It may be expensive to buy, but Champagne is certainly not cheap to make either. Gabriel Stone examines the main production costs and their implications for the world’s most famous fizz. 

What is luxury? Of course, the ascetic high ground offers worthy options such as time or good health, but for most mortals the answer is likely to involve spending hard cash on a tangible treat. When it comes to the drinks world, Champagne has done a peerless job of linking itself inextricably with luxury. It’s easy to be cynical about the marketing frills used to cement this connection, but take a moment to consider the considerable costs involved in Champagne production and that luxury price tag can start to look rather reasonable.

So what does it cost to produce a bottle of Champagne? Aside from confidential pricing agreements that blur this answer, there are simply too many variables: land may be owned, rented, managed on a share-cropping basis or a mixture of each; producers may grow all their own grapes, buy in fruit or do both; all Champagne must undergo a minimum of 15 months bottle aging prior to release but a top prestige cuvée could easily lie in cellars for a decade. Then there’s the work force. Hand harvesting is a mandatory and labour intensive seasonal cost for all growers, but broader decisions relating to quality will affect the number of man hours spent in the vineyard during the rest of the growing season.

On top of all these considerations come shifting trends outside the control of individual growers: a steady shrinking of the permitted yield, a concurrent rise in grape prices and, at the other end of the business, a marked decline in global demand. Back in 2011, buoyed by rising global shipments that would hit 323 million bottles that year, the Comité Champagne (CIVC) set the yield at 12,500kg/ha, while the average grape price also nudged up to €5.60/kg. That’s quite a different picture to last year, which saw Champagne shipments slide to around 297.4m bottles, its lowest level since the effects of the global financial crisis hit home in 2009. Partly to reflect this slump in demand, although nature also played her part, the permitted yield for 2019 was lowered to 10,200kg/ha while the average price for grapes continued its climb, reaching about €6.55/kg. In short, there are fewer grapes available and they cost more. Growers who simply sell their grapes may be getting a higher price for their product, but are harvesting considerably less. Meanwhile the vast majority of larger houses who rely on bought grapes are finding supply tight and prices steep. There is more than one business model to make a success of all these considerations, but miscalculate any element and profitability quickly becomes precarious.

Even if the global picture for Champagne is lacking in fizz, many individual producers have a more buoyant story to tell, invariably based on a value rather than volume driven approach. Laurent d’Harcourt, managing director of Champagne Pol Roger, outlines how a strategy geared towards achieving higher prices for each bottle should more than mitigate the rising cost of grapes. Suggesting that this column of the balance sheet may vary by up to 20% depending on the grapes’ quality, he observes, “there’s not a huge gap between the price of a kilo of normal grapes and grand cru, but the difference in price between entry level and prestige is very big.”

While Pol Roger currently buys in just over 50% of its grape requirements, Champagne Gosset buys all its fruit and is therefore particularly exposed to the relentless rise in grape prices. The house’s director of international business, Bertrand Verduzier, acknowledges this “strong impact” but shares d’Harcourt’s belief that achieving a justifiably higher price per bottle is key. He maintains: “The only way forward is continuing to bring value to the end consumer, with top quality products; demanding a no-compromise policy with grapes’ pedigree and aging time at the core.”

Among these producers able to command a decent price for their end product, it seems to be the slide in yields that presents a bigger commercial challenge. Charles Philipponnat, president of Champagne Philipponnat, describes the trend as “a dire pity.” While acknowledging the aim of bringing supply in line with demand, he laments: “we are in essence shrinking the region’s future potential, when we should promote and grow sales.” Philipponnat does however distinguish between the growth currently achieved by medium-sized, higher value producers such as his own house and “the weakness of the cheaper, more generic segments, especially those relying on mass distribution.” In other words, it is the least luxurious end of the Champagne market that faces the biggest existential threat.

Although Champagne’s yields remain high compared to other fine wine regions, producers maintain that lowering it would not increase quality, perhaps even the opposite. Michel Drappier, president of Champagne Drappier, maintains: “In Champagne you need a reasonable yield or you don’t get the elegance and freshness that customers expect.” In his view the current level has brought the region “close to a good balance” after the excesses of the 1970s and ‘80s.

