We are witnesses to a steady march toward a new and dramatic Champagne world order. At the time of writing, with most of the world beginning to emerge from lockdown into a new normal, the significance of Champagne’s sales in the first two decades of the millennium might seem inconsequential. In fact, the opposite is true. I am convinced that Champagne’s market performance, culminating in 2019, now bears a profound and new significance.
The world order that we took for granted just a few short months ago seems a distant memory in the wake of ‘the ceaseless showreel of calamity and disaster that now passes for everyday life,’ as one UK retailer poignantly observed. As a premium category and the universal symbol of celebration, Champagne’s vulnerability to the coronavirus pandemic is particularly acute, with sales since the beginning of the crisis down 75 percent year on year, according to Jean-Marie Barillère, president of the Union des Maisons de Champagne and co-president of the Comité Champagne.
And there is one particular sector of the market that is particularly vulnerable. The rise of the grower-producer has defined and revolutionised the current Champagne generation. Recent years have seen the little guy step forward to demonstrate that top Champagne is no longer the exclusive realm of the big players. That Champagne is not just about oceanic blends from everywhere, but single crus and individual vineyards, tended, crafted, matured and presented lovingly to the world by the same pair of hands.
And, oh, how we celebrated. Champagne’s grower-producers became the darlings of sommeliers and hip bars the world over, prized by the most fanatical Champagne purists. Top growers like Egly-Ouriet and Jacques Selosse realised prestige prices. Rightly or wrongly, the ‘RM’ (Récoltant-Manipulant) insignia on labels became a status symbol over ‘NM’ (Négociant-Manipulant). And the négociants took notice, inspired into more sustainable viticultural practices, more creative vinification and the creation of specialist cuvées to capture the detail of single crus and vineyards. But all this is changing.
Champagne is going to be a very different place in the next decade
“Champagne is going to be a very different place in the next decade,” I was recently told by one small grower and négociant struggling to sustain his family business in a highly respected premier cru on the Montagne de Reims. “It will not be possible for many of the small brands to survive.”
Already many have given up. In 2019, 164 grower producers followed a growing trend and ceased production. In 2008, growers sold 78.5 million bottles, almost a quarter of all Champagne production. A decade later, grower sales declined to less than 55 million bottles, representing 18% of sales by volume and less than 15% by value. This represents a devastating drop of more than 30%. Over the same time, sales by Champagne houses grew a little and coopératives declined by more than 7% as Champagne continued its return towards a steadily increasing dominance by the big houses.
Global forces continue to fuel this trend, and 2018 marked a milestone for the balance of Champagne sales. For the first time in history, not only did exports exceed domestic sales, but exports to countries outside the European Union exceeded those within it (excluding France). Fifteen years ago, exports represented barely more than a third of the region’s production.
This trend increased in 2019 and will continue to grow in the years to come. “I believe that in 20 years, Champagne will sell only 35–40% of its production in France and 60–65% in export markets,” forecasts outgoing Laurent-Perrier chef de cave Dominique Demarville. “And this is going to change the balance inside Champagne.”
The evolution is hitting growers much harder than houses and coopératives. Of Champagne’s 15,800 growers, 3,995 sold their own Champagnes in 2019, but only 1,336 exported their cuvées outside of France, and just 794 outside of Europe. Exactly two-thirds of Champagne growers now rely exclusively on domestic sales, and more than four-fifths entirely on European countries.
“Every year, we’re losing sales to the big houses,” reveals Nicolas Chiquet of respected grower-producer Gaston Chiquet in the village of Dizy. He is fortunate to be among the minority of growers to enjoy global distribution. “Outside of France we have less competition, and we have distribution through agents who are passionate about pushing growers. But in France we are alone, it is more difficult, and we have to work harder.”
Growers sold 47.1 million bottles – 85% of their production – in France in 2019. This left exports at just 8.2 million bottles, of which 4.8 million (8.7%) were destined for other European Union countries. The rest of the world shared just 3.4 million grower bottles (6.1%), compared with 71 million bottles from houses and 5 million from coopératives.
Success today is dependent not only on exports beyond the EU, but on the countries to which those exports are directed. “We clearly see that the producers who are successful in the US and in Asia, whether they are houses or growers, beat their sales and earnings records every year,” Jean-Marie Barillère told BestChampagne. “On the other hand, producers who are strongly present in France and the UK lose market share year after year, whether they are houses or growers. It is not a matter of producer category but of an evolution of the markets.”
“In mature markets like the US, there was once a time when growers equated to top quality in the minds of consumers, journalists and sommeliers, so they imported something like 400 or 500 different names,” points out leading grower Rodolphe Péters (of Pierre Péters). “And then they realised that it’s not because it’s from a grower that the wine is good, so now they are back to 350.”
“The problem is that the French market is tough and very competitive,” says Maxime Toubart, president of Champagne’s winegrower’s union, the Syndicat Général des Vignerons de la Champagne. “Vineyards are increasingly dependent on the houses to sell their stocks, because they have the means to sell the bottles in distant markets at high prices. So they can afford to pay a lot for the grapes.”
Champagne pays its growers the highest grape price in the world, an average of more than €7 per kilogram, and more than €8 in top grands crus, and rising annually – more than 80% up on the price 15 years ago. In the dismal 2017 harvest, Champagne’s largest player, Louis Vuitton–Moët Hennessy, shocked everyone by offering its growers a premium of 6–7%, and in some crus as much as 15%, inflating prices across the region. The only grower-producers able to sustain these costs are those who can pass on price increases in export markets.
