily due to heavy discounting by the multiple retail trade. The long-term impact of the discounting is difficult to ascertain as yet but many feel that the psychological effect on the consumer should not be underestimated. “Discounting has attracted price hunters who have been tempted to try Champagne at those prices,” Lorson said. “Consumers should be aware though, that at 10 euros per bottle, Champagne is no more than a loss-leader that fails to provide any kind of return, either for the producer or the retailer. “All it does is kick-start consumption by a certain kind of clientele that would not normally buy Champagne and will switch from Crémant to basic sparkling wine and then over to Champagne depending solely on the price tag”.

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