Jiles's Blog

CHAMPAGNE BULLETIN JULY 2022

In this month’s Champagne Bulletin

• A good time to be in the Champagne business - Champagne market value to boom in coming decade
• But there are some headwinds too – input costs are rising too
• The most expensive bottle of champagne ever sold
• Harvest news and reserves

You may remember that just a few months ago the Comité Champagne announced that the total value of champagne shipped in 2021 reached the record level of 5.7 billion euros or about 7 billion USD

Coming after two pretty dismal years in 2019 and 2020, the news was greeted with much celebration and confidence that Champagne had turned the corner and was once again on the path towards buoyant sales and decent profits, but even the most bullish champagne makers would probably be surprised by a recent study that forecasts that the value of the Champagne market will keep on powering ahead in the next 10 years.

A new study lead by Future Market Insights, an economic analysis group in Great Britain, believes that by 2032 the value of champagne shipments will have surged upwards to over 11 billion dollars thanks to an annualised growth rate of 5.08%

What’s driving the growth?

There seem to be a number of trends all converging to the benefit of champagne

• Although I wouldn’t go so far as to say that drinking Champagne has become an everyday event, it does seem that the Champenois are succeeding in finding the right balance between two potentially conflicting objectives: making champagne the first choice of an ever-growing number of consumers whilst still retaining the exclusive aura of luxury and that has always been the hallmark of Champagne

• More and more people see champagne as a drink to enjoy on informal occasions when they just want to have fun instead of just a drink for rare and special occasions.

• At the same time, as more consumers enter the world of champagne, they are discovering that not all champagnes are the same and they are eager to try something new such as rosé champagne, vintage champagne or low-dosage champagne all of which command a premium compared to non-vintage champagne.

• This means that the average price per bottle is moving steadily upwards as consumers are less likely to choose a ‘bargain basement’ ‘brand.

• Champagne drinking has had a boost as bars, clubs and restaurants are seeing business return to something approaching normal.

• Decades of investment in developing new markets is beginning to bear fruit. Although the USA is by far the largest market for Champagne, accounting for just under 25% of total sales value, other markets in Europe, Asia and elsewhere are growing fast.

 Still some issues ahead

Those of you who are already working with me on creating your own champagne brand will already know that the lead times are getting longer.

Sourcing the bottles of champagne has become more challenging over the past six months as dwindling stocks at several wine makers cannot be replaced following two consecutive small harvests. (but see below for more on this)

However, it’s the supply and production of the packaging that are really causing delays. Whether it’s foils, corks, labels or boxes, everything seems to be in short supply and costing more than a year ago.

Another significant issue is transport, particularly sea freight

As explained in a recent article in Drinks Business

From next year, a new law from the International Maritime Organisation (IMO) will require all ships to calculate their annual carbon intensity based on a vessel’s emissions for the cargo it carries. Shipping companies will be required to demonstrate that their emissions are progressively coming down.

The option is there to retrofit ships with devices to lower emissions but by far the easiest and cheapest way of meeting the new requirements is to simply slow down sailing. For companies with older fleets, this choice will be particularly favourable.

Given that a 10% drop in cruising speed can slash fuel usage by almost 30%, many shipping bosses are expected to put the proverbial brakes on as they sail into 2023.

As any Champagne maker will tell you, now more than ever ‘Patience is a virtue’

A new record price at auction

Image from the Instagram account of  Champagne Avenue Foch

Last month saw yet another Champagne record broken – this time for the world’s most expensive bottle of Champagne : 2.5 million dollars. That’s a large chunk of money, although to be fair, it was a magnum.

You might well ask what made this bottle worth so much

Well, it has very little to do with the champagne inside the bottle and everything to do with the NFTs associated with the sale.

The bottle was the brainchild of Shammi Shinh, a London-based businessman, self-styled champagne connoisseur and, more importantly, an authority on NFTs. It was a meeting between him and the artist Mig that lead to the creation of this record-breaking bottle of champagne.

