There's a World Champagne Surplus, The COVID Hit Is That Bad

Champagne consumption reflects the state of the economy.
Photo/s: Unsplash

EPERNAY, France -- Will a second wave of coronavirus infections burst the bubble of French champagne producers hoping to ring in 2021 with some good cheer after heavy COVID-related losses?

The pandemic has put a damper on fizz consumption this year, with retail sales in France falling 23% between January and July, as restaurants closed and millions of people went into lockdown. 

For the full year, the global decline in sales is expected to reach up to 30%, "a colossal economic shock unseen since World War II", according to the SGV champagne growers union. 

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Producers of the festive tipple in the champagne capital of Epernay, in northeast France, are hoping that the global mood will have lightened by New Year's Eve and that people will be popping corks again.

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But with the virus tipping the global economy into a slump and forcing revellers to call off large gatherings, including big weddings, there has been little cause for celebration.

In France, where bars in Paris and several other cities were closed last week, President Emmanuel Macron is widely expected to announce Wednesday new restrictions to tamp down record levels of daily infections.

Faced with the steady drip of bad news, the champagne industry has been trying to recast the wine's elite image and portray it as more than suitable for everyday drinking.

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A recent ad showed a glass of bubbly being set down next to a slice of toast topped with sardines.

"There's nothing to celebrate, just something to savour," was the catchline.

No French buffer

Champagne sales have traditionally acted as a barometer of global confidence, tanking during wars, economic crises and health scares.

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At the height of the first wave of coronavirus outbreaks last spring, sales in Europe plunged 65%.

Top brands, like Mumm and Veuve Clicquot, were particularly hurt by the slowdown in air travel, which all but dried up all-important duty-free sales.

The Union des Maisons de Champagne (UMC) trade body has said it expects to sell 100 million fewer bottles this year, an unheard-of hit that will slash overall sales to 3.3 billion euros ($3.9 billion) -- down 34 percent from last year.

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The SGV union has expressed "strong concern" for exports to the US and Britain, the two biggest markets for champagne outside France.

Antoine Chiquet, head of the Gaston Chiquet champagne house in the village of Dizy, near Epernay, is confident the bubbles will flow again before 2020 is out.

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But will it be a trickle or a flood?

"For the French, there's no doubt: champagne is the drink of choice for year-end festivities," he said.

"It's the same for our British and Italian friends," he said, "but the question is, in what quantities?"

Battle over yields

There was some relief this summer for smaller champagne houses as Europeans began to travel across the continent again, giving wine tourism in the Champagne region a shot in the arm.

The Boizel champagne house in Epernay said it received "surprisingly large" numbers of Belgians, Scandinavians and British visitors.

But with governments around the world imposing new lockdowns to slow the spread of COVID-19, the market looks set to freeze over once more.

The virus has saddled producers with over 1.2 billion bottles in stock, representing several years of potential sales.

While the surplus can be used by producers as collateral for a bank loan, excess supply also drives down prices.

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To avoid seeing prices go through the floor, traders representing the big champagne houses drove a hard bargain this year with the thousands of growers who supply their grapes.

The champagne houses demanded a sharp reduction in output, infuriating growers who were celebrating an exceptional harvest.

In the end the two sides agreed on 8,000 kilos of grapes per hectare -- the equivalent of 230 million bottles.

Besides shoring up prices, several champagne producers have also decided, somewhat belatedly, to go green.

Market leader Moet Hennessy, which includes the Ruinart, Dom Perignon and Moet et Chandon brands, announced this year that it would halt the use of chemical weedkillers in its vineyards by the end of 2020. 

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