Alongside quality considerations, there are also concerns that driving yields below the symbolic 10,000kg/ha mark could make viticulture unviable for too many in a region heavily reliant on its army of small growers, few of whom farm more than three hectares. Philipponnat warns that “Anything under 10,000 kilos, especially for those in debt because they recently purchased equipment or a parcel of vineyard will push some of them closer to, or below break-even.”

That picture may well be accurate, but Maxime Toubart, president of growers’ union the Syndicat Général des Vignerons de la Champagne, suggests that balancing supply and demand is the key concern for his members. “We are at a pivotal period,” he remarks, “sales decline and storing bottles that we cannot sell also have costs for wine-growing holdings.”

That sales decline has been especially sharp in the French market, a major customer for many of these small producers. Couple this sales pressure with rising grape prices and you have a scenario threatening to undermine the growers’ Champagne movement that has provided such a popular alternative to the big brands. As Toubart explains, the steady rise in grape prices “directly encourages winegrowers to disengage from the selling of their own bottle production and therefore to rely only on trading with Champagne houses”.

The Champagne houses are certainly keen to encourage this shift to help resolve their own shortage of good quality grapes. “Houses like Pol Roger have been exporting since the 18^th or 19^th century so we know how to travel and export,” remarks d’Harcourt. “It’s a partnership: they grow, we do the vinification and market the wine.”

There is a third way: the co-operative. A valuable system in many corners of France where small growers dominate, its ability to pool winemaking resources, build brands and temper profit targets with a community agenda represents a vital resource for many smallholders. Pascal Prudhomme, general manager of co-operative Champagne Castelnau, stresses the commercial pressure on many of his members as things stand. “Growers who sell only grapes are directly impacted by a potential decrease of the yield. That’s a fact,” he observes. “The increase of the grapes’ price will not be able to offset a decline of turnover.” Here too, a growing proportion of members are choosing simply to sell their grapes to Castelnau rather than use the co-operative to vinify and bottle their own brand. “Ten years ago, less than half of our growers population supplied us with grape sales,” records Prudhomme. “Now the figure is two-thirds.”

While yields and grape prices dominate Champagne’s cost analysis, several other factors have a major impact on profitability, not least manpower. As Drappier highlights, “If you are a grower with your own vineyards and don’t buy grapes then really workers are by far the highest cost.” An average sized holding of 2-3ha may be able to run with just one or two full time workers, although any family business often involves many extra hours of unpaid labour. While employers must pay a set minimum wage, those looking to retain higher skilled employees will go well beyond this. Factoring in benefits such as social security, Drappier suggests, “The real cost for one hour of basic labour is probably €20.”

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Come harvest, Champagne’s requirement that all grapes be picked by hand means there is an army of seasonal workers to fund. While estimating a basic cost of around €15 per hour for this labour, plus board and lodging, Drappier notes that growers in search of higher quality fruit will ask their team to work more carefully. This may mean each picker brings in closer to 500kg of grapes a day rather than the 900kg that might be achieved otherwise.

Land values are another source of pressure on Champagne’s economy. The Agrifrance Report 2019 by BNP Paribas put the average price of vineyards in the region at €1.2m- €1.4m per hectare, rising to €2m-€2.2m for a hectare in the highly prized Côte des Blancs. Although comfortably below the €2.4-€3.4m you’d expect to pay for premier cru vineyards in Burgundy today, Champagne has not generally been able to emulate the escalating bottle prices seen in the Côte d’Or to help cover this. Priced out of ownership, many growers rent or have a share-cropping arrangement instead, which may cost them about a third of their harvest.

As in Burgundy, the combination of high land valuations and small family estates can also cause serious problems when it comes to France’s punitive inheritance laws. With larger houses and pension funds poised to pick off the most vulnerable, the issue is an important focus for the SGV. “Controlling the land is an essential issue for the future of family wine-growing holdings and the maintenance of balance in Champagne,” maintains Toubart. One solution that has drawn particular support from the SGV is “portage”, securing external investors to help growers buy their land while retaining full control of how their vineyards are managed.

