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FESTIVE CHEERS

The worldwide Champagne market still has not settled down in the aftermath of the Millennium. The large stock overhang that existed in nearly all major export markets at the start of 2000 took most of last year to work through the system, and this has made current shipment figures for Champagne an even less reliable indicator of actual sales. However, the fact that total export shipments in the first six months of 2001 were down 12.92% on the same period in 2000, is unlikely to delight the Champenois. The UK was the only significant market outside France where shipments were ahead - up by 32.59% to 9.36 million bottles - on January-June 2000. This improvement merely returns shipments to about the level reached in the first half of 1998, and to match the volume for the whole of 98, nearly 15 million bottles more will have to be shipped in the second half of 2001. Growth of 18.73% in the stock sent to the French domestic market, where about 60% of all Champagne is still consumed, was more significant (nearly nine million extra bottles) and resulted in worldwide shipments rising by 5.44%. Worryingly for the Champenois, shipments to both the USA, the second biggest export market and one of the most profitable, and Italy, the sixth most important, were substantially down, by 49.54% and 33.57% respectively. If the second-half figures for 2001 are as bad, there will be several major houses looking for an alternative market for more than ten million extra bottles of fizz. Given the potential for oversupply in 2002, with demand slipping and a high level of maturing stocks from two particularly large harvests in 1998 and 1999, the poor quality of the 2001 vintage in Champagne - the wettest on record - may be seen as a blessing, although the volume is still expected to reach the set limits. Currently the UK looks like the best export option for producers looking to sell wine not wanted in other markets. In terms of volume, sales in the UK off-trade in the 12 months to July/August 2001 were down only 1%, and they were up 18% in the July/August bi-month, according to AC Nielsen. The problem in the UK is value not volume. Sales have been propped up only by massive discounting, with large chunks of stock shifted when prices are slashed. The average UK selling price of all Champagne took a deep dive below 11 in May/April this year and last, during what looks like becoming the supermarkets' annual Easter sale. While last year Sainsbury's was clearing one million bottles of excess stock when it halved the price of its own-label Blanc de Noirs, this Easter it bought Champagne in from Duval-Leroy especially to repeat the exercise. Tesco, not liking to be outdone by its nearest rival, also joined in the fray this time around, buying up at short notice what stock of Heidsieck-Monopole it could from Seagram UK (distributor for owner Vranken) to do so. Tesco has since repeated the offer with Heidsieck-Monopole, selling six bottles for 50 (8.33 a time) through its Internet site (mid-July to mid-August) and again in its stores over the August bank holiday weekend. The effect of this has been to rocket Heidsieck-Monopole into third place, behind Mot and Lanson, in the brand league table, with its market share in the UK off-trade rising to 6% (MAT to July/August 2001). Heidsieck-Monopole is now outselling even Veuve Clicquot in the UK off-trade, though Clicquot's strength in the on-trade, where about half its sales are made, makes it a bigger brand. Clicquot's owner LVMH may draw comfort from the price differential between the two marques, which at certain times of year is stretching to nearly 20 and rarely falls below 9 for a single bottle purchase. Even Clicquot has not been adverse to a bit of discounting in 2001, however. Majestic, for example, is currently in the middle of a two-month promotion offering three for the price of two, which brings the unit price of Yellow Label down to 17. If Clicquot's sales in the USA fall a long way short of target, it will be interesting to see if more deals suddenly become available in the UK. Perhaps LVMH will sensibly decide not to get involved in action that could devalue the brand, instead looking to add a little more bottle age to the non-vintage wine in an effort to justify its relatively high retail price. Compare it, for example, with the price of Louis Roederer NV or Charles Heidsieck Mis en Cave, two consistently high-quality wines produced in much smaller quantities, both of which are cheaper. Mot, Mumm and Perrier-Jout are the three other brands most likely to be adversely effected by a collapse of Champagne sales in the USA, although as Mot's big brand there is the sweeter White Star' style, not the Brut Imperial that is sold in Europe, the opportunity to redistribute stock to the UK is less obvious. In fact Mot sells more Dom Prignon in the United States than it does Brut Imperial. Asked if he has heard about any special deals on