From the AP:
This year’s champagne grape harvest will be limited to levels 21% below last year due to a collapse in sales and burgeoning inventories. This unprecedented action comes as Champagne revenues are down by a third with 100 MM bottles languishing in inventory by year end.
The pandemic has crushed champagne sales this year.
We should see lots of pre-holiday champagne sales this year.
Thanks for sharing Bob. My cliff note takeaway is that they set a limit of 8,000 kg/Ha for this year’s harvest. Does anyone have perspective on if that is dramatically lower than the yields that are typical from the prestigious houses that are popular on this board and some of the more well known growers? I know, for example, that Cedric Bouchard is famous for low yields so this certainly won’t make a difference for him. Not sure whether or not this really will impact many of the higher quality producers.
I would love to be “limiting” my harvest to 3.52 tons/acre!
Do you mean like the 50% price increases for 2008 Taittinger CdC?
I do expect that all or most of the discounting and clearances for Champagne will be at the lowest end, not mostly the wines we seek out and get excited about here at WB.
And it makes sense – Champagne is mostly getting hurt by lack of restaurant sales and lack of wedding receptions and other large events. What kinds of Champagne is sold at restaurants and served at large events? It’s 99%+ the lower priced, everyday Champagne. The market for premium $75+ wine overall is still pretty strong, and I think that includes premium Champagne as well as still wines.
I’d love to be wrong about that. Well, not because I wish any ill on Champagne, but just from the standpoint of a consumer wanting good deals.
Let’s be realistic if sales volume are down. I would think that price per bottle would either have to stay the same or rise. Since France has some strict employment laws. This line of thinking is based on the current prices on French bottles (non just champs) and the US auction market. A business has some level of ongoing fixed costs that need to be covered, if the volume of sales is down. One might take the position that the highest value of every bottle needs to be collected. [Or you could try and increase volume in sales by lowering the price]
How much of all this is being caused by the fact that they expanded the Champagne appellation a few years back. Do lots of people buy “cheap” Champagne at restaurants and for large events or are most people buying less expensive sparkling wines from elsewhere (which quite often are better and cheaper than “cheap” Champagne). My guess is that at the lower end a lot of what is going on are trends that are happening all over Europe where quality sells and producers of table wine are suffering and have for a generation.
A few quick comments on this years Champagne Yield situation:
This is all about protecting the current price level of NV Champagne - especially with mass market bottlings in Europe
Cellars in Champagne are already full and if they keep filling up with bottles, something has to give and that is a market dump; Champagne wants to prevent this
There is a fear that folks may start selling off bottles sur lattes for private labels that flood the market with 10 Euro Champagne; this has already been stopped for the time being as any sales like this now need approval to move forward
Growers need money and wanted a larger yield; Negociants cannot take on the supply and wanted a lower yield - They met in the middle
The actual yield would have been much higher than 8,000 kg/ha in a normal environment (easily as high as 12,000 kg/ha), but Champagne sales have not exactly been gangbusters lately so even without COVID, I doubt it would have been higher than 11,000 kg/ha
Depending on how the economy goes, it may only be 7,000 kg/ha; the 8,000 kg/ha number depends on how sales go in the coming months
As Champagne has its quirks, you actually could harvest up to 15,000 kg/ha and keep all the wine if you want to add up to 7,000 kg/ha of wine to your reserve stock (Réserve Individuelle) for protection against a complete loss of a vintage; most producers don’t have space and already are full of quality wine from 2019 and 2018
Most of the economic worry has to do with lower end, mass market bottlings that we do not see in the US, but that are very common in France and throughout Europe.
You can’t compare Champagne yields to still wine yields. 1000 kg of grapes in most Pinot Noir locations yield 25% more juice than what you get from Champagne grapes. It comes down to pressing.
Also, the vintage seems quite promising. From reports I have gotten, it isn’t quite at the level of 2019 or 2018, but still very good and appears to be very vintage worthy.
Brad, will we see any sharp sales from board favorites or are they close enough to selling g through?
(Or have more room)
all a hoax?? Any excess going into reserve wines, soleras, etc and they’ll get us and our $ later. Champagne has mostly always been about playin the long game, and seem to mostly always win
There was an article where it was said that Agrapart’s (I suppose a good example of a high quality grower that is championed here) sales so far this year have been pretty much similar to previous years and thus the set maximum yield for this year will punish them as they are forced to produce less than they would want.
Smaller, high quality producers were not having any problems with sales. Folks like Agrapart, Selosse, Chartogne-Taillet, Billiot, Lilbert, Savart, Vilmart, Egly, etc… are fine. The demand is there and they easily could have made more wine, but, to be honest, that is the case every year no matter what yield is set. The only real positive out of the lower yield is that it will allow producers to be more selective and this could potentially raise the overall quality of the vintage.
The financial complications of this year are going to hit many folks. Earlier in the year, due to COVID, the last two negociant payments to growers for the 2019 harvest were allowed to be delayed and the 2020 harvest payments are also going to be extended. Some negociants do not have the cash flow to pay, but growers are in a tight spot where they may not be getting paid when expected and are now selling less grapes than they would like. Some smaller producers also have made large investments lately so will be buying in more grapes than normal in order to make and hopefully sell more wine to cover expenses.
Over the last few years, Champagne sales have not really supported the volume produced. Stocks have been rising even with recent yields being limited more than they could have been. Over the last decade, yields have normally been in the 10,000 - 11,000 kg/ha range (not counting wine that could be added into or taken from a producer’s reserve which can raise the actual yield of a producer and the region quite a bit). A yield of 10,000 kg/ha normally results in a production level of around 300 million bottles in Champagne. Sales over the last decade have been around 308 million bottles per year, but production has been consistently higher each year by around 10%. This means that over the past decade Champagne has built up an excess stock of 300 million bottles or an entire extra year of supply. Add in the COVID-19 effects from this year and you have a lot of people worrying.
In regards to the Champagne appelation expansion from last decade, that really has nothing to do with current numbers. We aren’t seeing the effects of those grapes yet as everything moves slowly with French bureaucracy Now, Champagne has discussed further expansion in the past few years, but I am not sure that is going to go anywhere based on where they are at today.
With the three tier system in the US, sales/blowouts are not always the result of a producer dumping wine. Multiple layers are at play. There are sales and discounts every year though this year may see more than the recent past. The problem is that once that price point drops, it is hard to get it back up and Champagne has spent the last decade getting that price point up on a lot of the bottles that the folks on this board enjoy.
Has there been downward pressure on vineyard pricing? I could imagine a lot of thinking on both the buy and sell side in the current climate.
Thank you for your detailed and illuminating posts, Brad.
With demand down and supply up, prices have only one way to move, down. While that may not be the case for small boutique producers or limited edition bottles from years past, prices for the more popular high volume labels should move down to help clear inventories and raise cash. Given where the world is at with Covid, I don’t see this situation resolving this year. Who’s going to have the corporate holiday party with unlimited refills of bubbly?