As Champagne growers and producers navigate a commercial path most suited to their individual ambitions and cost pressures, an initiative is well underway that aims eventually to sweep up the whole of this multi-faceted community. By 2030 the CIVC wants the entire region to come under some kind of environmental certification. To support this aim, in 2014 it created the Viticulture Durable en Champagne scheme, although growers are also free to sign up to less regionally specific options such as Terra Vitis or Haute Valeur Environnementale. CIVC communications director Thibaut Le Mailloux reports that “close to 25%” of Champagne’s vineyard area is now accredited under one of these schemes, with the vast majority – 17.6% – choosing Viticulture Durable en Champagne. Whichever programme growers choose, they will face extra costs from staff training to temporarily lower yields and simply the additional paperwork required to audit their practices. Nevertheless, Le Mailloux is confident that this outlay will be repaid by the value added to its end product. “Consumers are eager to see independent guarantees of the environmental quality of the products they consume, and the market shows that they are ready to pay the extra cost,” he insists.

Philipponnat, whose house was among the first producers to sign up, is unequivocal about the importance of this environmentally conscious angle to Champagne’s commercial future. Despite the 25% increase in his vineyard workforce, extra machinery required and a “tenfold” cost increase in the tilling of tête de cuvée Clos des Goisses alone, Philipponnat insists it justifies the extra cost. “Our image, defined as the truthful perception of what we do to grow and produce our vines and wines aiming at both quality and ecological responsibility, is precisely what our business is about,” he maintains. Similarly at Pol Roger, d’Harcourt confirms “We are motivating our partners to get certified.” For him, the collective nature of this effort is crucial. “The Champenois all have to be conscious that Champagne as a name is a jewel and we have to protect this jewel together,” says d’Harcourt. In short, Champagne’s environmental push fits not only with the commercial need for added value, but also the prevailing wind of ethical consumption. Modern luxury requires that feel good factor to reach well beyond the contents of your glass.

The cost of organics

Every Champagne producer will have slightly different costs to consider but Champagne Drappier offers a useful case study for anyone considering the organic route. Of its own 62ha vineyard holdings, the house currently has 17ha certified organic and a further 33ha managed under organic principles but not yet certified. A third of its grape requirements are bought from growers, mostly those with premier cru sites since there are none in Drappier’s home region of the Côte des Bar. For the moment these bought in grapes are not organic, which president Michel Drappier estimates would add an extra 20-25% to their price “which is fair because there is at least 20-25% more cost to grow them,” he remarks. If the average price for a kilo of grapes in 2019 was about €6.55, Drappier suggests that organic grapes would cost closer to €8/kg. With 1.2kg of grapes required to make a bottle of Champagne, that’s a considerable raw material outlay.

Then there are the volumes to consider. “For the same amount of work you harvest 10-20% less,” reports Drappier, stressing that this is an average calculation across 20 years.

If there’s a saving on pesticides – Drappier suggests that “organic treatments cost three times less than conventional” – this is quickly spent on the additional labour costs that come with taking so much extra care in the vineyard, not least the considerable expense of Drappier’s two beloved equine workers. That said, organic farming has no monopoly on meticulous viticulture, so the wage bill is likely to be similar to any high quality but environmentally uncertified conventional grower.

Ultimately the commercial viability of organic viticulture depends on consumers’ willingness to fund these extra costs by paying a higher price for the product. Drappier reports that attitudes still vary considerably by market, with Scandinavia most receptive, southern Europe rather less so and the US as ever defying generalisation. “We have important organic fans in New York and California but the rest of the US doesn’t really care,” reports Drappier, adding bullishly “It’s just a matter of time.”

The key points

• Champagne’s network of houses and small growers are juggling the pressures of smaller yields, rising grape prices and shrinking global demand.
• For producers who rely on buying fruit, grapes are likely to be the major cost; for producers with their own vineyards, it is labour.
• High grape prices and falling sales are discouraging small growers from making their own wine, preferring simply to sell grapes.
• High land prices combined with French inheritance law threaten the security of Champagne’s many small growers.
• A collective move towards environmentally certified viticulture brings extra expense but is seen as essential to Champagne’s reputation among consumers.

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