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Going for Gold

“standfirst”>The decision to promote Bollinger’s Grande Année from vintage to prestige cuvée status,shows that it pays to be pricey in the competitive luxury end of the market, says Chris Orr

YOU DON’T have to be a rocket scientist to know that the Champagne market in the UK is big business. MAT figures for the week ending April 16, 2005 had the sector selling 12,869,600 cases of Champagne, up just 0.3% on the same period last year. Those sales are worth £263.5m to the Champagne industry, a rise of 4.91%. That value growth is outstripping volume growth by a factor of 16 should be encouraging news for an industry that has a luxury label, but is often accused of leading the deep discount charge with British retailers. Add to this the fact that ownlabel non-vintage sales were down 13% in volume terms, and 7% in value, and it looks like Champagne is beginning to turn the tide in terms of overall pricing.

From a volume point of view, nonvintage accounts for 96% of the market over the same period, with rosé accounting for 6.3% of that volume during the period MAT April 16, 2005. In value terms non-vintage takes 93.1% of the total value, of which rosé nonvintage accounts for 8% – though the latter is the fastest growing sector of Champagne, rising from 6.7% of market share in the UK off-trade, a boost in sales of some 19%. As always, the nonvintage market is dominated by Moët & Chandon, which accounted for over 13.5% of volume, and an impressive 18.1% of value in the UK, while Laurent-Perrier Rosé dominates the rosé non-vintage sector with 18.2% share of volume and an impressive 29.3% of total value.

Coming an apparently lowly third place, the vintage side of the business accounts for 4% of the total Champagne market, up from 3.8% last year, selling some 518,300 cases of Champagne. But it punches well above its weight, representing some 6.19% of the value, or some £18m of Champagne sales. Most importantly, however, it represents a substantial proportion of the margin involved in the business. While it is impossible to get accurate figures, most Champenois would admit that in terms of production cost, the difference between vintage and non-vintage bears little relation to the difference in prices on the shelf. That anomaly increases exponentially when one hits the prestige cuvée sector. Again, accurate figures for the total prestige cuvée market are not available in either off-trade or on-trade terms. But if you look at a comparative value status for the top six prestige cuvée brands in the UK, it becomes apparent that they represent a large chunk of the market. Last year Dom Pérignon, Veuve Cliquot’s La Grande Dame, Louis Roederer’s Cristal, Perrier Jouët’s Belle Epoque, Krug, and Bollinger’s Grande Année accounted for £5.1m of the total vintage market, representing 28.1% of the vintage market’s value. That is an increase in value terms of 11.2% on the same period the year before, showing the sector to be by far the best performer in terms of value growth for Champagne.

Of that £5.05m, Dom Pérignon was by far and away the biggest seller in the UK, shifting product worth £2.61m. Runner-up was Bollinger with sales in the off-trade of £940,000. Cristal lived up to its reputation with sales of £551,000, only just behind Krug, which sold £553,000 of wine in the off-trade. Perrier-Jouët shifted £389,000 of Belle Epoque and Veuve Clicquot sold some £23,000 of La Grande Dame.

What these figures indicate, other than the simple inherent value of the prestige cuvée market, is the increased competition within the sector, and the reason why more and more houses are targeting it as a source of increased revenue and profit. Bollinger is perhaps the best example. It saw rises of 74.3% in off-trade sales last year, while Cristal posted an 114% rise in sales in the offtrade and Belle Epoque, thanks to a big push from owner Allied Domecq, saw a rise of 224%. Add this to the sales value of the on-trade (roughly 50% of the total prestige cuvée market, though, again, accurate figures are not available) and it becomes clear that the prestige cuvée market is a battleground that’s beginning to hot up.

George Atkinson-Clark, managing director of Ruinart UK, whose Dom Ruinart prestige cuvée operates mainly in the on-trade, says, “It is certainly getting more competitive. But, you know, I think that’s a good thing. Frankly, anything that raises the profile of the prestige cuvée sector and also helps educate people about the quality values that are inherent in it can only be a good thing. It’s also positive that people are beginning to see that there is more to the sector than just the three or four brands that have tended to dominate, both in sales and image.

