Battle’s on for sparkle

12 November, 2010

C hampagne sales in the UK off-trade are up. Perhaps surprisingly in the present climate of doom and gloom, with more cuts in government spending expected to further hit consumer confidence, they are ahead in both volume and value terms in the year to September 4, according to Nielsen figures.

There is little evidence to support the idea of consumers generally moving away from Champagne to less expensive sparkling wines. However, the fact that value growth in sparkling wine is up 10%, while volume growth has risen just 6%, suggests that growth is coming from the higher echelons of the sparkling wine sector.

Supporting this view at the recent Waitrose Autumn Tasting, there were no fewer than five new sparkling wines on show. Just one of them was priced under £10 – a semi-seco cava from Cordoníu at £8.99.

Interestingly, the only new Champagne line, Pol Roger’s Pure (at the other end of the taste spectrum as a zero-dosage style), was the most expensive fizz in the line-up at £39.99. The four remaining newcomers comprised two cavas from the other main Penedès-based producer Freixenet, priced at £14.99, and a pair of Kiwi sparklers under the successful Oyster Bay brand each listed at £12.99.

Sparklers vs Champagne?Dee Blackstock MW, Champagne buyer at Waitrose, agreed all these wines were perhaps priced a little high, although the Oyster Bay Rosé and white brut styles will be promoted at £9.74, just under the psychologically important £10 barrier.

Waitrose, which Blackstock claims has six months’ exclusivity on the wines in the UK, is testing the water to see if this, like Jacob’s Creek (another table wine brand with strong consumer interest, and therefore sales) may transfer to the sparkling wine market. Fermented in tank, not bottle, the wines were only introduced in New Zealand over the past couple of years.

The two Freixenet wines, although £2 more expensive, seem distinctly superior sparklers, but will consumers pay that much for cava?

Significantly, both pairs include a rosé partner and given that many retailers and consumers have come to regard rosé Champagnes as having excessive and unjustifiably high prices, perhaps these will be the more successful styles. The Freixenet Elyssia Pinot Noir Rosado is a very attractive, fruity sparkler produced from low-yielding vines: 6,500kgs/ha as opposed to Champagne’s 13,000kgs/ha-plus. It is packaged in a smart, clear bottle so you can see the pretty shade of pink, while the green bottle for the Oyster Bay hides the fact, perhaps deliberately, that this rosé is practically colourless.

The off-trade market for rosé Champ­agne continues to grow, and at a slightly faster rate than white non-vintage Champagne at 18% versus 15%. But value growth is significantly lower at 5% versus 9% for white non-vintage, suggesting rosé prices have fallen slightly.

In reality, however, it seems there has been quite a volume of older pink stock on the market which has been sold off cheaply. So whether the real growth in sales of rosé Champagne has halted – even if only temporarily – remains unclear.

Ruth Yates, owner of Corks Out, says her five shops in Cheshire still manage to sell more vintage and prestige cuvée Champagne than non-vintage, despite the economic climate. “Customers are sometimes put off by the difference in price on rosé compared with regular white Brut and I don’t blame them,” she says.

“They don’t pay extra for rosé wine so why pay more for pink Champagne? If something isn’t done I think sales will drop quite significantly soon.” There may be room to slightly lower margins on pink styles – as Bollinger showed when repositioning its rosé, originally released into a booming market. But for the all-important NV category, which has become ever more of a focus for most houses and UK retailers, there is upward pressure on prices from the production side.

At the bottom end of the market, prices have been rising for several months and suppliers have told supermarkets the prices they pay for their own-label wines will inevitably rise early in the new year.

It is clear the major houses will want to raise their prices early in the new year, in the off-trade, too, even if only to cover increases in their production costs.

This is despite Champagne sales in the supermarkets only really being made on promotion – as witnessed by the fact the fastest growth is all coming from strongly discounted lines such as Etienne Dumont (Sainsbury’s), André Carpentier (Tesco) plus Vranken-owned Heidsieck Monopole and Charles Lafitte.

There is a mechanism agreed between the negociant houses and growers in Champagne linking grape prices at the time of harvest to an index of selling prices achieved over the previous 12 months.

Although clearly these have gone down, grape prices for the 2010 harvest are firming up. This is despite the quality of the 2010 not comparing favourably with the previous two excellent harvests of 2008 and 2009.

François Roland-Billecart of Champ­agne house Billecart-Salmon said mid-harvest: “With prices the negociants achieved over the past year down by between 6% and 7%, grape prices should also fall by a similar amount.” However, in reality because certain major players have agreed to pay a similar amount to last year, prices won’t fall as everyone else will have to follow their lead.

A few weeks on from the end of the harvest it seems grape prices for certain sought-after crus are actually likely to rise – perhaps by around 2%.

The question for UK retailers is will the major brands try to pass on all of this increase, especially knowing that VAT and duty increases early next year are likely to add around £1 to the price of a brand currently selling for £35.

The alternative is for them to take a further cut in their margin, and Roland- Billecart, for one, believes this approach (if adopted) will have a negative effect on the Champagne region when it comes to future development and investment.

Discounting frenzy?The major brand owners are hoping, as David Hesketh, managing director of Laurent-Perrier, confirms, that the discounting frenzy in the supermarket arena doesn’t take off this year in the same way it has in the past.

But with supermarkets already unveiling pretty deep discounts of around £10 a bottle, it seems likely to happen as the grocers fight for consumer footfall in the ongoing recession.

Those retailers which have decided to steer clear of the major Champagne brands that might become embroiled in this are more likely to enjoy the Christmas trading period.

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