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Suffering from hyper-bubbly

Last year, 327 million bottles of Champagne were shipped to the global markets. Whistles of disbelief were heard in the corridors of the bubbly producers when these staggering figures were revealed at the end of January 2000, and only now can we see the true consumption picture for Champagne over that mad and surreal Millennium Moment. Hindsight is the most accurate science of all - along with a glance at the empty bottle in the kitchen before joining in the "guess the wine in the decanter" fun at any dinner party - but it now seems that an awful lot of buyers were swept along by the huge Millennium hype. Somewhere between 30 and 40 million bottles of Champagne were still standing on the shelves around the world to gather dust by the time the sun came up on the first day of January 2000. No-one, of course, had a clue as to the potential size of the demand for Champagne on that big night, but for many different reasons expectation from the retailers far exceeded the public need.

Scares and scams

Scarcity stories in the British Press (the British do have to take the main blame for this) first started to appear as early as 1996, and were rapidly followed by those Champagne Millennium offer scams. Although quickly exposed and condemned by the trade - and despite the constant re-assurance by the CIVC generic body that there would not be any shortages - the seeds of doubt were sown. Similar stories appeared in other markets such as the USA and Canada and they, too, began to have an effect on the market.

Early purchasing

By the early part of 1999, regular Champagne consumers had been swept along by the general hype, and had already put away their expected requirements for the New Year festivities. The top vintages and prestige cuves were snapped up, and as the year progressed, more and more people bought a few extra bottles (just in case), so that by December the Champagne cognoscenti had little need for further purchases. While occasional Champagne drinkers obviously bought their bottles closer to the end of year deadline, there was very little evidence of any avalanche of last-minute purchases, and the mountain of Champagne stocks remained a mountain. If anything, last-minute buyers came into the stores for the best prices in town, opting for alternatives such as Cava in the UK, and Korbel in the USA, rather than paying the top price for the real McCoy.

Over-estimates

Interestingly enough, the producers themselves began to suffer an attack of Millennium fever during the course of last year and re-adjusted their sales targets to the upper limits of their potential. Three years ago, the trade consensus in Champagne was that an extra ten million bottles would be required for the Millennium festivities. Two years ago this had been adjusted to 20 million and early last year the figure was expected to be an extra 30 million bottles. Taking the 1997 Champagne global shipment figure of just under 270 million bottles, last year's total could have been expected to be about 300 million bottles (allowing for a small natural increase in demand as well as the Millennium factor). In the event, 327 million bottles were actually shipped during 1999 - hence the whistles of disbelief.

Distortions

The biggest distortions in the marketplace have been confined to the big off-trade outlets and, in the UK market, the own-label sector in particular. The on-trade, because many restaurants opted out of the Millennium bunfight - with staffing problems and difficulties in getting people to pay impossibly high prices - has been little affected by the overstock position. In consequence, trade in Champagne has carried on quite normally in 2000 and consumers continue to buy their preferred brands on a regular basis. "The UK on-trade remains very buoyant, and things are looking very positive right through to next year," said Vincent Gillet, Mot's brand manager, revealing that 50% of the brand is sold through hotels and restaurants.

Normal consumption

There is no evidence to suggest that consumers are consuming less Champagne in the home environment. Where own-label Champagnes have been put on very low offers (Sainsbury's in the spring) demand has been exceptionally brisk. So there is the strange situation where consumers are quite prepared to buy Champagnes when their home stocks are exhausted and when the offers are too tempting, and the producers are, as yet, unworried by the smaller shipment orders because their own stocks in their cellars needed to be replenished. However, another bumper crop has just been harvested in Champagne (equivalent to some 330 million bottles) and next year could see some very competitive prices. "At Marne et Champagne, we are concentrating on 2001 onwards and we have exciting plans to redrive Champagne sales forward generally, and Lanson in particular," said John Smither, international vice-president of MCD. What has become increasingly clear is that the stock holding and stock piling in the year 2000 have all been at the retail distribution end, and only in the second half of this year have conditions begun to return to normal. "Statistics show that consumption of Champagne has been very erratic. The good news is that our research shows that the usual 50% figure of consumers drinking Champagne over the holiday period rose to 85% during the Millennium celebrations. Despite the fluctuations, Veuve Clicquot has sailed through 2000 like a supertanker," said John West, managing director of Veuve Clicquot UK.

