Wine in the Time of Pestilence VIII: Champagne

[Thanks to Dr. Liz Thach MW for some of the USA information I’ve used here].

Covid-19 seems to have dealt the champagne business a severe blow.  Remember when I started blogging on the plague I said that it doesn’t change the world – it will accelerate changes that are already happening.  That too is happening I think to champagne – although many will disagree with me and say it has overturned the existing landscape.  However, let me explain what I think is happening.

Right at the beginning of the crisis it was noted that champagne sales were plummeting, although the perennially optimistic CIVC was saying that it expected an upturn before the end of the year.  Fifty percent of the wine is (still) sold in France – though the amount has been declining for the last decade but much is sold in bars and restaurants.  With these closed for around four months volume reductions of up to 70% were seen.  Meanwhile, as I’ve noted before, the English speaking world avoids anything which smacks of celebration or success during a recession and it has moved away from champagne.  By the end of May the champagne industry was suggesting a possible loss of sales of 1.7 billion euros for the year and the original hopes for a recovery in fortunes passed by.  More recently it has been suggested that they will sell 100 million fewer bottles this year than normal. The result of this was a big split within champagne.  On the one side were the large houses, already sitting on huge levels of unsold stocks and not wanting to augment them – who thus demanded a big reduction in this year’s harvest.  On the other side the growers who have much less need to sell wine but who rely primarily for their income on selling lots of grapes, and in the middle of the current crisis could not afford to lose perhaps 25% of their income or more.

Nevertheless, if you look at the recent history of champagne none of this decline is quite so revolutionary.  For seven years, from 2001 to 2008 the business was on a roll – continuing the fairly continuous rapid growth seen for the region’s wines for the previous 50 years – as the table below shows.  I remember, in May 2008, hearing a leading member of the CIVC pronouncing publicly that champagne had ‘learnt how to beat the cycle of booms and downturns’.  If only! I assume he was eating his words six months later.

Table courtesy of Dr David Menival

The global financial crisis prompted – naturally – a downturn, with a sales loss of almost 15%.  Yet a few years later the business seemed to be bouncing back, so that by 2011 over one half of that loss had been clawed back.  However, it wasn’t as good as it seemed – as the graphic below shows.  What could be seen as a growing market up to 2011 turns into a stagnant market from 2009 to the present, and despite a good year for the value of sales in 2019, even before Covid-19 arrived this stagnation wasn’t really changing.

What does this mean?  The champenois have been concerned from some time about the threat of sparkling wines from other parts of the world; I think that is too simplistic a view.  My interpretation is that the reason for this longer term stagnation has complex origins, some of them quite long term.  The rise of ‘lifestyle’ rather than social class as one significant marker of identity means that the old obvious signifiers of the community you belonged to, based on a traditional hierarchical symbolism of the things we use, is breaking down; champagne, once the symbol par excellence of the French bourgeoisie and the British aristocracy has less cachet than before and less use as a means of conveying who you feel you are.  Add to that the fact that a new generation of consumers is much less likely to swallow marketing hype (and thus the assumption that ‘champagne is naturally the best because we all say it is’) and you have a tendency to move away from the fizz.  This was reinforced by the instant response of the champagne industry to the economic crisis of 2008, which was to reduce prices to push up sales.  That’s great in the short term, but in the longer term, with some champagne priced a little more than a good crémant from Alsace, or a better Spanish Cava, subliminally it suggested that it wasn’t such a special drink as all that.  Finally, over the last five or ten years, a more general move to nationalism and national introversion (think Trump, Putin and Brexit) and consumers are again moving away from the luxury drink from another country.

