Champagne in Economic Recession

PARIS (AP) — Partygoers worldwide have at least one good reason to forget the economic pain, job fears and mortgage woes of 2009: unusually cheap Champagne for New Year's.

Champagne houses and retailers have had a tough year, forcing some to make aggressive price cuts. But the discounting is causing divisions among vintners, and analysts warn the move could threaten the bubbly's premium reputation.

In supermarket chains such as Carrefour SA and Auchan, French shoppers were snapping up real Champagne for less than €10 ($14) a bottle, as even high-end producers such as Laurent Perrier compete with cheaper bubbly such as Italian prosecco and Spanish cava.

With Champagne exports plunging, some producers are cutting prices to sell more in France. Large retailers are also taking advantage of the decline to woo recession-weary shoppers during the festive season.

Carrefour, Europe's largest retailer, has stocked 450,000 bottles of Hubert de Claminger Champagne on its French shelves , which it is selling for €8.90 ($12.80). It is also offering up-market brands at a discount — Moet & Chandon Imperial now retails with a €3 reduction for €22 ($31.60).

"It's fine to do some discounting but if you do it too steeply you can really damage the brand," said Ann Gilpin, an analyst with the Chicago-based research firm Morningstar. "Once you start to lower the price you run the risk of destroying the idea of it being a premium brand."

The discounting is being driven by some of the cash-poor smaller Champagne houses who need to boost flagging sales, but some of the bigger houses are also seeking to sell off stocks and boost volumes.

That marks a change in strategy for Champagne growers, who have been raising prices to cultivate the prestige of the sparkling wine that can only be made in a specific region of France.
Laetitia Delaye, an analyst Kepler Equities in Paris, says most of the big houses are wary of cutting prices on top-end wines because it will be difficult to persuade consumers to pay more when the economy recovers.

"This year they are trying to preserve the premium brands," she said. "It took them time to increase prices."

She said it's probably the retailers who are driving the promotions of premium-brand Champagnes, not the producers.

Laurent Perrier spokeswoman Marie-Clotilde Debieuvre-Patoz says prices are not being cut for the house's premium brands. Grand Siecle La Cuvee, which retails for around €150 ($215), is being sold in a fancy case.

"In a crisis, you have to adapt," she said. "Our policy is to have a complete portfolio of brands, each of which is adapted to its clientele and the economic climate. We don't want to touch prices on the (premium) Laurent Perrier brand."

Other Champagne houses that can afford to let volumes tumble are also resisting cutting prices.
Remy Cointreau CEO Jean-Marie Laborde vowed last month not to cut prices on brands such as Piper-Heidsieck so that when the recovery comes he won't be stuck with lower-priced bubbly.
Champagne is Remy Cointreau's smallest division and losses are made up for by profits in its liqueurs and spirits division. But for companies whose sole product is Champagne, times are tougher.

Champagne exports in the first half of the year plunged 45 percent, according to the Federation of French Exporters of Wines and Spirits.

France accounts for just over half of all Champagne sales, around 50 percent of which are made by cooperatives and small growers that offer cheaper Champagnes.

The large houses dominate the export market, accounting for 86 percent of volume, and analysts fear discounting among premium brands risks making consumers question why they are paying more for a sparkling just because it is made in France.

In Britain, where prosecco is roughly a third of the price of Champagne, bargain hunters are being treated to some of the deepest discounts this decade.

Trevor Stirling, a beverages analyst at Sanford Bernstein in London, said prices have been slashed by as much as 50 percent, with even premium brands such as Moet & Chandon and Bollinger selling for as little as 14.39 pounds (€16; $23).

Stirling said Champagne houses are stuck with a difficult choice in Britain, which accounts for a quarter of exports.

Given competition from other sparkling wines "there is a danger that people start to realize they can get something almost as good for half the price and Champagne isolates itself as something that you only pay the premium for very special occasions," he said.

At the same time, Champagne wants to preserve its prestige. Gilpin said Champagne has also been discounted in the US, where it is a flagging status symbol.

"People don't really know what brand of Champagne you drink at home, or at a wedding when you receive a glass of Champagne, you don't really know what kind of champagne is in there," she said. "It's a lot more difficult to flaunt that status symbol."

Even the usually recession-proof Swiss are turning away from Champagne.

Figures from the Swiss federal customs office for September to November show an 11.7 percent year-on-year rise in imports of Italian prosecco while imports of French Champagne fell 4.1 percent.

Reports from 2010 Associated Press