Changing patterns

One pattern that has emerged is that consumers are taking a "breather" on their demands for vintage Champagnes. Caught between the prestige cuves and the big NV brands, this sector is proving to be quite difficult. "Temporarily, vintage sales have taken a bit of a bashing, despite the wines tasting beautifully. We are still on target to sell all our Bollinger allocation, but the year is turning out to be an old-style wine trade year, with a big, late rush for Christmas," said Simon Leschallas, Bollinger's man in the UK. Last year, the shipping pattern for the Champagne business was heavily weighted to the first six months, when all the big supermarket customers and specialist chains were anxious to ensure that their Champagne needs were safely in their own distribution. This year, it is quite the reverse with very light shipments in the first six months, and a "wait and see" attitude to the all-important run-up to the Christmas and New Year celebrations this year. By the end of July this year, world shipments of Champagne were running more than 25% lower compared with same seven months of 1999. Increasingly, the trade is hoping that this year will revert to type when normally half of all annual Champagne shipping orders are executed in the last three months of the year. This year's Christmas pattern will be an anxious time for the major brands whose progress has been hampered, somewhat, by the requirements of the big stores to ensure that their own-label and special labels are back in balance before topping up with their stock range of Grande Marque Champagnes. "Only now is the off-trade reverting back to normal ordering patterns. All new Millennium listings have been retained by Laurent-Perrier, and the on-trade has seen strong growth. The key thing is to promote sensibly and to take a long-term view for the brand," said David Hesketh, MD, Laurent-Perrier UK. Since 1997, when Champagne shipments to the UK regained their previous highest level of 22.3 million bottles, the shipments to Champagne's favourite export market have risen to 24.2 million bottles in 1998 and 32.2 million bottles in 1999 (as high as 35 million bottles if some of the parallel imports are taken into consideration). For all the reasons already mentioned, the actual consumption figure for last year was probably between 26 and 28 million bottles. There is no reason to suggest that Champagne consumption in the UK by the end of 2000 will be less than this figure, but this would mean an actual shipment figure probably less than 20 million bottles during this calendar year.

Two-year trend

In order to get a more realistic figure, 1999 and 2000 should be taken together, before any undue pessimism on the UK market should be construed. "I think that there has been too much criticism levelled at the big buyers, and we have to look at the two years together to get the correct Champagne picture," said Patrick McGrath, this year's chairman of the Champagne Shippers and managing director of Hatch Mansfield. "Taittinger is going well overall, and the brand has made good progress, particularly in the on-trade. More and more people are now drinking Champagne." This two-year formula should also be adopted to get an accurate global picture for Champagne. If 300 million bottles was near to the actual consumption figure for Champagne last year, then shipments during 2000 will certainly be no higher than 270 million bottles.

Critical Christmas

However, if there is a 5% natural decline in consumption in this post-Millennium hangover year and the Christmas trade is less than ecstatic, then shipments by the end of 2000 will be no higher than 255 million bottles - a real possibility, according to the statistics for the first seven months of this year. It all really depends on the big sell-in to the distribution points during this pre-Christmas period. One thing that will be certainly be lacking this Christmas is the special Millennium presentations. Having said that, Christmas and the New Year are prime times for Champagne, and gift packaging will be shown in force from most of the houses. An additional edge to Christmas sales this year will be the Champagne offers available through Internet suppliers, such as ChateauOnline. "Pol Roger is featured strongly by the leading e-tailers, whose potential may first be seen this Christmas. We are majoring on our Vintage Cuves Pol Roger Brut 1993 and Churchill 1990," said Bill Gunn, MD of Pol Roger Ltd. More than ever, Christmas sales hold the key to the final figures for the year.

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