Champagne drinkers have more to worry about than just the Greenhouse Effect, for the planet’s temperature is not the only thing that’s going up. Three years ago you could buy a selection of French champagne in Australia for around fifteen dollars a bottle. These days you are doing well to find one for less than thirty. If present worldwide trends continue, Australians could find their champagne vastly more expensive – and on ration to boot. Global champagne consumption is increasing by more than ten percent per annum, at which rate it doubles every five years. Francois Henry, Director of Remy Martin’s Champagne Division, claims this could enforce the adoption of a global quota system for all champagne in around five years’ time. Already several premium brands, whose demand far exceeds limited supply, like Krug, Bollinger RD Vintage and Louis Roederer Cristal, are carefully allocated around the globe. Australian Krug drinkers will have to be quick to seek out the new 1982 Vintage, of which only 140 dozen have been earmarked for our entire country. Mind you, its scarcity is matched by its price, so at $142 per bottle you won’t be stampeded by the rush. On the surface one would expect the steadily increasing champagne prices to be greeted with nothing short of jubilation in the premium French wine region, the origin of all wine labelled as ‘Champagne’ in the EEC. But the major champagne Houses themselves are wary, for their potential for future expansion, which would allow them to fully capitalise on the success and quality of their product, is strictly limited. The past five years have seen the discrepancy between the supply of wine to the major champagne Houses, or ‘grandes marques’, and their actual sales widen dramatically, affecting the likes of Moet et Chandon, Veuve Clicquot, Louis Roederer, Mumm, Lanson, Perrier-Jouet et al. Today the difference between incoming grapes and departing wine has widened to nearly 35%, translating to a deficit of nearly 110 million bottles, since 1984 – approximately eight months’ sales. Fortunately the major Houses have held enough stocks in their cellars to date to contain the shortage within reason. “Therefore”, says Francois Henry, “we will have to go outside the champagne area for future growth – for we can’t be looking at no growth at all.” Champagne’s four main markets are Germany, the UK, Italy and France, the biggest, but two of the major contributors to the forthcoming shortage are the Spanish and Japanese, who drink 20-50% more champagne with each passing year. Spain’s introduction to the EEC has opened up new trade channels, according to Francois Henry, who finds the Spanish to be a race of champagne connoisseurs. Not quite the same in Japan, where some aggressive marketing has paid off with the intense Japanese passion to have only the best. Mr Henry says this is the first time an Asian market has opened to champagne, and expects others to follow shortly . Mr Henry observes that countries with an optimistic outlook buy more champagne, although it’s not unusual, he says, for a period of euphoria, and a related rise in champagne sales, to precede a recession; not unlike the hysteria prior to the last stock market crash. “Switzerland is the highest per-capita market, and Australia has fallen since 1987”. With the price rises here, our champagne consumption dropped almost overnight by 50%. An ardent admirer of champagne, who enjoys his interest with rare dedication, Francois Henry jokes that our fall in national champagne consumption coincided almost exactly with his departure to the United States in 1988. Francois Henry had a background in law and banking before he joined the finance department of Remy Martin Cognac in 1974. He then moved to Hong Kong, where he developed the company’s now lucrative Far East business. His next assignment was to restructure Remy’s interests in Australia. He quickly jettisoned the interests of Lilydale and Devondale Ciders and set about the redevelopment of the now-impressive Victorian facility of Chateau Remy, originally founded to produce top-class Australian brandy. Now it sits amongst Australia’s leading production facilities for premium ‘methode champenoise’ sparkling wine. Francois Henry left Australia in 1988 to become the Managing Director of Remy Martin Amerique, a position he relinquished to take over his current role at the helm of Remy Martin’s Champagne division, which today comprises Charles Heidsieck, Krug and Piper-Heidsieck. Remy Martin recently acquired a majority in the 204 year-old Charles Heidsieck in 1985 and launched its new and since widely acclaimed flagship, the Brut Reserve (a non-vintage blend) in 1988. Today he is based in the city of Reims, the capital of Champagne, where he has bought an apartment. “I live in a vineyard, of course”, he jokes. “All French villages are in the vineyards.” Francois Henry is a fashionable, sophisticated man who presents himself immaculately and quickly makes a guest feel comfortable. Underneath, too, is a touch of the larrikin – honed no doubt by his seven years in Australia. He enjoys his work and appears to have no concerns that a bottle of champagne can’t cure. “I don’t find I am trying very hard, for I love what I am doing. Everyone in Melbourne says I look so relaxed. And why not? I have the best position in the world.” The major challenge facing Mr Henry and those in equivalent positions in other Houses, is to find a way to develop Charles Heidsieck’s business within the highly-regulated framework of Champagne, controlled stringently by the Commite Interprofessionel du Vin de Champagne (CIVC). The CIVC determines the exact allocation of grapes to the major champagne Houses, which every year is based on the actual sales achieved by each House. So the only way for a House to acquire a larger allocation is either to sell more champagne or to buy another House and amalgamate the allocations, as Moet et Chandon and Remy Martin have done with their various brands. The recent success of the new Charles Heidsieck Brut Reserve has increased that company’s share of the cake, and may in itself provide an incentive for other grandes marques to follow Charles Heidsieck’s aggressive move to develop a new, improved and contemporary champagne. When grapes begin their conversion to champagne they are pressed three times. The first pressing, or ‘cuvee’, yields around 77% of the juice and is regarded as the finest quality, being fresher and more delicate than the two subsequent pressings, called the ‘first and second tails’. Some champagne Houses such as Krug and Charles Heidsieck only use the ‘cuvee’ juice, and exchange their ‘tails’ juice for other cuvee from smaller growers, through a network of brokers who negotiate between the