Spotlight - Champenois mull over expansion as demand rises
Champagne has a problem very few wine regions currently face. It does not make enough wine to meet demand. Many believe the only way forward is to expand the vineyard area but, writes Chris Losh, expansion would be a political minefield and not all agree that it is the best course of action in any case.
Things are hotting up in Champagne. And not just because the region that is famous for its cool climate is seeing average temperatures climbing practically year after year, courtesy of global warming. With sales growing steadily too, the region is working itself into something of a lather over how to meet global demand.
The problem is simple enough. Exports are growing at 5% a year and, save for the blip at the turn of the millennium caused by post-Y2K overstocking, have been doing so for 40 years.
But this growth in demand has not been coupled with a corresponding increase in vineyard area. Exports may be 40% higher than in the early 1990s, but the vineyard area has grown by only 14% in that time. And while the current 32,000 hectares under vine is over three times what was planted 50 years ago, it isn't enough to supply a world that seems to have fallen in love with bubbles.
The INAO (Institut National des Appellations d'Origine) has done what it can, raising yields to an astonishing 13,000kg per hectare - a level that would make a Languedocien blush.
Yet still the pressure on supply means that grape prices are rising. The head of one Champagne house estimates the increases at 4% a year, which quickly impacts on overheads. No wonder, then, that there is such a scramble for land: controlling their own grape supply can save producers money in the long run.
But it's not an investment either for the impatient or for the faint hearted. Pol Roger has undergone a steady programme of land-buying in the last ten years, their tortuous negotiations adding 2ha. While earlier this year Moet and Vranken were engaged in a bidding war that saw some fairly unremarkable (82% rated) vineyards change hands at a rumoured EUR1m (US$1.34m) per hectare. To compare, prices in Alsace are around EUR150,000/ha, while vineyards in Burgundy fetch around EUR85,000/ha.
Given that it's some of the most expensive land in the world, you might wonder why anyone would want to sell it. The answer lies in France's draconian inheritance laws, which can tax estates at up to 50% of their worth. For many families, the only way to pay this inheritance tax is to sell all or part of their estate.
It's a situation that plays into the hands of the biggest players, who are able to fund their huge investments with an eye on the long-term gain, and this is sure to lead to a (comparative) concentration of vineyard power.
The simplest way to ease the pressure on the region's overheating finances is obvious: expand the vineyard area. And many in the region see that as a clear way forward. "If we can find some good areas that produce good wines, why shouldn't we do it?" asks Pol Roger CEO Patrice Noyelle.
However, Noyelle adds the telling caveat that "if it's not done properly, it will ruin the image of Champagne".
And that is the key point. Given that the conversion of a field from bog-standard northern French champ into AC Champagne will increase its value ten times, any expansion is likely to be intensely political and of Gordian complexity.
Difficulty of implementation, however, may not be the only reason that vineyard expansion hasn't already happened. Even some Champenois (perhaps with one eye on the disastrous growth in Bordeaux ten years ago that has contributed to a subsequent surplus and economic implosion) believe that increasing the vineyard area is not the solution, and that, with demand at such a high, Champagne marketers should concentrate on increasing retail prices and selling less at the cheaper end of the market.
"While there is so much cheap Champagne around, there is no need to make more," said one powerful operator sniffily. "We would be better off increasing the price per bottle."
Nor is this anonymous Champenois alone in his assessment. "There's a very good argument for charging more and knocking out some of the cheaper wines," said Keith Isaac MW of UK agents Patriarche Wines. "A lot of the cheap Champagnes are sold by supermarkets to drive footfall. They'll work on peanuts to get a bottle on the shelves at GBP10 (US$19.93) or GBP12, and all that means is that Champagnes off promotion don't sell."
Perhaps, though, there is an alternative. The south-east of England (similar climate, same soil to Champagne) is experiencing a fizz boom at the moment. An extra 620 acres have been planted to Champagne grapes in the last three years, which will quintuple English sparkling wine production to 1.2m bottles in the near future. By 2015, some producers are estimating England will make over 3m bottles of fizz.
This is unlikely to have the Champenois quaking in their boots from a competitive viewpoint, but with arable land at just GBP25,000/acre (about EUR100,000/ha), the chance to buy volume at a tenth of the cost to make, say, a sparkling flanker brand to their echt Champagne must be tempting indeed.
A spokesman for English Wines admits that two Champagne houses have been "exploring in some detail" potential opportunities with their English counterparts.
And as the thermometer continues to rise in Reims, the cooling breezes of the South Downs must look ever more inviting.
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