The United States of Champagne

The value of US Champagne shipments pushed the country into pole position for exports last year. Arabella Mileham looks at how producers can best navigate the massive opportunities on offer in the States

Champagne sales have been booming in the US. 2015 saw the country overtake the UK to become the region’s largest export market for Champagne by value, even though around 13m fewer bottles were shipped there.

Given that its population is five times bigger than the UK’s, there are clearly more opportunities to be had.

But in a vast market that constitutes 50 states, each with its own rules and regulations, what is the opportunity for Champagne? And how can suppliers overcome the inherent challenges?

Stanislas Thiénot, managing director of Groupe Thiénot’s Champagne division, has seen its Champagne Canard-Duchêne brand go from zero to 150,000 bottles in five years. And provided producers put the work in, there is massive potential for them. “The US is the biggest market for fine wine and it has seen strong growth, with the expectation this will still continue in the future. And Champagne is quite dynamic there, although at the same time the market is very low compared to the size of the population.”

2016 saw US shipments of Champagne rise by 4.9% by value to €540 million (£446m), with volumes also rising 6.3% to 21.806 million bottles. This strong growth is set against a wider decline of overall shipments, as exports fell 0.6% by value on volume down by 2.1%.

Meanwhile, the UK – historically the region’s most mature market and its largest by volume – saw an even steeper decline, down -14% by value, on volumes that fell by -8.7%.

Although US shipments are not quite as high as during the pre-economic crisis peak of 2006, as Enguerrand Baijot, director North America at Lanson, points out, they have recovered rapidly from the 2009 nose-dive in which only 12.5m bottles were shipped, one of the only major wine markets to recover so quickly.

“While the economic situation remains concerning in many historic European markets, most Champagne houses and fine-wine brands have put their efforts into penetrating the US market.” Baijot explains.

Thanks to its Prohibition past, the US market evolved its three-tier import, distribution and wholesale system along with complex licensing laws regulated on a state-by-state basis. As a result, producers describe it as being like 50 separate countries, each state requiring new partners, a strategic focus and investment. And consolidation throughout the chain means that while the number of brands in the market has never been so large, brands need to work harder to gain visibility.

“Brands need to invest in local support to help drive their distributor sales and get some focus if they don’t want to get lost in larger portfolios and continue to grow. That is the way to build a brand and create awareness,” Baijot notes. “Even though the task seems endless sometimes with the size of the US territory, that ground work and hand-sell is an absolute necessity to build awareness and drive local sales.”

Olivier Legrand, marketing and communication manager at Champagne Nicolas Feuillatte, agrees: “Taking into account the size and complexity of the market, it’s understandable that it requires time, investments, and a clear strategy to build a strong, distinctive image.”

Complementary not competing

But being less heavily dependent on multiple grocers than, say, the UK, has helped Champagne maintain higher price points in the US. The price of Champagne is not consistently undercut by big supermarket promotions, so it is steadier, more consistent and easier to manage, Thiénot explains.

As a result of this, the independent off-trade and specialist drinks retailers and on-trade work hand-in-hand, instead of competing.

“If you go to a restaurant, you taste Champagne by the glass, then you can buy it in the shop and the price is well-priced, because the two halves respect each other,” he notes.

This model suits Champagnes such as Lanson, with its distinctive non-malolactic style, and independent, family-run Bruno Paillard, as it allows the brand to become better established with consumers.

As Bruno Paillard himself explains: “A brand like Bruno Paillard is a ‘hand-sell’ product, and only the finest, detail-oriented restaurants or retail stores can understand our passion and share it with consumers.”

However, Isabella Catino, VP of marketing at Champagne Taittinger’s US distributor, Kobrand Wines and Spirits, argues that this is starting to change. “All wines are experiencing the industry changes of consolidation, and Champagne is no exception,” she argues. “The chain stores, including club stores [warehouse discounters or cash & carries such as Costco] are growing in importance, as are on-premise national accounts.”