“But it’s not an easy market to operate in. Apart from the obvious quality aspect, which has to be of the highest level, the branding and sales aspect is quite unique. I think, with the exception of the big brands, who obviously sell a lot through image, for many in the sector it is more of a hand-sell product. The consumer has to be given a reason to spend what is a significant amount more on the product and, unless you do that, you’re going to find it difficult to do well in the sector.”

“Doing well” in the sector would appear to involve getting a number of things right. Packaging, image, a sense of luxury and, perhaps most important of all, pricing, need to be finely balanced for anyone trying to compete in a sector where prices regularly stretch from £50 to £200-plus per bottle. This competition has led to a number of Champagne houses reviewing their offerings in the sector over the past 12 to 24 months, and increasing investment in their prestige cuvées.

Pol Roger is a perfect example, with a redesign of the packaging due out later this year. James Sampson, marketing manager for the brand, says, “It’s not just the packaging. We’re actually going to be promoting it in the market, which we haven’t always been particularly good at. We’re putting significant funds behind the brand and we feel confident that we’ll see an uplift in sales and profile for Cuvée Winston.”

Sampson is keen to point out that while there are significant changes to the packaging and design, they’ve been careful not to alienate existing devotees. “You have to be really careful when you’re playing around with history,” he says.

That is a feeling Mark Cornell, managing director of Krug, knows only too well. “We felt the brand needed a certain refreshment,” is the diplomatic phrase he uses when discussing the redesign of the packaging he kicked off at the Champagne house two years ago. “But you have to be incredibly careful how you approach such a move, especially when you have a brand that has a heritage and success in what is quite often a very traditional sector. Essentially, we wanted to enhance the positive aspects of the Krug design. Throughout the process, we kept on asking ourselves whether whatever we did with the look would be acceptable to the traditional Krug drinker. If we thought it would be a step too far, we simply didn’t do it. Whether it’s the luxury and prestige sector or not, it doesn’t make any sense to trash your traditional customer base in a bid to attract new customers. It’s simply counterproductive.”

But perhaps Cornell’s biggest step since taking over has been to deal with price. Since he has been in charge there has been an 8% rise in the price of Krug, with the average retail price now standing at £86. “I think when you look at price as a part of the prestige cuvée market you have to face facts that you have to be price competitive – only, at the luxury end of the market, it means something entirely different from the opposite end of the market. You have to be pricecompetitive in the sense that you have to ensure there isn’t too much of a disparity between your product and others in the market. I think there is an element that comes into play where people, even those who are fairly educated in this sector of the market, use price as a guide to quality. In the luxury sector, people are very often saying, ‘Give us the best,’ and the best is often, rightly or wrongly, equated with being the most expensive.”

Cornell is confident that the redesign and repricing has worked. “We’ve only had two complaints, which is pretty impressive when you think about it,” he says. But, as both complaints have only filtered into the UK market over the Christmas period, it is too early to tell whether it has had a significant impact on sales.

Bollinger, on the other hand, has had its new packaging in the market for a longer period. It has also had almost a year in which to test the house’s decision to reposition its Grande Année marque. Previously, Grande Année had languished in the low £40 area and competed with other vintage offerings. But Bollinger felt that it deserved a loftier position and decided to position it firmly in the prestige cuvée sector, raising the price to £55 over the course of 2004, with most retailers upping the price tag even further to £60.

The results have been plain to see. A 74% rise in sales in a single year is good by anybody’s standards and means that Bollinger has gone from sales of £586,000 in the off-trade to £940,000.

“We’re very pleased,” Simon Leschalles says. “The response from the retailers has been excellent, and it’s worked both in the off-trade and, importantly, in the on-trade too. We changed the packaging slightly, but the biggest move was definitely with pricing. I think we always knew that the wine punched well beyond its price point but I think the past year has proved that customers think the same.”

