Supermarket Champagne deals ‘suicidal’
The prices of Champagne in UK supermarkets in recent months is “suicidal” for producers, according to Julie Campos, managing director of the Centre Vinicole Champagne Nicolas Feuillatte (CV-CNF).
Speaking to the drinks business in Champagne earlier this year, Campos confirmed that the deals among major UK retailers were below-cost and stressed that they were unsustainable.
“It is suicidal to continue to encourage sales of products that are below their normal value,” she said, referring to suppliers of very cheap Champagne for supermarket offers.
“The cheapest possible Champagne should be at least €11 (£8.70),” she added, referring to ex-cellar prices (ie, those without duty and VAT).
Explaining further her thoughts, she recorded that the cheapest vin sur latte (bottled Champagne that hasn’t been disgorged) on the market at the moment is between €7.30-€7.50, and “then you must add everything you need to finish Champagne”.
Considering that UK prices would also include the margin for the person buying the Champagne, and the retailer selling it, along with the cost of VAT and duty in the UK – which is £2.67 per bottle for sparkling – Campos said that there was no way that Champagne priced at £10 or lower in the UK was covering the cost of production.
As for her own business, she told db that the cooperative, which produces the 10 million-bottle Nicolas Feuillatte brand – which is the third largest Champagne brand in the world, and best-selling label in France – had turned down a major UK retailer last year, because it was offering a price that was too low.
“We lost a major UK customer last year because their buyer came to us and said that they will buy our champ at €9.50 and we said that we can’t sell at that price,” she recorded.
Continuing she remarked, “It was a very tough year on pricing, and we lost some volume because we couldn’t supply some customers in the UK and France [at the prices being offered], but we compensated for that with some growth with other customers.”
“It is a struggle to maintain our margins and we are not a brand with huge margins so we can’t afford to lower them, and if we did, we couldn’t sustain our brand development – it would be crazy to follow the prices down, and the majority of buyers know that.”
Explaining the reason for the low Champagne prices in UK retailers, despite the rising costs in Champagne (grape prices have stabilised at a high of €5.89 per kilo), Campos said, “Multiple retailers are struggling to get feet through the door, and Champagne has been a product that these retailers perceive as something that gets feet through the door… but I would love them to move onto another product.”
Speaking about private and exclusive label Champagne (which are the main footfall-drivers in supermarkets), she said that the CV-CNF supply a buyer’s own brand (BOB) in France and some for Marks & Spencer in the UK, but stressed that such products represented “less than 5% of what we bottle”.
“We are not a specialist for that [BOB] because such products are sold so cheaply that it’s not worth our while,” she stated.
Implying that the quality of Champagne may be suffering due to the unsustainable pricing, she said, “Consumers want an excellent product, and for anything over £10, the consumer expects excellence – but to make an excellent product you have to factor in just enough margin.”
As for who is supplying the Champagne for recent deals, Campos wouldn’t reveal any names, but said that she believed it came from producers in desperate need for cash.
“I think there have been batches of Champagne which have been sold cheaply because people have needed to get rid of stock, but there have been more of these batches than anyone expected, and I can only suggest that’s because there are some with financial difficulties who have been encouraged to sell at a loss to get cash for their business,” she said.
She then condemned the practice, saying, “I know exactly how much it costs to make a bottle of Champagne and I believe strongly you must add value as an economic principle, and you must create a brand: Champagne is not a commodity and it is extremely dangerous to bring it down to a commodity level – there has got to be shared responsibility.”
Continuing, she commented, “These short term hits are not necessarily in the interest in the long term for the consumer too: I believe strongly in financial sustainability: it is not just about paying shareholders and giving money to the happy few, but allowing producers to to live from their production.”
She also pointed out that “other high quality sparkling wines are not cheap either,” suggesting that Champagne is further damaging its top-end image by pricing itself below the competition.
Finally, looking ahead, she said, “2016 will be a very challenging year for us and for Champagne… We know what we have to do: we must make enough added value to give us the means to fulfil our ambition to build the brand more strongly … there will be hurdles but we are determined to follow that path.
“We are certainly not in the period of milking,” she concluded, stressing that the Champagne region should not use its high brand value to fuel temporary sales increases, but must invest in marketing to promote its superior characteristics.
The drinks business has reported extensively on recent deals on Champagne in UK supermarkets along with the low prices of fizz in the discounters.
The cheapest Champagne on sale over the Easter weekend was a multi-buy Champagne offer in Tesco – the Pol Aimé Brut NV was discounted down to £7.46 per bottle.