CHAMPAGNE BULLETIN JUNE 2021
Always optimistic – never satisfied
Ever dreamed of owning a vineyard in Champagne? You’ll need deep pockets!
Well, the good news is that the price of vines is coming down. The bad news is that it is still eye-wateringly high.
Every year a report is published on the price of vines in Champagne and the latest report came out this month. It shows that, based on the transactions completed in 2020, the average price per hectare (that’s about 2.2 acres) was down 1.9 % versus 2019.
That follows a fall of 3.9% in 2019 versus 2018, so you might think that now is a good time to snap up a bargain. Well, that might be true, but you’ll still need very deep pockets because even after two years of falling prices the average price paid in 2020 was still €1,102,000 per hectare, which works out at about 600,000 USD per acre.
These figures are the average across all the sub-regions in Champagne of which there are many more than you might imagine. In some of the less well-known and not quite so prestigious parts of the Champagne appellation you can still buy vines for around €850,000 per hectare.
On the other hand, to buy just one hectare in the most sought-after locations (from which you could produce perhaps 10,000 bottles per year), will set you back 1.6 million euros or more.
Good times are back again…?
After a torrid 18 months which saw sales of champagne in 2020 fall dramatically, the champenois have been anxiously waiting for some good news to indicate that business is bouncing back, so you can imagine the relief and satisfaction that the shipment figures for the months of April and May have brought to the region.
Shipments in May this year reached 22 million bottles which is a whopping 155% increase versus May 2020. What’s more, the growth is spread quite widely: the biggest increase was in export markets (up 185%), but shipments to France also grew strongly (up 124%) albeit at a slightly slower rate than exports
The May figures follow on from an increase of 197% in April 2021 versus April 2020, so we’ve had two months of really solid performance.
To put things into perspective, it is worth remembering that in 2019 – the last ‘normal’ year - annual shipments of champagne were just under 300 million bottles, but in 2020 that figure crashed to approximately 250 million bottles. Not as bad as some had feared early in 2020, but still a huge fall of nearly 20% nevertheless.
Now, after the April and May results some in Champagne are saying that the market will bounce back to pre-Covid levels by the end of this year.
There’s a way to go yet, but if this comes to pass it would indeed be a spectacular result and proof that people’s love of champagne has lost none of its sparkle.
The on trade opens up
As shipments from Champagne are on the up, people around the world are beginning to get out and about to enjoy themselves, particularly in the USA.
The latest Beverage Trak data from CGA’s COVID-19 On Premise Impact Report, indicates that 98% of states have bars open indoors, although capacity limits are in place in some states.
Matthew Crompton, CGA’s client solutions director, was quoted as saying:
“The country is by and large completely ‘open’ again now – our research shows that there isn’t any state left where you cannot make an indoor On Premise visit of some kind”.
Not surprisingly the major centres for champagne consumption such as Florida, Illinois, California and New York are leading the way, albeit at slightly varying rates.
The tax man cometh
There’s no getting away from the fact that alcohol of all descriptions is a highly taxed commodity and one of the points I stress to everyone who contacts me about creating a private champagne brand is the importance of knowing the rules and regulations regarding the import, distribution and sale of wine in the country of destination, including the tax situation.
If you are not familiar with these topics you are not only flying blind as far as any business plan is concerned, you also risk getting into difficulties with the local and national authorities.
The subject of taxation can be very complex as is illustrated by this map and report published by The Tax Foundation in the USA https://taxfoundation.org/state-wine-taxes-2021/
The rates of taxation are different in almost every one of the 50 states, but although the USA may be one of the most complex regimes as regards the taxation of alcohol, every country has its own rules, and I would urge anyone considering creating a private champagne brand to get specialist advice on this vital subject.
What’s happening in the vineyards?
It is often said about farmers and anyone that works with Nature, that they are never entirely satisfied and sure enough, amidst all the optimism about the increase in champagne sales, a small cloud has appeared on the horizon.
June is usually the month when the vines come into flower. It’s not a spectacular event; in fact, you’d hardly notice it at all unless you looked closely because the white flowers are so tiny, as you can see from this picture, but it is a crucial moment in the annual cycle of the vine.
The fertilized flowers give birth to the tiny grapes which slowly grow over the next few months until the harvest, but if the weather during flowering is too cold or wet the flowers are not properly or fully fertilised and consequently fewer grapes are formed which reduces the harvest.
Whilst the weather this year has not been disastrously cold, temperatures have been well below the seasonal norm and we’ve had quite a lot of rain, sometimes associated with violent thunder and hail storms. All in all, not at all the ideal conditions for flowering.
There’s an old saying in Champagne: “année en 1, année de rien” which means roughly, “years that end in 1 are good for nothing.”
There have occasionally been exceptions (1961 for example) but they are the exceptions rather than the rules, so figures are crossed here that this year this particular old saying will not prove to be true.
That’s all from me from Champagne for this month, but I’ll be back in July with another bulletin.