Other brands that have “refreshed” their image recently include Laurent- Perrier. Daniel Brennan, brand manager for Laurent Perrier, says, “Grand Siècle has been redesigned in line with the rest of the work on the Laurent-Perrier brands, but we’re also doing a lot of work in terms of repositioning the brand.” This repositioning includes major tie-ups with the contemporary art establishment. Grand Siècle will be sponsoring Frieze, the UK’s largest contemporary arts fair, along with Tracy Emin’s exhibition at the White Cube gallery. What Laurent Perrier’s work highlights with prestige cuvée is that it is often as much about the company a brand keeps as the brand itself that is important to who buys it.

Ed Penny, brand manager for Perrier- Jouët’s Belle Epoque, says, “When you’re marketing prestige cuvée it’s important not just to know who your market is, but, most importantly, to be a part of it.” For Belle Epoque, that means being in the right high-end bars and clubs. “We’ve done a lot of work with the more fashionable top-notch bars, like Aura in London.

“It’s introduced the brand to people in a way that you can’t simply do through advertising. While quality is, of course, always paramount, it is also a case of making sure your brand is in the right places, being drunk by the right people.”

But as well as being in the right spot with the right faces, Belle Epoque is also a good example of what a little love and attention can do in the luxury sector. In April last year the brand was selling just £117,000 of wine in the UK off-trade. As new owner Allied Domecq began to invest in the brand so sales began to rise, and fast. By April this year sales had risen to £379,000.

Naturally, the two brands that dominate the sector, Dom Pérignon and Louis Roederer’s Cristal haven’t missed out on TLC. Dom Pérignon is still the biggest by far, with sales in the off-trade last year of some £2.6m, compared to Cristal’s £551,000. But DP’s performance in the off-trade is mirrored and multiplied in the on-trade.

Alex Field, PR manager for the brand, says, “Overall, Dom Pérignon’s growth is being driven by the on-trade. That’s due to several factors. First, we’ve increased the above-the-line investment and consequently are seeing consumer pull at key on-trade accounts.

Second, we’ve been doing some very targeted initiatives from the marketing and PR perspective, which includes our DP dinner parties, with leading figures in music, film, media and business. That covers the likes of Kay Saatchi and Damon Dash, but also the heads of banks such as Goldman Sachs and key consumer editors from the likes of GQ and Esquire.”

Again, the right people and the right faces are crucial, even for the big daddy of all prestige cuvées, Dom Pérignon, which accounts for more than half of the entire prestige cuvée market.

For Cristal, it’s been a good year, particularly in the off-trade, where the brand has seen a rise of 114% over the past year. “We’re still very strong in the on-trade,” Chloe Wenban Smith, marketing manager for the brand, says. “But we’ve seen healthy growth in the off-trade this year. As a marketplace it is getting more competitive, but that’s a positive. Only around 35% of our business is in off-trade, with the majority in on-trade, and we tend to be in the likes of Oddbins and Waitrose. But in general it tends to be the smaller, more independent retailers in the off-trade that really sell prestige cuvées for you. It is very much a hand-sell product, because of its luxury status.”

Wenban-Smith’s comments are borne out by the ACNielsen competitive set figures for the top six brands. Between them, they saw an overall rise in the offtrade last year of 13%, going from Champagne sales worth £4.53m (MAT April 17 2004) to £5.01m this year. Yet when you break those figures down, only £1.04m was sold through the grocery multiples.

That was up 18% on the previous year, but most of that was accounted for by Bollinger which saw a 124% rise in the value of Champagne sold through the multiples, most of which was due to the price rise instigated in early 2004. Nearly every other brand saw a reduction in the amount sold through the multiples and they accounted for less than 25% of all sales – a proportion that should leave smiles on the faces of most independents.

“At the end of the day, it is a luxury product,” Lynne Murray, marketing controller for Taittinger and its prestige cuvée, Taittinger Comtes de Champagne says. “When you’re faced with dummy bottles on a supermarket shelf, it just doesn’t work. A lot of it is really about hand-selling. That’s why we, and others, have such a strong presence in the ontrade, because you can hand-sell it. It’s always important to remember with prestige cuvées that it’s a considered purchase, based more on wine values than fashion.”

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