Printed on the bottle are 5 NFTs designed by Mig who is the creator of the NFT collections The Bored Ape Yacht Club and The Sneaky Vampire Syndicate NFT and it is these unique and rare NFTs on the bottle that warranted the huge price tag.

The champagne itself comes from a small producer in the village of Chamery by the name of Allouchery-Deguerne. It’s a blend of Pinot Noir, Chardonnay and Meunier from Premier Cru vineyards and it’s a vintage champagne from the 2017 harvest which means the Champagne is not very old for a vintage cuvée

Since Allouchery-Deguerne’s regular non- vintage cuvée sells for around just €15 a bottle, it would seem that the value of this exceptional bottle lies almost entirely in the NFTs

A great harvest in prospect

With demand for Champagne unexpectedly booming since mid-2021,  stocks of bottles in cellars across the region are disappearing rapidly because there are too few bottles to replace them after a combination of appalling weather in 2021 and what many say was a strategical error in 2020 which led to both harvests being very small.

Recently several smaller producers have been turning away customers because they just don’t have enough bottles to supply them

But now we have some better and much-needed news: this year’s harvest promises to be a bumper crop and, even more importantly, the Comité Champagne has announced that the amount of grapes that can be picked and made into champagne has been set this year at 12,00 kg per hectare which is what champagne makers have been crying out for to replenish their stocks.

Equally important, there have also been quite significant reforms made to the system of reserve wines, reforms designed to avoid peaks and troughs of supply in future

There are many ramifications involved in the reserve system but in essence it’s a mechanism whereby producers can pick more grapes than the official allowance as long as those grapes are not used immediately to make champagne, but instead are turned into still wine and stored in vats pending the day it needs to be released to meet shortages due to increasing demand or future poor harvests.

The promise of a large harvest this year coupled with access to reserves when needed, should greatly ease the pressure on supply in the foreseeable future.

As for the quality of the harvest, it’s too early to say but we should have an initial idea once picking starts in the final few days of August.

Until next month…

 

CHAMPAGNE BULLETIN JUNE 2022

In this month’s Champagne Bulletin

• As shipments continue to grow, the big question on everyone’s lips in Champagne right now is ‘What will this year’s harvest be like?’
• More success stories for private wine brands
• The two faces of Champagne: NFTs and SGV

 

If you’ve been following the news of the weather in France this year you would be forgiven for thinking that the prospects for this year’s harvest in Champagne are not looking great.

There were reports of severe and widespread frosts in April, then of violent storms that left many vineyards badly damaged and more recently, to add to the woes of the vignerons, there have been exceptionally high temperatures that could potentially fry the grapes on the vines.

All this is true, yet for the most part it was wine-growing regions in the south and south-west that were affected and Champagne has come out of all this relatively unscathed and it’s a case of ‘ So Far, So Good’.

Size matters

Of course, everyone would like the quality of the grapes to be brilliant, but this year, the size of the harvest is probably more important, and that issue will be decided in the next two months.

The importance of the question needs to be set in context:

In the month of May champagne shipments continued their upward trend that has been unbroken for more than a year. Of course, the past two unusual years don’t necessarily provide the most reliable basis of comparison on a month-by-month basis, so it’s more relevant to look at the Moving Annual Total (MAT) which shows the trend over a 12-month period.

This shows that the total number of bottles shipped over the past 12 months reached 335 million bottles – that’s only a couple of million bottles shy of the highest figure ever recorded and the trend is still upwards.

This would be unmitigated good news if it weren’t for the fact that, for reasons that are not necessarily linked to the amount of grapes available to pick, the weight of grapes picked in past two harvests has been disappointingly small.

This has resulted in stocks in the cellars, more or less all across Champagne, being low, or even very low, to the extent that some champagne makers have taken the decision to simply stop sales to some countries or customers. It’s a painful decision but if you simply don’t have enough bottles, what else can you do?

The timing of the harvest is becoming ever more clear with every passing week and judging from the development of the vines it appears that picking with start in the first week of September. This is based on the rough and ready calculation that one has to wait 90 days after the flowering of the vines and, this year, that happened in early June, about 10 days earlier than the historical average.

