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Champagne Demand Increases Worldwide, Prices In U.S. To Move Up

November 4, 2011

Rapid recovery in mature markets and soaring demand in the emerging countries of Brazil, Russia, India and China has put global Champagne supply under pressure in the run-up to the crucial holiday selling season, with brands now on allocation and price hikes in the offing for 2012.

“Champagne now faces growing scarcity, due mainly to growth in the BRIC markets,” Jim Clerkin, president and CEO of Moët Hennessy USA, told Shanken News Daily. “Compared to the worst days of 2008 and 2009, the rebound has been phenomenal.” Touting the long-term strength of the emerging markets, Clerkin cited figures showing 111% growth in the Mideast-Africa region since 2001, along with 150% growth in Asia-Pacific and a whopping 430% advance in Russia.

“But the Champagne region is limited to 34,000 hectares and production of 320 million bottles,” Clerkin added. “It simply can’t go beyond that capacity. I have a number of brands on allocation, including Veuve Clicquot Yellow Label, Veuve Clicquot Rosé, Moët & Chandon Imperial Rosé and Nectar Imperial Rosé. Now that Champagne reserves are topped out, I will have more allocation issues next year.”

Clerkin also cited sharp rises in Champagne’s production costs, with grape costs rising by 97% in U.S. dollar terms from 2001 to 2010 and vineyard land more than doubling in price during that period. As a result, Moët Hennessy will be taking price increases across its Champagne portfolio during the first half of 2012. “Other worldwide markets have been taking prices up consistently, but we (in the U.S.) have not,” Clerkin said. “Indeed, we’ve fallen behind some of the competition on pricing. So 2012 will see a significant increase.” The biggest hike will be taken on Moët & Chandon Imperial, which will see a double-digit percentage rise. Other brands in the portfolio will receive single-digit percentage increases. Moët Hennessy USA is expected to announce the precise level of the price hikes in about four weeks.

Clerkin expressed confidence that demand would continue to be strong, notwithstanding the price hikes. “People have come back into Champagne faster than we’ve ever seen before,” Clerkin said. “We’ve studied the data over the years, and the correlation between Champagne growth and healthy economic indicators is incredibly close. Now, for the first time in 50 years, Champagne sales have rebounded strongly without overall economic recovery.” Clerkin added that the on-premise has also improved significantly. “When the on-premise is strong, we get a spinoff into the off-premise as well, because people like to take these affordable luxuries home,” he said.

Moët Hennessy is the dominant Champagne player in the U.S. market, led by Moët & Chandon and Veuve Clicquot. Last year, the company’s Champagne portfolio reached 837,000 cases for a 67% market share, according to Impact Databank.

 

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