this quartet of brands, which between them control about 70% of the US market, Justin Apthorp, Majestic's Champagne buyer, says, It will probably take them (brand owners LVMH and Allied Domecq) three or four months to realise what is happening and the consequences won't be known until February, March or even April of next year.' In any case as Apthorp points out, Majestic is already doing very well with Perrier-Jout, which, along with Mumm, it promoted for a quarter (February-April 2001) in a buy two get one free' offer that reduced the single bottle price of Perrier-Jout to just 14 and saw sales rocket by 208%. Perrier-Jout is our number one selling brand by value over the first nine months of 2001; we've only sold more of our two house brands, De Telmont and Brossault,' says Apthorp. Majestic is known as the place to buy Champagne because the deals last. With most of the other retailers, particularly the supermarkets, you don't know what price you are paying until you arrive in the store. Because we usually run offers for three months, if people like the wine they can come back and get some more. The effect on sales has been awesome. This year Perrier-Jout, Mumm and Heidsieck-Monopole have all done really well.' Apthorp reports that Majestic's Champagne sales are up 53.2% by volume in the first nine months of 2001'. And value is ahead by 41.9% in the same period, even after the long-term discounting. Other multiple specialists have not performed so well. When asked if LVMH is already offering its UK arm more stock as a result of the US downturn, Mot's brand manager, Vincent Gillet, says he has not been party to any such discussions. In any case Mot does not want to get involved in the sort of discounting which that might trigger. The brand leader was not happy when last year certain retailers offered Brut Imperial at just 15 for a single bottle. Mot cannot actually stop retailers slashing margins, Gillet admits, it can only discourage them by offering other types of support, including below-the-line activity. He concedes also that in the current climate, when talking with off-trade customers, a 10% discount on the bottle price is the bare minimum you must offer, or else you are out of the door'. Gillet predicts total Champagne sales in Britain in 2001 to be similar to last year at about 26 million bottles', but he already expects 2002 to be a much harder task'. The supermarkets, which now account for nearly two thirds of all off-trade sales, have driven growth through heavy discounting and this has artificially sustained the market,' says Gillet. We've had very healthy business this year, other than in the vintage category. Perhaps that's not surprising when you can get two bottles of Lanson for the price of our vintage.' Even so, Gillet admits that sales of Mot are less than 5% up in the first nine months of 2001, compared with the same period in 2000. So has the discounting in the market hit the brand? Although Heidsieck-Monopole sold a ridiculous amount when it was offered at half-price, our volume was hardly affected,' explains Gillet. And when Heidsieck-Monopole goes off promotion, sales drop right back down.' Mot has certainly increased its market share. In the year to July/August 2001, it is up to 16.1% (by volume) rising from 14.9% in the previous 12-month period, according to AC Nielsen figures. Sales of vintage Champagne are down about 20% and we expect consumption to fall from 1.5 to about 1.3 million bottles this year. But we've increased our market share, at the same time as putting our price up by 1 to 28.99. Mot's dominance in the vintage sector is even greater than our leadership in non-vintage,' says Gillet. At the top end of the vintage market, boasting a full retail price of 46, Bollinger has also seen its sales of vintage Champagne fall markedly, in each of the first four bi-months of 2001, by between 8% and 16%,' according to Simon Leschallas at Mentzendorff. Bollinger has no need to worry just yet, however, as its sales of non-vintage Special Cuve have grown by between 10% and 28% over the same eight months. There is even a certain amount of stock pressure on Special Cuve, according to Leschallas, although weaker sales elsewhere in Europe have increased his allocation. One place where sales of vintage Champagne seem to be holding up is at Majestic. But Apthorp suggests that this is partly due to the large savings that can be made on the three for the price of two' deals, three quarters of which have involved vintage Champagne. Vintage Perrier-Jout sales are up 577% and it's a core line. Jacquart, too, has performed well for us priced at 16 a bottle (for the 92 vintage) when you buy three. Sales are up 54.4% in the first nine months. It's difficult to get people to buy Jacquart initially, because they don't realise it's a quality product until they've tried it. Champagne is still about buying the label. Veuve Clicquot still has a life of its own because of the strength of the branding,' says Apthorp.