That brings us back to the size of this year’s harvest and given the number of different actors in Champagne each of whom may have differing priorities, coming up with an answer that suits everybody is not easy.

Just about everyone agrees on the general principle that it needs to be a big harvest, but not always for the same reasons

The most obvious argument for a large harvest is that it will bring supply back in line with current demand. This has traditionally been the primary consideration when the picking quota is fixed each year.

When one looks deeper into the matter however one might conclude that the famous brands would not mind too much if supply continued to lag behind demand. After all the appeal of an established brand is that it can benefit from strong demand and limited supply to increase prices and margins which is the ultimate objective for the big brands.

At the other end of the scale are the hundreds of small producers and the thousands of vine growers who supply grapes to the larger houses. Most people in these groups are in favour of larger harvests but for slightly different reasons.

For many in these groups the main concern is survival and if the harvest quota is too low, the former group cannot pick enough grapes to produce the number of bottles they need to make profit, and the latter group cannot earn enough revenue from selling grapes and may be forced to sell their vineyards.

And who would be the most likely buyers in that case?

Many would say the big houses who have the desire and financial means to buy more vineyards but who, according to some, would thereby increase their influence over the entire Champagne industry to an unhealthy extent.

Faced with this complex situation and many heterogeneous interests, one organisation, Les Vignerons Indépendents de Champagne has already put forward some innovative proposals that, they say, take a more sensible long-term view rather than just looking at supply and demand over a short period.

They argue for a minimum quota fixed for an entire 5 year period, subject only to there being enough grapes on the vines. In addition, they are calling for increases in the amount of wine that can be held in reserve in abundant harvest years and which would enable the smaller operators to keep going in the event of a small harvest due to natural, rather than economic, reasons.

The next couple of months should reveal much more about all these topics, but, as ever in Champagne, there’s far more going on behind the scenes than the average champagne consumer would ever imagine.

Private brands

There continues to be a stream of success stories in the press about successful celebrity wine brands

Singer song writer Gary Barlow has launched a range of wines from Spain and Jon Bon Jovi has launched a rosé wine from Languedoc.

Meanwhile, Kylie Minogue’s brand goes from strength to strength in the UK with sales of over a million bottles and a brand value estimated to be over £18 million pounds sterling - No wonder she's smiling !

Picture: Drinks Business

You don’t have to be a global celebrity to create your own wine brand (although it helps!) and you don’t need to sell over a million bottle to have a success on your hands.

A strong idea, a good network, careful planning, and meticulous execution count for a lot, so if you’d like to discuss your own champagne brand, contact me by email for an exploratory discussion.

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The two sides of Champagne: NFT – SGV

Many champagne lovers don’t realise that Champagne is a bit like an iceberg – they get to see and enjoy the relatively small number of well-known brands (less than 50 I would say) which exude the imagery of opulence and luxury on which much of the success of champagne has been built. That’s perfectly understandable because these brands are widely available, often well-advertised and account for the lion’s share of all champagne sales.

In contrast, there are hundreds of other brands made by thousands of small producers most of whom, despite the often-excellent quality of their wine, enjoy nothing like the wide distribution and public awareness of the bigger brands.

This dichotomy was brought into stark relief recently by the publicity around NFTs or Non-Fungible Tokens and by the latest marketing campaign launch by the Syndicat Général de Vignerons, a body representing the lesser-known and smaller champagnes mentioned above.

NFTs have been used in many industries in recent years to authenticate the provenance of products but their introduction into the very traditional wine industry is much more recent and three companies, Winechain, Blockbar and Wokenwine have been in the press in the past couple of weeks.

All three companies offer benefits that will appeal first and foremost to serious wine lovers and collectors, most of whom are also very wealthy. Consequently, the wines which use NFT technology are invariably the rarest, most prestigious and most expensive in the world, in short, wines whose authenticity must be proven beyond any doubt to those involved in wine investing, be that auction houses, collectors or the producers themselves.

A common ambition of the people and companies involved in wine NFTs is to attract a new and younger set of clients into the world of wine investing whilst enhancing and perpetuating the aura of opulence and exclusivity associated with the wine collector’s lifestyle and the products he or she buys.

