Research in Focus - Smaller Emerging Markets still Important for Champagne
The forecast gradual recovery of Champagne shipments to nearer their record level over the next four years will be borne primarily out of economic recovery in its powerhouse export markets, such as the UK and Germany, and, albeit more sluggishly, in France.
As a result of that recovery and the size of those traditional markets, a new just-drinks report forecasts that the percentage of sales represented by export markets outside Europe, known officially as the "pays tiers", will fall during the coming four years. However, these markets remain a key focus for Champagne companies.
The forecast decline in their share of total Champagne shipments is in marked contrast to the progression over the past ten years, during which time the percentage of sales from countries in the Americas, Africa, Asia and Oceania, rose from 14% to 20% - the first time they reached the 20% mark.
Their share of revenues last year reached 25%, underlining that sales in these countries, while often small, are slanted towards higher value products, such as vintage, rosé and prestige cuvées. In South Korea, for example, prestige cuvées account for almost 25% of the market by value.
Since 2009, Champagne revenue growth has outstripped volume growth and, as a result, 2013 was one of the five most lucrative in the industry’s history, according to the report, which goes on to describe this as a "vital trend" for Champagne companies. Continuous growth in non-European markets, with their bias towards more expensive offerings, has played a part.
It should also be borne in mind that this varied group of markets includes some that are far from small, the US, Japan and Australia being the most notable examples. Some 17.9m bottles of Champagne were shipped to the US last year, and the report forecasts the US market will grow steadily over the next four years to reach 19.5m bottles. That makes the country second only to the UK among Champagne's export markets.
The report points out that there are now 11 non-European markets that sell more than 1m bottles of Champagne a year, and 28 that sell over 200,000 bottles. The fact that the proportion of sales in non-European markets will fall matters little in terms of their significance as developing markets and their interest to Champagne exporters, as the report points out.
"The prospects in a growing number of markets are whetting the appetites of the leading Champagne houses in particular, who have the resources, image and expertise to maximise their returns from newly wealthy consumers in Singapore, São Paulo and Sydney," the report states.
Until comparatively recently, the Champenois were primarily focused on developing sales in the BRIC markets of Brazil, Russia, India and China, the report continues, but today "a raft of other promising destinations" are attracting producers.
Indeed, Champagne has two very clear reasons for looking beyond the BRIC markets. For now, wine has not been included in the Russian retaliatory sanctions against the European Union, but there is no guarantee that will not change.
Meanwhile, China suffered a double-digit decline in Champagne shipments in 2013 as a result of President Xi Jinping’s anti-corruption and anti-extravagance measures.
While China remains an important and attractive developing market for the long term, Champagne producers are now expanding their horizons in South-East Asia. "For the future, there are many opportunities – not just China," Thibaut Le Mailloux, communications director at the Comité Interprofessionnel du Vin de Champagne (CIVC), tells just-drinks. "For instance, the whole of South-East Asia – Malaysia, Thailand and so on. There are a bunch of markets which are growing and which represent good potential."
Among the most exciting emerging markets in the Americas are Mexico and Brazil. Mexico passed the 1m-bottle mark in 2013, becoming one of Champagne's top 20 markets. However, Brazil has had "a trickier time in the past couple of years amid renewed economic uncertainty", the report notes.
The report also notes that many of the smaller emerging markets, like Brazil and Mexico, are subject to "exorbitant taxes", and the relative dominance within those markets of the big, multi-national brand-owners, such as Moët Hennessy and Pernod Ricard. "The more complex and closed the country in trade terms, the higher the market share for businesses with sizeable budgets and good routes to market," the report states.
Not all of Champagne's emerging markets are located outside Europe. Denmark sustained the position it gained in 2012 as a 1m-bottle market in 2013. The report suggests the Danes' love of good food and wine is partly responsible for the progress in the country, along with the considerable opportunities for cross-border sales to Swedish and Norwegian consumers.
Interestingly, the United Arab Emirates (UAE), another significant smaller market, performs a similar role for Africa and India, the report adds. Re-export business to Africa and India accounts for the majority of sales to the UAE, which produced another year of double-digit growth in 2013, pushing volumes to almost 1.7m bottles. The UAE is 12th in the league of Champagne markets. South Africa also recorded double-digit growth in 2013, taking it past 500,000 bottles for the first time.
The next largest market after South Africa is South Korea, where progress underlines the growth potential of these small emerging markets, albeit expanding from very low bases. Over the past decade, South Korea has achieved a compound annual growth rate (CAGR) of some 13%.
While Champagne's traditional European strongholds may account for 80% of global shipments, with their share of sales expected to rise in the coming few years, the combination of strong growth potential and high value offered by many smaller, emerging markets make them a critical area of development for Champagne.
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