Champagne makers turn bubbly despite price war

By Noelle Mennella

PARIS, Nov 3 (Reuters) – The champagne industry is heartened by a sales rebound this autumn but has no visibility for 2010, said Ghislain de Montgolfier, the head of their industry body.

“Sales are up in September and October compared with the start of the year,” De Montgolfier told Reuters in an interview on Tuesday. “Sales to the wholesale trade are now at the same
level as last year.”

He said  the holiday season would not fully make up for this
year’s unsold stock but cited an old proverb to sum up his mood:
“When I’m optimistic, I drink champagne; when I’m pessimistic, I
drink champagne to recover my optimism.”

De Montgolfier said we might see champagne bottles selling
for under 10 euros (nine pounds) in the holiday season.

“When there is more stock there is more temptation to
increase promotional activity,” said de Montgolfier. “There
could be some for Christmas or New Year.”

De Montgolfier’s cautious optimism for 2010 is supported by
a “very good” 2009 harvest of 13,000 kilograms of grapes per
hectare. Last year’s harvest was at 14,000 kilograms. Each
bottle requires around 1.2 kilogrammes.

Overall, he expected lower champagne sales in 2009
year-on-year, against 322 million bottles in 2008.

This 2008 figure was down 4.8 percent year-on-year after two
years of strong growth.

UK AND US MARKETS WORST-HIT

De Montgolfier said the worst-hit markets until August were
Britain, the biggest buyer of champagne exports, and the United
States, though since then there have been signs of a rebound.

The French market is less exposed because its economy is in
a relatively better state, according to de Montgolfier. He said
France accounts for just over 50 percent of sales volume and
just under 50 percent of sales value.

The champagne industry is mainly represented by the CIVC
body — Comite Interprofessionnel des Vins de Champagne — which
regroups revenues worth 4 billion euros (3.57 billion pounds).

Well-known champagne producers include Boizel Champagne,
Vranken-Pommery Monopole or Laurent Perrier,
though more diversified spirits groups like Pernod
Ricard and Remy Cointreau also own champagne
names such as Mumm and Piper-Hiedsieck.

The industry heavyweight is LVMH, owner of Dom
Perignon, Moët & Chandon, Veuve Cliquot-Ponsardin, Ruinart and
Krug. Most of these companies have seen sales fall since the
start of the year.

The CIVC organisation brings together vineyard owners and
dealers to decide on general issues including management of the
“appellation” –the product’s geographical certification– as
well as regulations or grape prices.

“It’s this structure that allows the Champagne region to
better resist the crisis than other wine producers,” said de
Montgolfier.

He added management of stock played a major part in the
Champagne region’s economy, with producers needing a minimum of
15 to 18 months to make champagne.

Analysts say stock build-up can lead cash-strapped producers
to wage a price war in the run-up to the Christmas holidays.

De Montgolfier said the price war was fiercest in France
because the supply chain was much shorter than abroad, where
champagne producers had more long-term price policies.

He added this was more threatening than rival “sparkling
wines” from the United States. “Americans are the biggest fakers
of champagne but it’s not a serious competition. Have you ever
seen James Bond with fake champagne?.”

(Writing by Lionel Laurent, editing by Marcel Michelson)