cooperatives and major Houses. But the actual proportion of the overall Champagne crop available to the CIVC and the major brands is itself limited by contracts with the representatives of the growers’ cooperatives in the many villages of champagne, whose role it is to find the best pricing deal for their members. Like the other major Houses, Charles Heidsieck has a six-year contract with its growers. As things stand, the growers sell 47% of their produce to the major Houses, and a new contract is shortly to be negotiated to commence with the 1990 vintage. Francois Henry believes there is a possibility the growers will demand a larger share of their own grapes, but doubts that a contract will be signed which decreases the grandes marques’ allocations. It would be naive for the growers’ cooperatives to make life too difficult for the major brands. Already they are in an advantageous position, for they do little, if anything, to promote the growth of the champagne market and are only successful because of the image promoted by the grandes marques”, says Mr Henry. “In France a grand marque champagne sells for 100F, and a grower’s only 30-40F. Many customers would buy the grand marque, but growers’ is clearly cheaper.” Mr Henry believes the approach of the growers is shortsighted, saying that if the grandes marques were to disappear, the growers would lose their market. “They want us to stay and provide their marketing for them”, he says. The CIVC has the power to set the volume of tonnage harvested and price the fruit is able to fetch, by establishing a fixed price for each sub-region within Champagne. Each village is graded with a percentage figure, which determines the price of its fruit relative to the top price set by the CIVC. Bonuses may be paid if grapes are harvested of particular quality. A champagne House cannot increase its profit by cropping beyond its normal maximum level, which has to be adhered to. It is also virtually impossible for a champagne house to expand its existing plantings within the area strictly defined as the Champagne district. Of the total of 33,000 ha in Champagne, a maximum of 30,000 ha could be planted, allowing room for villages, roads and churches. Over the past five years the area under vine has increased by a mere 6% from 24,639 ha to 26,171 ha, giving a potential future expansion of the area under vine of less than 4,000 hectares, around only ten percent of the present area. Currently the plantings expand by 1.5% every year, which suggests that the entire Champagne vineyard will be fully accounted for in six or seven years from now. In this highly-regulated and finite environment, in which expansion is possible only at the expense of a close neighbour, how does Francois Henry intend to expand Remy Martin’s sparkling wine business, given that his desire is to increase its scale? Champagne has become critically important to his company’s future, seeing that for 250 years it was basically a spirit business, specialising in cognac, which needed a second string. Champagne has become that string, taking advantage of the company’s extensive worldwide distribution network. The answer to the growth problem is the past, present and future development of foreign offshore brands of premium sparkling wine. Today Remy Martin owns Piper Sonoma, a major and prestigious Californian sparkling wine operation, originally developed by Piper-Heidsieck, which Remy Martin now owns; ‘Gancia’, an Argentine equivalent; Chateau Remy in the Pyrenees Ranges, Victoria; and Pol Cheneau, a Spanish sparkling wine (or Cava) production house. It is currently looking to buy a German sparkling wine (or sekt) production facility and will establish a premium methode champenoise centre in Spain, along the lines of Piper Sonoma, possibly to be called Piper Spain. Mr Henry suggests there is eventually a possibility that all these wines may be tied with a corporate name, possibly linked with Piper-Heidsieck. “Each of these centres will produce premium wine to cater only for its local market’, says Francois Henry. “All will be authentic, original to the soils and culture of the regions, and aimed at the top of the markets in terms of quality and price. We will continue to sell our French champagnes alongside the local wines in the same markets, giving them the opportunity to help each other through cross-fertilisation.” Is there a chance the two products could be sold against each other? Mr Henry doubts it. “At its best, some foreign wine will closely match the quality of champagne”, he says. “But champagne as such will have no competitor for decades – it has a unique quality and image. It’s a specialist wine in a specialist market and has nothing to fear from the premium foreign sparkling wines.” Ultimately all the hopes of Champagne depend on agriculture – itself dependent on the sun and the rain. Bad seasons for the next two or three years will have a disastrous effect on the price of champagne in Australia and around the world. What then, of the immediate future, the 1989 vintage? A large crop is needed to replenish the run-down levels in some cellars, and a quality season will help to justify the prices the future scarcities will inevitably bring. Fortunately, 1989 looks to be one of the great ones, although it didn’t always appear that way. A huge frost in May reduced the crop by 25% and in June heavy rain at flowering reduced the yield again. However from July to August perfect hot, sunny weather allowed a second budburst, with enough sun to ripen what became a bumper crop, with no disease. Light rains just prior to harvest filled out the grapes, further emphasising both quantity and quality in a remarkable and unpredictable season. Most of the growers and makers of Champagne are happy to let life go on as normal. The predicted future scarcity will bring a financial bonanza to the smaller growers and their cooperatives while the prices stay high. But if prices then fall, as world markets turn to their locally-made premium sparkling wines such as those made and planned by Remy Martin, the growers will be back to square one, facing the inevitable reality that if they want to seriously compete with the major Houses then their quality and consistency will have to be comparable and they will need to promote as heavily. Both these phenomena are highly unlikely, a few exceptions aside. As prices rise and fall in Champagne the only changes will be the continual amalgamation of the grandes marques and the development of their overseas offshoots, like Domaine Chandon in Victoria’s Yarra Valley. As a drinker of champagne I just hope for two things – that the prices stay realistic and that the champagne Houses are able to retain their own individuality and integrity.
