Champagne - Part III: The Companies
The penultimate part of this month's management briefing, which focuses on the Champagne category, sees Richard Woodard review the industry's main players.
As companies adjust to the post-recessionary world and try to reinject value into their businesses, the corporate landscape in Champagne has changed little in recent times – with one notable exception.
In May this year, Rémy Cointreau sold its Piper-Heidsieck and Charles Heidsieck Champagne brands to Société Européenne de Participations Industrielles (EPI), valuing the business at EUR412.2m.
If eyebrows were raised at the identity of the buyer – a business owned by the Descours family best known for its clothing and footwear brands – the new CEO of the company offered some reassurance: Cécile Bonnefond is a former boss at Veuve Clicquot.
It’s early days for EPI and Bonnefond, but already she has signalled her intention to target the US market, where Piper ranks a distant third to Moët and Clicquot, giving the brand both critical mass and potential to grow.
There’s a general feeling in the trade that Piper’s sometimes lowly reputation is out of synch with its inherent quality, so limited edition, high-margin special products will also be part of the equation – the brand has already recently teamed up with fashion designer Jean-Paul Gaultier.
Less significant in volume terms is Charles Heidsieck, where Bonnefond will have to wrestle with a problem never really solved by her predecessors at Rémy: how to turn the brand's stellar reputation among the trade and journalists into increased sales, while constrained by limited production levels.
Away from the Heidsiecks, the activities of the main players have been characterised by the most bullish general outlook for Champagne since the summer of 2008, as rebounding volumes are matched by resurgent value in the sector.
The biggest of them all, Moët Hennessy, spoke of “the dual effect of sustained demand and a favourable product mix since the start of the year”, as Champagne played a significant part in an 11% rise in organic sales for the company’s wine and spirits activities in the first nine months of 2011.
The positive figures justified the company’s decision in May this year to renew a EUR30m investment programme designed to increase production and storage by 20% – a project put on hold by the economic crisis in late 2008.
Citing internal forecasts suggesting that 2014 sales volumes will surpass the boom year of 2007, Moët Hennessy will have a 6,000sq m building, complete with 137 vats and a capacity of 100,000 hectolitres, in service in time for the 2012 harvest.
A look at the results of Champagne’s other major operators offers detail on the general trend of value returning to the market. Lanson-BCC even revealed a 2.5% drop in sales volumes in the first half of 2011, but coupled this with a 4.5% upswing in revenues to EUR109m as higher-value products increased their sales.
Lanson-BCC boss Bruno Paillard has always made much of his company’s mix of brands – from cheap and cheerful Chanoine to boutique houses like Philipponnat. While the likes of Chanoine and Boizel generated renewed volumes in 2010, the company’s higher-margin cuvées are returning to growth in 2011.
Vranken-Pommery Monopole arguably lacks Lanson’s extreme versatility, but the owner of Pommery, Vranken and Heidsieck Monopole showed a similar performance in its third quarter, with Champagne revenues rising 5.3% and reporting “substantial” growth for Vranken and its vintage cuvées Diamant and Demoiselle.
More importantly for the company’s long-term strategic plan – it is currently undergoing a restructuring process due to last into 2014 – sales at its foreign distribution subsidiaries were up 15.8%, exploiting what it described as “the positive trend in Champagne sales on every continent”.
Perhaps the surest sign of the return of value to the Champagne sector comes with Laurent-Perrier, the major house worst affected by the economic downturn, thanks to an ill-timed repositioning exercise which enforced large-scale price hikes on the markets just as boom was turning to bust.
The company’s last fiscal year, which closed on 31 March, was characterised by rebuilding volumes at the partial expense of margins, but this trend was reversed in the first quarter of fiscal 2012 (to the end of June 2011).
Here an 11.5% revenue increase represented a deceleration on the previous year’s growth figure, but came despite a 2% decrease in volumes – in other words, the company is selling more Champagne at higher prices.
Elsewhere in Champagne, there is much brand rebuilding work going on as the region catches its breath after a turbulent few years on the main markets.
Champagne Thiénot continues its work on rejuvenating its marquee Canard-Duchêne brand, unveiling a new communications platform and advertising campaign this year, revolving around the “Noble by Nature” strapline.
As well as repackaged classic cuvées under the Authentic name, there is a new set of Grandes Cuvées grouped under the Charles VII sub-brand – all designed to exploit the strong underlying awareness of the Canard-Duchêne name, especially in France.
Meanwhile, Champagne Jacquart’s somewhat haphazard approach of recent years – the brand was premium in some markets and volume-driven in others – has been consolidated with a new, premium-focused and streamlined product range.
Under managing director Laurent Reinteau, the Alliance Champagne-owned brand is also diversifying, acquiring rival Champagne Montaudon in 2010, and refining its distribution arrangements, signing a UK deal with premium importer Enotria.
It’s a similar story at the other main co-operative-owned Champagne brand, Nicolas Feuillatte, which is currently in the midst of a top-to-toe revision of its entire range, including a wholesale repackaging exercise.
The idea, says CEO Dominique Pierre, is to “maintain our contemporary character, but also give consumers an idea of Champagne’s inherent fame”.
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