Until now, NFTs have been adopted almost exclusively by spirits brands, but a few iconic champagne brands such as Pierre Peters, Jacques Selosse and Bérêche & Fils have just placed a few selected cuvees with Wokenwine and it surely won’t be long before a few leading champagne brands take advantage of this cutting edge, dynamic and youthful trend.

Contrast this approach with the marketing campaign just launched by the Syndicat Général de Vignerons which comprises a series of pictures of real champagne makers designed to promote the many different styles of champagne and the character of the people who make them.

Bear in mind that because this campaign will be used in France rather than export markets, it is subject to very strict advertising rules that prohibit any suggestion that might link the consumption of alcohol with increased success, happiness or enjoyment.

The purpose of NFTs is prove the authenticity of products that are rare and expensive as evidenced by the screenshot above from Blockbar’s website. The imagery associated with those brands is one of luxury and aspiration – in a word, it is exclusive.

The SGV campaign provides a different sort of authenticity conveyed via images of real people. The products concerned are down-to-earth but that too has a value that many will find appealing – in a word the imagery is inclusive.

Both approaches have their place and their own value. Without doubt both are worth discovering although I must admit to finding the SGV campaign really brilliant and I like it so much that I can’t resist posting one more picture from the series

 Until next month…

JH

 

 

CHAMPAGNE BULLETIN MAY 2022

 

Hello and welcome to the May edition of the Champagne Bulletin

In this month’s bulletin…

• Ever thought of buying vineyards in Champagne? This bulletin will definitely be of interest to you.

• Wondering which markets are showing the greatest potential for champagne right now? Read on to find out more.

• Creating your own champagne brand. Time spent at the outset in clarifying your objectives will save time and expense later.

Vineyards in Champagne

Every client who contacts me about creating a champagne brand has a different vision and each one has a different time scale in mind to complete the project. I usually tell them that the project will take about a year. For some people that’s too long, but other people take a very different view and want to go right back to basics by buying vineyards.

If that’s you, I have some good news and some not-so-good news for you.

Taking the bad news first:  the cost of vineyards in Champagne is amongst the highest in the world; so high, in fact, that for a newcomer to the industry, making a return on your investment is likely to take a (prohibitively?) long time.

On the positive side, prices are coming down, but before you get your cheque book out, let’s take a closer look at those prices.

Champagne covers several separate administrative areas or départements and 3 of these are distinguished in the latest report on vineyard prices*.

 

At the least expensive end of the scale is the area called the Aisne which lies to the north-west of Reims. The vineyards here are not ranked amongst the cream of the crop but they can nevertheless produce good quality grapes. The average price per hectare in the Aisne region in 2021 was 814,000 euros. (down 4% versus 2020)

Slightly more expensive was the average price in the Aube region which is some 100 kilometres south of Reims and is centered close to the town of Troyes

The Aube plays a significant role in Champagne. It’s a large area that is particularly suited for Pinot Noir grapes which are increasingly sought after by the major brands, partly because the price of the grapes is less than in the more prestigious areas nearer to Reims and Epernay

On average, a hectare of vineyards in the Aube in 2021 would have set you back 888,000 euros (down 5% versus 2020)

The third area covered by the report is the Marne which includes most of the vineyards around the twin centres of Champagne: Reims and Epernay.

Here the average price per hectare in 2021 was 1.128 million euros which is (6% down versus 2022)

Be aware though, that the fall in the average price per hectare hides the fact that the prices in the best Premier and Grand Cru villages have hardy moved at all and in La Côte des Blancs, the best plots actually increased in price.

Generally speaking, buying vineyards in Champagne with a view to creating a new brand is a costly and lengthy affair and is not something that I usually recommend. There are other ways to create a new brand and if you’d like to know more about that, don’t hesitate to contact me

*Source SAFER (Société d’aménagement foncier et d’établissement rural)

Annual report gives details about last year’s unexpected demand for champagne

The latest report on the state of the Champagne market (*2) in 2021 shows strong increases almost everywhere particularly in terms of value. In the current circumstances of strong demand on the back of tight supply following two small harvests, adding value is definitely the name of the game.

