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Prorietaire - Recoltant

Tyson Stelzer, the Australian champagne commentator, recently posted a very detailed article about the state of the Australian champagne maket.

http://tysonstelzer.com/articles/growers-in-crisis-despite-record-smashing-champagne-year-down-under/

The article is full of data and charts and makes interesting reading if you're into statistics. However I was intrigued as to why, with so many topics raised in the article, Tyson chose to use the title Growers in Crisis?

Well, I think the topic is very relevant. In fact it deserves a closer look and when you do delve a bit deeper I think you’ll see that the situation is both better and worse than Tyson suggests...

 First the good news.

True the market share of grower champagnes in Australia is a dismal 1% but to compare this with a global share of 19% is, I believe, misleading. Why? Because most grower champagnes are sold in France where they have a share of over 33% - although this is dropping year on year – and this skews the overall picture. In fact grower champagne’s share of export markets is just 4.6 %. So whilst Australia is indeed lagging behind the rest of the world the situation is not quite as bleak as Tyson suggests.

Now the bad news.

Leaving aside the issue of market share, I entirely agree that grower champagnes are in crisis and, except for the relatively few that have managed to make a bit of a name for themselves and will do well, I fear that, as a category, grower champagnes may be in terminal decline.

It pains me to say this because having lived in Champagne for the best part of 20 years and having worked with many small champagne houses over the years, I’d love to see them enjoy the success they deserve, but I am pessimistic; here’s why

Most makers of grower champagnes are farmers. They are wonderful people and often make excellent wines, but most of them don’t know how to sell and market their champagnes and certainly don’t know how to add value to their brands.

This is partly due to the fact that they have always depended for sales on the French market. Many started out selling to friends and family and the business grew from there; they didn’t need to do much marketing so they never had to learn those skills, but the prices were, and still are, the type of prices you’d give to your friend and family i.e. low.

Bottles-ageing-in-cellar300Nevertheless that system worked wonderfully as long as the French economy was doing well but in recent years that has not been the case and sales of all wines, champagne included, are suffering. With falling sales and thin margins there is less and less profit and more and more stock in the cellars to finance – not a happy combination.

Of course they can learn to sell and market better – indeed that’s the whole thrust of my work with the small producers - but this is not an instant fix, it takes time and needs investment and I fear that many grower champagnes are running out of both faster than their sales and profits are improving.

To make matters worse many growers are set in their ways and slow to change when what’s needed is action now. Time is, I fear, running out.

Market forces?

In parallel to this the big houses are offering attractive prices to buy grapes. After all, with their sales rising they need an ever-increasing supply of grapes. So it’s ever more tempting for the growers to sell their grapes to the big houses and that leaves them with fewer grapes to make their own champagnes – you can see where that’s leading.

Last but certainly not least is the problem posed by the few champagne makers who are still prepared to sell at €10 ex cellars or occasionally even less – and the importers who buy at these prices thinking that they are getting a bargain.

I have some sympathy for a wine maker who, in order to plug an urgent hole in his cash flow, decides to sell a given number of bottles at a low price. When your back’s to the wall you have to do something, but when your cost of production is €8 or more this is a one-off measure, not a sustainable solution.

Where I have little or no sympathy is with the importers who buy at these prices. If there are any importers reading this perhaps they can enlighten me about why they do it.

The champagne maker will either have to raise his prices quite a bit in the near future if he is to survive at all, or he’ll go out of business – neither outcome is good for the importer’s long term business. I assume ( always dangerous and perhaps incorrect) that the importer sees an opportunity to offer a cheap champagne to consumers who are not prepared to pay for a famous brand, but there’s is no need to slaughter the price of the grower champagne, quite the opposite in fact. These are often excellent wines that can be sold at a good price - perhaps a little less than a famous brand, but not necessarily much less.

It may make sense to sell and buy at €10 if the producer can produce and the importer can sell very large quantities, but grower champagnes by definition are not available in large quantities. So it’s brainless, in my view, to think that the low price business model will work for grower champagnes.

The only approach that is viable in the long term is to present grower champagnes as what they are: good quality wines made in limited quantities by skilled and dedicated artisans. In most product categories this combination is a recipe for raising prices and making better margins. To do the opposite indicates, again in my view, a lazy approach to sales which reveals an inability to see an opportunity to create value all down the supply chain from producer to consumer.

Is there any hope?

Fortunately yes. Whilst the British and the Australians seem to be fixated on brands or cheapies (the classic don’t get caught in the middle syndrome) in the USA and in several European and more distant countries the market share and average prices of grower champagnes are both rising.

So come on you Brits and Aussies, importers as well as consumers, you can do better than this and do yourselves and the grower champagnes a favour at the same time.

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