Glut Champagne's vineyards have enjoyed good growing conditions. But sales are down
With this year's harvest almost in, Champagne's grape growers should be rubbing their hands. It has been a good year in the vineyards, with enough rain and sunshine when it mattered and very little disease to spoil the grapes. And so the growers — or vignerons — were looking to sell a bumper crop to the Champagne houses such as Moët et Chandon, Lanson and Mumm, who turn the grapes into bubbly and sell it worldwide. The vignerons, who supply around 90% of Champagne's grapes, are essentially paid by the weight of fruit, so a bountiful harvest usually means good money. "This was shaping up to be a vintage year for us," says Patrick Le Brun, president of the growers' union.
But the Champagne makers — the so-called négociants — had other ideas. In recent years they have pushed for higher and higher yields to meet the growing global taste for France's famous fizz. Even when regions such as Languedoc and Roussillon in southern France suffered from massive overproduction, Champagne producers could barely keep up with demand. Now, though, recession and the strong euro have pummeled sales, notably in the U.S. and Britain, the two largest Champagne markets, which together take nearly 40% of all exports. Back in 2007, when economies were riding high, some 339 million bottles of Champagne were sold worldwide. Last year that figure fell to 322 million and in 2009 sales of 270 million bottles may be as good as it gets. Next year doesn't look much better, and with 1.2 billion unsold bottles still crowding their cellars, the last thing the négociants needed this autumn was a hefty grape harvest. The obvious solution — price cuts to jump-start sales — is a nonstarter since this would, the Champenois insist, undermine their product's luxury (read expensive) image.
Come harvest time a testy standoff developed. The négociants, many of them cash-strapped, offered to buy 7,500 kg of grapes per hectare (roughly 3 tons an acre) from the growers — a whopping 47% reduction on last year. "We have no choice other than to adapt to the economic climate," said Ghislain de Montgolfier, president of the Union of Champagne Houses.
Predictably, the growers rejected the proposal as ruinous. Many blame the glut on the négociants' overly ambitious sales projections and suspect the Champagne houses of playing hardball in advance of negotiations to renew supply contracts. But the two sides know they need to hang together. The growers, most of them smallholders, depend on the négociants to buy their grapes and create the market for bubbly; the Champagne houses, who are only about 10% self-sufficient in grapes, are hostage to the growers. So it came as no surprise when Champagne's governing body, CIVC, announced an eve-of-harvest compromise described by Le Brun as "the least bad solution." The Champagne houses will buy 9,700 kg per hectare but bottle only 8,000 kg per hectare, leaving the equivalent of 48 million bottles to age in vats for 10 months, after which, they hope, demand will have revived.
But will it? Much depends on an economic recovery. Just a few years ago the Champenois argued that global demand for Champagne would bubble ever higher, and lobbied successfully to extend the acreage of vineyards that can claim the Champagne name. With the outlook uncertain, the industry must be relieved that it will be 10 years or so before those extra vines come on stream. Meanwhile, like OPEC, the Champenois must manage their cartel as best they can to ensure prices stay high.
As any OPEC watcher knows, however, there is always the possibility that some producers will break ranks and start discounting. Many Champagne houses are in debt and cash-flow problems are endemic in the business, so the pressure to move inventory will grow if credit remains tight. Already there are rumors of special deals. If that happens Champagne lovers will be able to cash in — or at least enjoy a pause in the relentless price hikes of recent years. For the moment the only certain beneficiary of the latest decision is Champagne's bird population. They will get to eat the thousands of tons of grapes that will be left on the vine as a result of the reduced harvest. What is birdsong for cheers?