It probably won’t surprise you that the USA is the largest market in terms of volume as well as value (34 million bottles for a total value of 793 million euros)

The next 4 or 5 largest markets are shown in  chart A below and it’s interesting to note, if you do a very rough calculation (divide the value by the number of bottles), how much higher the price per bottle is in the USA and Japan than in the other markets.

Despite the different value per bottle generated from market to market, the overall trend is very much towards higher prices

In chart B below change in volume is shown in the block bars and change in value in the hatched bars and as you can see, even in markets where volume fell, the value still increased.

Apart from the leading markets shown in chart 1, there has been a surge in demand in many other countries

Norway + 58% versus 2021

Denmark + 37%

Sweden + 11%

and further afield

South Korea + 54%

and

New Zealand + 47%

Both of which imported over 1 million bottles in 2021, a target also surpassed by South Africa which is the biggest champagne market in Africa

It’s worth noting as well that shipments to the United Arab Emirates jumped 71% in value in 2021 versus 2020 to reach a total of 31 million euros, putting the UAE in 19^th position in the world for value.

In other market news, outside France, Brut non-vintage accounted for 77% of volume but only 64% of value, whilst in contrast, Rosé champagne took 11% of volume and 13% of value and Prestige Cuvée accounted for just 5% of volume but 16% of value.

*2 All data from the Comité Champagne

Setting clear objectives for a new brand

As mentioned above, the talk in Champagne at the moment is all about how to add value. Even the smaller brands are changing their attitude. Whereas in the past they may have chased volume, these days more and more producers recognise that adding value and raising prices is the way to go.

Consequently, there are fewer opportunities for launching new brands at the low end of the market and correspondingly more at higher price points provided that the strategy has been well thought-out.

The producers who are willing to create brands for third party customers increasingly want to know more about the buyer to ensure that their champagne is in good hands

For this reason, time spent in the early stages of a new brand project to gain clarity on the objectives in terms of volume and value, style of champagne, target market and distribution is time well spent because it helps to avoid costly mistakes and changes of direction later.

To discuss these issues and others related to creating a private brand, email me at This email address is being protected from spambots. You need JavaScript enabled to view it.

The champagne market is particularly dynamic at the moment with growing demand chasing limited supply. All thoughts now are turning to this year’s harvest. If it’s of good quality and above all, abundant, there will be sighs of relief because stocks can gradually be built back up to what is considered to be normal levels at around 3 times annual sales.

 On the other hand, another small harvest would make a tight situation even more difficult. The next couple of months will be crucial and you will be able to follow developments in the next few Champagne Bulletins.

Until next month…

JH

 

 

 

CHAMPAGNE BULLETIN APRIL 2022

 

This month the CIVC published the official shipment and market figures for 2021 and there is plenty of interesting material to read with the US consolidating its No. 1 position for champagne in terms of bottles shipped and total value, ahead of the U.K. with many other markets showing very strong growth.

In addition, since many readers are interested in launching their own brand of champagne, we take a look at a success story for a relatively new brand in the USA and ask what lessons there are to learn for future new entrants.

USA champagne market on a roll

It’s a few years since the USA surpassed the UK as the biggest export market for champagne and in 2021 it consolidated the No.1 position with sales volume increasing to 34.1 million bottles and sales value growing to 938.7 million US dollars.

The rebound in both volume and value versus 2020 was to be expected since there was so much disruption in that year, but the 2021 figures show big increases versus 2019 as well. What’s more, the trend is the same in many other markets with the UK, Spain, Italy and Holland returning very strong growth figures too.

However, because many of the readers of this bulletin are based in the USA, as are the majority of people who contact me about creating their own brand of champagne, let’s stay focused on the USA .

