Champagne: wine law and wine business

Question 1

Champagne: Wine law and wine business

Champagne appellation

Answer 1

Champagne is a single appellation, unusualy for a very large region (similar to Alsace but much larger)

Question 2

Champagne: Wine law and wine business

Quality hierarchy

Answer 2

• Échelle des crus: hierarchy system created in the early 20th century to establish the price to be paid for grapes
• 17 villages = Grand Cru (100% rating)
• 42 villages = Premier Cru (90-99% rating)
• 257 villages = other (80-89% rating)
• Price fixed by the Comité Champagne according to the rating
• System ended by EU / designation of GC and PC continues as well as reflected prices
• Prices today are determined by the market (Moet & Chandon setting the trend being the bigger buyer of all)
• GC or PC designation is for a village as a whole
• If all the grapes come from that village = name of village can appear on label
• If grapes come from different GC villages = GC can appear on laber

Question 3

Champagne: Wine law and wine business

Structure of the industry

Answer 3

• Industry comprises more than 15000 growers who own 90% of the vineyards and 360 Champagne houses
• Most growers sell grapes to Champagne Houses or co-operatives
• Some growers keep part or all their grapes and make their own wine = Grower Champagne
• Champagne Houses own only 10% of the vineyards but sell most of the wine
• Brokers play an important rolem in finding wine for the houses

Question 4

Champagne: Wine law and wine business

Different types of businesses

Answer 4

• NM: Négociant manipulant : commonly referred to as Houses / buy grapes or wine to make Champagne on their own premises and market under their own label
• RM: Récoltant manipulant : commonly referred to as “growers” / make and markets their own label from grapes exclusively sourced from their own vineyards and processed on their own premises
• Cm: Coopérative de manipulation: co-operatives that market Champagne under their own label from members’ grapes

Question 5

Champagne: Supply and Demand

Influencing supply and demand

Answer 5

• Supply influenced by mechanism of setting maximum yealds of grapes (number of kilos per hectare) that can be made into champagne in the coming harvest:
• 2 parts to the system: Grape yealds for base wine for the coming year / Allowance for wines to go into reserves
• Decision based on current stocks, world demand and progress of the season until the decision is made in late July (avarage yeald in the last decade is 10500kilos/hectare)
• Region is also conducting a review that includes the possibilities of additional land around the perimeter of the appellation

Question 6

Champagne: Supply and Demand

Demand

Answer 6

• Domestic market consumes half of all Champagne produced
• Average bottle price is low (due to the volume of inexpensive champagne sold in supermarkets in France)
• Percentage of cheapest wine (Under 12€) has dropped / percentage of wine over 20€ has risen
• Main export markets: UK, USA, Japan, Germany and Belgium
• Highest price paid per bottle markets: USA and Japan
• Biggest market by volume: UK
• Champagne has been re-positioning iutself away from the volume market in the light of the growth of mid-priced sparkling wine (especially prosecco)
• less use of chemical fertilisers (enviromental reason and lower maximum yealds)
• Focus now is wine at higher price points / 10% drop in volume + value rise of a quarter in the decade of 2018

Question 7

Champagne: Cost of production

Cost of production in relation to price sought

Answer 7

• Price for grapes are high in Champagne (€6.10 per kg / around 1.2kg to produce a bottle) = very large proportion of the cost
• Vintage champagne is more expensive to produce than NV (most likely to be made from higher rated grapes (GC and/or PC)
• Rosé Champagne marginally more expensive as red wine is required (lower yealds in the vineyard are needed to produce base wine with the required ripeness, concentration levels of flavour and colour)
• Using oak for primary fermentstion or base-wine ageing increase costs

Question 8

Champagne: Cost of production

Route to market

Answer 8

• 20% of price of the bottle = marketing and advertising
• Many of the larger Houses own and run their own distribution systems (often through their own companies set up in particular markets) = way to control the price of the wine in different markets
• Some Champagne Houses prefer to use agents to distribute their wine
• A relatively small number of growers sell their wines internationally in a number of different markets via specialist agents

Question 9

Champagne: new products and trends

New products and Trends

Answer 9

• Brut Nature niche market
• Brut Nature and Extra-Brut grew more than 1/3 in sales in the last decade to 2018
• Major Houses have launched sweet wines intended to be drunk over ice and in cocktails (Moet & Chandon Ice Imperial = Demi-sec)
• Rose Champagne is increasing in demand (M&C and Vevue Cliquot made big investment in production facilities for red wine and marketing)
• Increased interest in single-vineyard Champagne
• Increased interest in Grower Champagne (Jacques Selosse, Jacquesson, Drappier)