This scenario coincides with the retirement of many of the pioneers who produced their own grower Champagnes for the first time. As the next generation takes over, many are recognising that strong grape prices and high demand for quality fruit presents a more stable and compelling opportunity to focus back on selling to négociants. “It’s so easy to sell grapes at the moment that I am afraid some growers will give up,” says Lanson chef de cave Hervé Dantan. “Growers who don’t manage to sell good volumes of their own wines will be completely fed up and sell more to négociants.”
“In the past it was very easy for small producers to sell Champagne, but today a lot have trouble finding their place in the market,” says Francis Egly (of Egly-Ouriet) in Ambonnay, whose rising production of exceptional cuvées is in very strong demand. “The new generation of Champagne lovers expect very good quality from small producers, and those who make mediocre quality will find it increasingly difficult to sell their production.” In the same village, Sophie Déthune (Paul Déthune) goes so far as to suggest that “today, we are 4,000 independent grower-producers; in five years I think we will just be 150.”
Champagne is the fastest moving wine region in France. Things are changing now, and you have to adapt
Jacquesson’s Jean-Hervé Chiquet argues that in the grower world there is a ‘super top ten’, and beyond that just a few dozen who are successful. “I will be generous and say there are 150 great growers, but there are more than 4,000 making wine the way the laboratory tells them to make it, and the quality is very low,” he suggests. “But Champagne is the fastest moving wine region in France. Things are changing now, and you have to adapt.”
Rodolphe Péters puts an even smaller number on it. “Very few growers are succeeding and fewer and fewer are producing,” he discloses. “There are very, very few growers with a strong demand – probably no more than 50 – and another 200 who are less successful. So there are really only 250 growers selling worldwide.”
This consolidation in grower Champagnes is being amplified not only by economic forces but by the harrowing extremes of climate change. The vagaries of Champagne’s marginal climate and the diversity of its microclimates have long dictated a wine style dependent upon blending multiple vintages, varieties and crus. Ever more dramatic extremes are taking their toll, and yields suffered bitterly in 2016 and even more in 2017. “A small grower in one village has nothing to compensate for difficult weather,” said Benoît Gouez, chef de cave of Moët & Chandon. “Grower wines are very good, and I have friends among many of them, but by nature the quality of Champagne is uneven. The more grapes you can access, the more you can be consistent.” Champagne’s average grower now owns less than 0.7 hectares. In a good harvest, this would facilitate production of just 7,000 bottles. Larger growers are naturally more likely to bottle their own Champagnes, but the average production of the region’s 4,159 growers is a mere 13,200 bottles.
As third-generation grower Erick De Sousa prepares to pass the estate on to his three children, a threat has arisen more crippling than global economics and climate change. France boasts one of the highest levels of inheritance tax in the world, and children are stung with 45% tax on assets worth more than €1.8 million. A generation ago it was possible to pay off inheritance tax in a single harvest. Today, the average Champagne vineyard is valued at more than €1.5 million per hectare, ranking Champagne as the highest-value appellation viticultural land on earth, and its top Côte des Blancs grands crus are now fetching up to €3 million per hectare. De Sousa owns 11 hectares of almost exclusively Côte des Blancs grands crus to produce 100,000 bottles, and at any time holds 250,000 bottles in its cellar. This small family estate must be worth well in excess of €30 million. It would take a lifetime to pay off the tax on such an inheritance.
“In France we say that the inheritance tax is a stupid law,” exclaims Erick’s daughter Charlotte. “If the parents pass away and haven’t prepared for this, then the children say it’s a poisoned gift and they’re forced to sell the vineyards to big companies.” And hence the more than slightly ironic twist of switching from récoltant to négociant to uphold the business in the family name. “We changed to a négociant in 2013 to pass on the domaine to us three children,” explains Charlotte. French taxation is more kind in the inheritance of a company than vineyard land. Erick and his wife Michelle now own the vineyard, and their children the company, “so we effectively buy the grapes from ourselves.”
Jérôme Prévost is one of Champagne’s most celebrated growers, producing just 13,000 bottles from a 2.2 hectare vineyard he inherited from his grandmother in 1987. Although his wines are in high demand and sell for respectable prices worldwide, such a small production is insufficient to sustain his livelihood. In 2017, frost wiped out 80% of his harvest, and he relinquished his récoltant-manipulant credentials to be reincarnated as a négociant-manipulant in order to purchase fruit and grow production – to the collective gasp of the hip sommelier world. This is a trend followed by an increasing band of Champagne’s most celebrated growers, including Diebolt-Vallois and J.L. Vergnon (though not all for the same reason).
We are at a critical juncture in the evolution of the Champagne grower-producer. “The years to come will see an increasing reconciliation of growers,” says Demarville: “We are creating a new generation of growers who don’t necessarily want to sell bottles, but who want to be top growers and sell their fruit to the leading houses,” he says. “In the next 10 years, 35% of growers will retire, and most will lease or sell their vines to other growers.”
But while many smaller and lesser estates will return to selling their fruit to négociants, Demarville predicts that the top growers, like Egly-Ouriet, will thrive. Certainly in my mind there is no doubt that the very best growers, well established and well loved across the Champagne world, will continue, against all odds, to strengthen their rightful place among the great wine estates of the world.