29th January, 2018
by
Patrick Schmitt
Sales of Champagne in UK retailers fell by 20% in 2017, and the total British market for the fizz has shrunk by around four million bottles in the past 12 months.
According to Nielsen, the volume of Champagne sold in the UK until the end of December (MAT to 30.12.17) suffered a 20% decline in volume and 11% fall in value, bringing the amount of bottles sold through UK retailers down from 16.7m in 2016 to 13.3m in 2017.
While this reflects a decline of 3.4m bottles, sales in the on-trade also fell during 2017, with Champagne volumes in chain restaurants and pubs down 12% (MAT to the end of September), leading Julien Lonneux, CEO of Vranken Pommery UK, to suggest that Champagne shipments to the UK for 2017 would fall from 31m in 2016 to 27m for this year, when discussing the market with the drinks business last week.
A similar decline was recorded by Andrew Hawes, chairman of the UK Champagne Agents Association and managing director of Mentzendorff, the UK importer and distributor for Bollinger.
Speaking to db on Thursday last week, Hawes suggested that the total number of bottles shipped to the UK in 2017 could fall to around 25m, representing a decline of more than 5m bottles during the past year alone.
And such a decrease comes on the back of a 3 million-bottle decline during 2016, when the UK market shrunk from 34m to 31m.
The cause of such a drop in Champagne sales in the UK is threefold, according to Hawes, who blames societal changes in Britain, a rise in prices for the French fizz, and an altered approach to selling the product in the UK’s major retailers.
However, Hawes stressed that the picture for the Champagne market in the UK was “varied”, pointing out that “the situation is considerably less negative for premium brands”, and worst for exclusive and own-label Champagne.
He also told db that viewing the UK through the lens of Nielsen statistics would not provide a complete picture of the market, because the data analyst captures the trends in mass retail, where price increases on exclusive-label Champagne have had the greatest impact.
“It is important to say that Nielsen is capturing the areas of the market that are performing the worst, with the numbers comprising essentially just the multiple off-trade, and, for the on-trade, the pub and restaurant chains, so it is capturing the areas that are most negatively affected, and doesn’t include, for example, sales of Champagne online, or through merchants such as The Wine Society, or Berry Bros, while it [Nielsen] gives just a cursory view of the indies,” he said.
Having said that, he admitted that the decrease in Champagne sales was highly apparent in the UK off-trade, mentioning, in particular, the negative affect of increasing Champagne prices, particularly among entry-level products sold in supermarkets.
Nielsen records an average price per bottle of £21.98 in the UK off-trade for 2017, a rise of 12% on 2016, which, as reported last week by db, takes the average price of a bottle of Champagne over £20 for the first time.
The reason for such a rise in retail prices stems from Sterling’s devaluation against the Euro following the Brexit vote in June 2016, the full impact of which was only really seen on Champagne prices in UK retailers at least six months later.
But it also comes from increasing prices in Champagne, particularly the cost of grapes, which have continued to rise in the region – and this year, have gone up again, increasing on average by 5%.
Of course, those Champagnes with the lowest margins, which tend to UK retailer own-label or exclusive label Champagnes, have seen the greatest price increases.
“Nielsen records a rise in the average price per bottle of Champagne of 12% to £21.98, but, for our peer group of premium brands, the average price has gone up by 7% to £27,” began Hawes, referring to the performance of Bollinger and other Grandes Marques, in contrast to the wider market.
Continuing he said, “So why hasn’t the price increase been as much [as the overall retail market for all Champagnes]? Yes, it’s because the brand strength is better, but it’s also because these brands are better placed to manage foreign currency volatility.”
Furthermore, Hawes said that the UK consumer can expect to see further increases in the retail price of Champagne, not only due to a continued rise in the cost of grapes, but also because those players who have absorbed some of the impact of rising costs – be they related to grapes or FX issues – “can’t take the margin off forever”.
But Hawes also identified another impact on sales of Champagne in UK supermarkets, and that is “the changing promotional tactics of the major retailers”.
“Boosting Champagne sales were a lot of high-low price promotions with exclusive labels, but that is definitely fading out as the traditional supermarkets react to the discounters [such as Aldi and Lidl who sell all products at an ‘everyday low price’, or EDLP],” he said.
Finally, he said that there was a “continued societal change in how we eat and drink, full stop.”
When asked if Champagne sales were down significantly over the Christmas period he said, “Champagne didn’t have a great Christmas but it didn’t have a great year, Christmas just confirmed the situation, and it relates to own- and exclusive-label: Champagne got used to massive promotions over Christmas but Champagne hasn’t been give the same shelf space or the same strategic importance in driving footfall [in UK supermarkets], so the enormous shipments in November or early December have not gone out.”
Significantly, he told db that the poor performance of Champagne in 2017 was not reflected across the board.
“If you dive under the surface of these figures there is quite a varied position, and you take a reading of our peer group of premium brands then the situation is considerable less negative than it is for the total market, because what’s doing the worst is exclusive-label Champagne – these were sold through high-low price activity that has vanished, so the exclusive- and own-label Champagne is performing worse than the average, while the major brands are just down a bit.”
Speaking about Bollinger specifically, he added, “We are happy at how we’ve weathered the conditions of 2017, we have passed through price increases and maintained all our distribution. Our volumes are down slightly on 2016, but in line with our expectations, and in terms of value, we are holding up well.
“The underlying strength of individual brands is really coming through, prices have moved up, and the consumer has been prepared to pay a bit more,” he added.
He also commented, “The more you move away from purely the Nielsen view, the stronger the market [for Champagne] looks.
“But there is no longer a magic category called Champagne that is driving things along… those who are strong members of that tribe will continue to prosper, but those who have to rely on the generic brand of Champagne, then the tide has gone out and they have been left stranded on the beach.”
Nevertheless, he said that the decline in Champagne sales among the entry-level end of the market was a concern, because “we need a strong Champagne: the brands and the generic brand.”
And on that subject, he said that the Comité Champagne’s decision to continue to support the UK market with an annual tasting – which for this year will be called Champagne Live – was extremely important.
“We need Champagne to be more vocal about the great things that apply to all Champagne, and currently, a lot of that work is being left to the major brands to do, and while they are doing that well, and holding up the category, there is a lot more that could be done across the board,” he said.
“I am very happy that [the Comité] Champagne is still supporting the UK, and I look forward to something quite different on the day: the tasting should be more about what makes Champagne different, from the quality of the wines to the region,” he concluded.
Read more
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