Baijot agrees, pointing to Total Wine, which is looking to more than double the number of its stores to 300 by 2020. “Their size allows them to do lots of private labels and import their own brands exclusively and directly with wineries without buying through wholesalers,” he points out, adding that sites such as Wine-Searcher.com allow consumers to find the best prices at retail.

It will be interesting to see if the launch of German discounter Lidl on the East Coast this summer will accelerate this development, given how crucial a role the discounters have played in the over-promotion of cut-price Champagnes on the UK retail sector – but suppliers are not unduly worried.

Baijot argues that the strongest independent retailers, such as Sherry Lehmann in New York or Wally’s in LA retain their diverse offering and knowledgeable staff, allowing them to remain very competitive.

“They generally target more high-end clientele, and though there is still traffic in their store, most of their sales happen online or through their dedicated call centre. They deliver directly to customers, and that convenience is a big plus.”

Broadening base

Big brands have long dominated the US market – led by LVMH’s Moët & Chandon and Veuve Cliquot, with the top five Champagnes in 2014 making up around 70% of the market by volume and 76% by value.

Meanwhile, the Champagne houses overall accounted for 87.4% by volume that year, rising to 87.5% in 2015.

As Michel Drappier, owner and head winemaker of Champagne Drappier, argues: “The top brands remain strong and that will not change – smaller producers can only occupy a small segment of the market and Drappier is happy with that, as the volume that we produce doesn’t allow us to do more.

“But there are more players with smaller market share for each of the boutique houses. There is more competition and it is, generally speaking, easier to ship and distribute in all states.”

So although American consumers remain influenced by those well-known names, the statistics also show that balance is starting to shift in favour of a broader product base.

In 2005, Champagne houses comprised 93.4% of shipments, with growers’ Champagnes contributing only 2.5%. But by 2015 growers’ Champagnes had doubled their annual shipments to around 5.2%, going above the one-million bottle threshold for the first time. There has also been growth in Champagne cooperatives, albeit less steady growth, to around 6.6% of shipments in 2015, up from 3.9% in 2005.

As Jennifer Hall, who heads the Champagne Bureau US, explains: “We have seen a marked increase in recent years in the prevalence and popularity of smaller producers and growers’ Champagne wines. Today’s consumers crave uniqueness and individuality in their products, and for this reason, Champagne made from smaller producers and growers has gained increasing appeal.” Bars and restaurants in particular are increasingly committed to serving Champagne from smaller suppliers, she notes, providing niche producers with the opportunity to boost their presence in the industry.

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And this benefits the on-trade, retailers and consumers, according to Stanislas Thiénot. “When you have five skus for 20 years, you want to change things a bit – you won’t bin them, because they are strong and you get a nice revenue without doing anything, but in a professional wine shop or restaurant, you want to propose some different wines from those you find everywhere.”

As the market matures, it provides an opportunity for smaller Champagne houses, which weren’t on the market 15 years ago.

“It is easier now – the market is more sophisticated, there are more Champagne drinkers who have been drinking Champagne for a long time and want to experiment and try new wines,” Thiénot adds.

This trend also favours more distinctive styles, such as deep, complex Champagnes that have been aged on the lees for a long time, according to Pascal Prudhomme, general manager of Champagne de Castelnau, while Charles Philipponnat, president of Champagne Philipponnat, argues that the increase in consumer appetite for variety has been fuelled by the growth of more specialised importers looking for something different.

“After having almost disappeared because of growing concentration, more specialised importers and distributors are burgeoning again,” he notes.

Diversity blooms

Nowhere is this diversity seen more than in the booming sales of rosé.

The rise of pink Champagne in the US market has been phenomenal, going from 6.4% of shipments in 2005 to 14.6% in 2015, when it reached nearly three million bottles. It is the Champenois’ largest export market for rosé.

“Champagne is increasingly being enjoyed throughout the year, and rosé Champagne has become a popular alternative to some of the more traditional styles,” Hall from the Champagne Bureau explains.

This desire for something different is also casting its net over vintage wines, special bottles and prestige cuvées, although this tends to favour the bigger brands.

