Sunday, February 23, 2014

Champagne Producers Dismiss Rumors of Supply Squeeze [Wine Spectator]

Following reports that Champagne is facing a shortage of wine, trade officials and producers say everything is under control
Jacob Gaffney
Posted: August 20, 2007

Champagne sales are on track to grow for a fifth consecutive year in 2007, but some say the renowned sparkling wine region may be at risk of becoming a victim of its own success, as prices, as well as with consumer interest, are on the rise. However, producers and the region's governing body are quick to squelch rumors of a lurking Champagne shortage, and are confident that they're making the right moves to keep up with growing demand.

Rumors of a shortage started flying when Frederic Cumenal, president of Moët & Chandon, recently told the French daily Les Echos that his production house was in danger of an undersupply. That interview was soon picked up by media around the world, and word spread that Champagne prices would rise and stocks would fall. After all, sales of Champagne are increasing in just about every export market, including the United States.

"This year, the market for Champagne is set to grow 7 to 8 percent, and we need to bring it closer to 2 percent," said Daniel Lorson, communications director of the Comité Interprofessionnel du Vin de Champagne (CIVC), the trade association of the grapegrowers and houses of Champagne, France. "We have to accept that we have to limit our growth." But he was quick to point out that several measures are underway to increase production to satisfy demand.

For starters, 865 acres of vines were planted this year alone, which leaves only a few hundred acres left for new plantings in the 84,016-acre region. The Institut National des Appellations d'Origine, which governs France's Appellations d'Origine Contrôlée, is even looking at the possibility of expanding the borders of Champagne to allow for even more planting, according to the CIVC (but such a move won't happen for several years, as tests need to be performed on soil samples in outlying areas to make sure any added land will have similar terroir to Champagne--and a years-long approval process would follow).

Other large producers remain optimistic. Thierry Gasco, winemaker for Reims-based Pommery, denied that there is a shortage, and confirmed his plans to keep growth staunchly at 2 percent per year. But that's not to say that the large Champagne house hasn't had the odd supply problem in the past.

"For Pommery, the only problem that we had was two years ago [with] rosé Champagne," Gasco said, "because we have seen a big increase in our sales during two years, and in order to have the right level of quality, I closed the sale of [rosé] during 12 months, from April 2005 to March 2006." It seems to have worked. "Now everything is right," he added. "I have no problem of volume in any [level of] quality."

Sharon Castillo, director of the Office of Champagne in the United States, said that even though America is set to become the largest export market by 2010 if current trends continue, she doesn't see a looming shortfall. When compared to the 41.2 million bottles of Champagne shipped within the borders of France during a four-month timeframe in 2007, Americans still only consumed about one-eighth as much in the same four months.

The recent reports also led to speculation that producers are sitting on vast reserves of Champagne and are waiting to sell the bottles once prices increase greatly. Lorson estimated that there are, in fact, around 1 billion bottles of Champagne in storage, but such practices are nothing new. Indeed, Lorson's grandfather was a Champagne producer who calculated his release dates according to how much money he needed to earn for his pension.

But stockpiling to deliberately increase prices has never worked, Lorson added, citing price increases in the early 1990s that led to widespread consumer rejection. "We shouldn't get too greedy with our prices," he said. "After all, Champagne can't last forever, so one day or another these bottles need to be sold." He further explained that prices aren't necessarily rising faster than normal, but that American consumers are, on average, spending more per bottle, typically from smaller producers.

Gasco added that if any Champagne producers are holding reserves, it's most likely among the smaller houses. "Deliberately, they don't sell all of their production because they don't want to pay too much tax," he said. "And it's preferable for them to have bottles in the cellar: They know that in case of a financial problem, they have reserves."


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