All the figures in the table below are expressed in thousands of 9-litre cases (a 9-litre case holds 12 x 75cl bottles)

You’ll see that the Moet Hennessy group which owns Veuve Clicquot, Moet & Chandon, dominates the market and if you add in Dom Perignon which is also part of the MH stable, the group’s market share is +/- 46%

it is undeniable that the US market, like most others, is dominated by big, established brands, but the good news for challenger brands is that over 50% of the market is potentially available for other brands and that thought leads us nicely on to the second topic of this month’s bulletin

 

Beau Joie – Brand profile

Just missing out on the table of best-selling brands shown above is a relative newcomer by the name of Champagne Beau Joie ( http://www.beaujoiechampagne.com/) which according to Impact Data Bank – one of the definitive sources of information about the drinks business – enjoyed growth of 65% in 2021 and sales of 20,000 x 9 litre cases – that’s 240,000 bottles - to break into the top 20 best-selling champagnes in the USA.

Let’s take a closer look at this brand and hazard a few educated guesses about some of the secrets of its success.

The brand was created back in 2011 Jon and Brandis Deitelbaum of Toast Spirits in Las Vegas.

Although that’s not long ago at all compared with most of the famous champagne houses that count their history in centuries, not decades, it’s still 10 long years of effort and investment, but building a brand is not usually a short, get-rich-quick project.

The champagne is made by Champagne Bertrand Senecourt based in Epernay, which was itself only founded in 1972 by Champagne Charles Ellner. These are respectable houses, but nothing more;   they don’t have the same caché of a small boutique winery (which couldn’t produce the necessary volumes anyway) nor the glamorous history of the more famous names.

If you look on some of the wine review web sites, you probably won’t find remarkably high scores for Beau Joie, so the success must be due to other factors, so what have they done right? Here are some suggestions:

Plenty of investment: According to Crunchbase.com , the brand has raised some 19 million in investments over the years. Of course, it is possible to start with more modest funds, but the bigger your ambitions for the brand, the greater the investment needed, particularly if your goal is to grow it to a quarter of a million bottles and beyond (and that’s just in the USA).

Unique positioning: the brand story is woven around the days of knights in armour and of chivalry.

For many people that will not appeal at all, but it’s a niche that Beau Joie has successfully taken over as its very own. It’s recognisable and distinct.

Clear targeting: Interestingly enough, there is almost no mention at all on the Beau Joie web site of the contents of the bottle, nor of the vineyards and history of the brand (there is none, in fact, since it was only founded in 2011).

Equally there is no mention of medals, awards and high scores in wine competitions. This implies to me that Beau Joie knows exactly who its target consumers are and recognises that they are not wine experts who want to know the finer details of the wine itself. This is not a problem because this type of consumer represents the huge majority of the market.

Innovative packaging: taking about being distinctive, all Beau Joie bottles are wrapped in a copper cage evoking a suit of armour. Like it or not, this creates a striking visual impact and instant brand recognition.

Brut non-vintage

Rosé

Brand Endorsement: Beau Joie has an association with the Golden Knights ice hockey team in Las Vegas and has attracted investment from well-known figures in the music industry.

Distribution: No matter how good a wine may be, if it is not available in all the right places in all the right cities, sales will never grow to any significant extent. Beau Joie is distributed by some of the most powerful distribution companies in the USA. They may have been impressed by the strong brand identity and unique positioning strategy developed by Beau Joie.

A quick search on the internet reveals that Beau Joie is available in a whole host of locations throughout the USA and elsewhere including some of the biggest retail outlets.

Pricing: The non-vintage offering which is always the mainstay of any range, is priced at $99 USD and the rosé at $129; both prices considerably above the mid-range of the market where the most famous brands and the fiercest competition can be found.

This prestige positioning offers larger profit margins to fund investment and positions the brand as a cut above the average.

JH: apparently a lower priced addition to the range at $49 is under consideration. In my opinion, this poses quite a risk to the current premium positioning which is already successful (if it ain’t broke, don’t fix it) and in addition, you have to sell a lot of bottles at $49 to generate a profit, but if the distribution network is powerful enough, perhaps those large sales volumes are attainable.

But that’s just my opinion. What do you think? Let me know by email.

That concludes this month’s Champagne Bulletin.

See you again in a month’s time and meanwhile, you can contact me at This email address is being protected from spambots. You need JavaScript enabled to view it.