There is “lots of opportunity for special bottles, rosé, special vintages,” Stansislas Thiénot argues, adding that the price of NV rosé compared to more expensive prestige cuvées encourages people to try it. “It is easier to make people try that kind of product – it is easier to experiment at $50 ($40) than at $150.”

As a result, many Champagne houses are reporting growing sales of special bottles and distinctive cuvées, including Taittinger’s Brut La Française, both unboxed and in gift boxes, and its Comtes de Champagne, which it says is “beloved by sommeliers and collectors”. Similarly, Nicolas Feuillatte’s Brut Reserve is growing in distribution along with its ‘niche’ Brut Millesime 2008 and the Palmes d’Or, which has hit its key target audience. Champagne Piper Heidsieck’s prestige brand Rare is showing “exceptional growth”, it notes – so much so that a 2008 rosé version was rolled out in the US market in 2016.

Affordability

However, Spiros Malandrakis, senior industry analyst of alcoholic drinks at Euromonitor International, sees a darker side to this premiumisation, warning that Champagne suppliers must address the problem of affordability.

“Champagne is lacking enough interest in the lower end, and that underscores the importance of having a whole spectrum of products, rather than concentrating on one section of the market,” he argues.

He points to the rise and fall of premium Cognac in China as a salutary warning. “You don’t want to put all your eggs in one basket, which is what Cognac did in China, especially with macro-economic headwinds around the corner.”

This, he warns, could see Prosecco, and other bubbles, which so far have encouraged new consumers to the category, to jump into this gap.

“At the moment it is a stepping stone into the sparkling category, and people graduate to the lower end of Champagne and onto prestige cuvées, but Prosecco producers will capitalise on the affordability gap between Prosecco and Champagne and [consumers] can jump into it,” he says.

Prosecco has been quick to appeal to millennials, he argues, but Champagne brands have increasingly been taking the initiative to broaden their appeal in more imaginative ways.

“Champagne is making a fresh attempt to engage consumers – particularly younger consumers – and become more accessible, rather than appearing snobbish and out of touch,” he says.

“It can take the initiative to ensure it isn’t just speaking the language of time on lees and how long the wine has been stored, but to make it more approachable, although without leaving behind the luxury element.”

The US market has changed hugely as it recovered from the recession, and there is much more competition from delivery services and grocery store prepared meals companies than ever before. Capitalising on this is therefore increasingly important, and Malandrakis highlights the importance of engaging with consumers through social media to boost that more casual positioning strategy, along with strategic partnerships with companies such as Deliveroo or Uber Eats.

Breaking the mould

Press coverage of unconventional food pairings, such as Champagne and fried chicken, or with popcorn, is also helping break the mould, according to Stephen Leroux, global chief executive director of Champagne Charles Heidsieck, and give Champagne a more prominent place on the spectrum of food pairings.

Champagne is also not just for celebration anymore, he adds, and enjoys stronger press coverage across the year rather than being limited to New Year’s Eve and Valentine’s Day. Growing the value of Champagne beyond ‘the celebration’ is its best opportunity, Leroux notes. “We need to build its image as a wine that has good, better, best options, while making Champagne some people’s go-to beverage.”

But the Champenois are setting their sights at the millennials, as Malandrakis points out, embracing “poptails” (albeit hesitantly) and exploring new serves such the ‘piscine’ on-the-rocks serve using Champagne created to have with ice (Moët was the first to push this in the US with its Ice Imperial cuvée, which was followed last year by an Ice Imperial Rosé NV) or use of sabrage (slicing open a Champagne bottle with a cavalry sword).

These allow Champagne to compete in a cocktail culture that is long-established in the US, and extend its appeal beyond key holiday and celebrations, when sales traditionally spike.

And as Olivier Legrand points out: “Our main challenge is to anticipate and to influence these upcoming opportunities: what are the new types of consumption? What are the consumers’ needs and expectations regarding Champagne?”

Brands are showing that by exploring and tapping into these opportunities, Champagne will maximise its potential in this vast and diverse market. db