Need for promotion It is, however, a sign of the times that even a brand as strong as Bollinger is having to spend a certain amount of money on promotional activity. Mentzendorff is supporting by-the-glass sales in the on-trade, which is, Leschallas says, suffering badly since 11 September, particularly the hotel sector in London. Lanson sales director David Loosemore says the London hotel trade is a disaster and the larger tourist-based operations will be happy if they get 50% occupancy over the next two months'. For the moment the restaurant market, apart from top-end outlets catering for Americans, seems to be faring slightly better. In particular style-bars continue to flourish and several major brands, including Mot, Pommery and Piper-Heidsieck, intend to increase their marketing efforts in this arena with various versions of 20cl bottles. Pommery, 70% of whose UK sales are in the on-trade, takes this market seriously enough to produce a different wine especially. Pommery Pop is not just Brut Royal in smaller bottles, says UK brand ambassador Boris Breau, but an Extra Dry style with a higher dosage, about 17g per litre, and the bottles are kept at a lower pressure. The latest player to emerge in this embryonic sector is Heidsieck-Monopole, which has just launched its non-vintage blue top' fizz in a brilliant-yellow glass 20cl bottle. It is available also in the off-trade in Oddbins in a four-pack carton costing 19.99 that includes picnic cups. Seagram UK, which is still handling the marketing and distribution of Heidsieck-Monopole for brand owner Vranken, intends to be very pro-active in the on-trade as it has been in the off, says commercial director Ian Harris. It has already rolled out the Gout American Extra Dry style of Monopole and a premium ros. Over the past year, however, Heidsieck-Monopole's significant growth has come from the off-trade. Our activity in the multiple grocers has been driven by a clear strategy in the wake of the post-Millennium blues and the reluctance of consumers to pay the full price. We see increasing distribution as a key issue in strengthening the brand. Paul-Franois Vranken is very pleased with what we've done,' says Harris. He confirms that a full range of promotional activities' is in place for the pre-Christmas period, but will not be drawn on whether half-price Champagne will be a feature. At the beginning of the vital pre-Christmas trading period, when a disproportionately high percentage of Champagne's annual sales is always made, it is hard to predict how far the discounting will go. A third off, or three for the price of two, has become commonplace and half-price fizz not just the preserve of Sainsbury's and Tesco. Safeway sold Champagne Gauthier at 9.49, or half-price, during the second week of October. Although some may quibble that 18.98 is an unrealistically high, full price point for this marque produced by Marne & Champagne, given that Marne's flagship brand Lanson Black Label was reduced to the same price point last year, after it became clear that excess stocks were going to depress sales of such major players as Mot and Lanson. Elsewhere price cutting is already starting to hot up. Pommery has been sold in Sainsbury's at 15.99 a bottle, ie 5 off, throughout October. Prices on Mumm and Pommery were both cut by 4 (to 16.99) by First Quench during the same period. Sainsbury's and Tesco have each revealed plans for a week-long 20% reduction off single-bottle sales of all wine before the end of next month. Sainsbury's desire to keep its apparent statistical advantage in the grocery Champagne stakes, and Tesco's annoyance at Sainsbury's crowing, may drive the Champagne price war further. We have a 40% share of Champagne sales in the grocers, we overperform in this category, which is partly down to our strength in the south-east (where more Champagne is drunk),' says buyer Julian Dyer. Half-price Champagne is not just about maintaining market share, there's the resulting increased footfall, the halo effect.' Even without the idea that Champagne supply is running ahead of demand across Europe gathering momentum, there is a feeling that prices could come down further in the run-up to Christmas, and they are highly likely to in the New Year. Virgin Wines has already announced that it will be cutting the single-bottle price of several quality brands by 17.5% for the whole of November and December, including Lanson Black Label, Ruinart, Laurent-Perrier, Louis Roederer and Pol Roger. Strong rumours that Virgin will go further and announce even more dramatic price cuts on two leading brands of Champagne may start a new discounting spiral.

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