Yet, as always with wine, there are exceptions to this.  Blips for some of the summer in Britain and Norway. Most interesting is the USA.  Sales were stagnant there at the beginning of the year – yet astonishingly, whilst they have collapsed elsewhere in the English-speaking world, they have been rising in the United States.  At the end of July Nielsen, the data tracking organisation, claimed that champagne sales had risen 65% since May.  This is an astonishing turn around – so why has it happened?  Nielsen themselves found it hard to explain to us.  There was general comment about the warmer weather, people coming out of lockdown, and doing more gardening – as well as the popularity of ‘quarantini’ cocktails!  Hardly responsible, I’d say, for such a big growth in an expensive drink.  If anyone has any suggestions I’d love to hear  them.

Paradoxically, as I’ve also noted previously, outside the USA other forms of sparkling wine have seen sales behave more buoyantly.  Maybe this is, partly, due to the success of champagne producers in separating their wine from other forms of fizz.  Champagne has been marketed for over a century as the wine for celebration, success and seduction; all other wines with a sparkle – prosecco, cava, Tasmanian, even English – are for having a good time with friends or family.  In lockdown, and even more as lockdown eases it’s the latter which benefit – we want to be sociable again; however, we have nothing to celebrate, there is no success yet, so champagne is not appropriate.  Perhaps more than any other part of the world of wine champagne must be hanging out for a vaccine, and the wild parties which will inevitably follow.  Maybe that, too, will enable them to transcend not just the current crisis but also the longer-term stagnation.

Wine in the Time of Pestilence VI – Wine Production

As I said in my last blog post, I want to devote the next few posts to the world of wine and its changing social and cultural context post Covid-19 (then a more normal service will resume!)  The last post also explained how I think that the impact of the plague will not be to revolutionise the world of wine but to accelerate existing changes which are in train.  So in the current post I want to use this lens to examine how wine production and its culture may be changing in the future.  There are two things which I want to consider: one is how the structures of wine producers may change and the other is producer contact with consumers.

I don’t want to be too economic or business focused, but we need to start with a little bit of business economics.  One is the historic failure of wine businesses to make a return on investment – that is to pay for all of their expenses, including land value, and make a profit as well.  In many parts of the world wineries are not profitable.  One well-known New World wine region, famed for its (often expensive) Bordeaux blends, was the subject of a study a few years ago which suggested that only two of thirty vineyards made a profit; they were kept going by money from other sources.  Equally, in much of France domaines are only profitable because the current owners inherited the land.  Thus, as land prices rise dramatically in regions like Champagne and Burgundy those who inherit vineyards valued at many millions of euros per hectare cannot make the business pay in the future. 

The Covid-19 crisis is likely to accelerate this.  In France we already see a number of smaller hospitality businesses close because it just isn’t worth continuing, and this is a good place to stop.  Likewise, I heard anecdotally early in the crisis that it was suggested that in excess of 700 (mainly) small wineries in Australia would have to close because the plague would destroy their distribution.  The age of the ‘lifestyle winery’ (the New World especially) or the domaine without a viable business plan (all over the world) may be drawing to a close.  That doesn’t mean all small and medium-sized producers will disappear: many will stay.  Yet it isn’t a question of the quality of wine – rather good wine allied to business sense – which will keep the survivors going.

Different places will have differing problems with Covid-19.  Champagne grapes are all picked by hand.  Each harvest the sides of the vineyards are full of coaches parked with Polish, Bulgarian, Romanian and other eastern European registration plates; 120,000 pickers, most from other countries, pour in for the harvest.  Lockdown in Europe is easing – but will the same number of pickers want to risk the journey for a few French meals and a fistful of euros?  This source of labour is likely to dry up at some point soon anyway as the eastern economies grow and approach those of the west.  Why do eight hours backbreaking work in northern France when you could have two weeks on the beach in Crete, Croatia or the Costa del Sol?  Perhaps, then, the pestilence will accelerate this trend; the problem, consequently, will be who will pick the grapes?  The French no longer want to, nor do students, nor the Spanish nor the Portuguese; yet the grapes must be picked by hand. 

In a wider sense, the management of harvest – starting in the northern hemisphere within the next six weeks – will be complicated.  How do you maintain social distancing when people pick or work in the cellar in proximity?  Furthermore, how do you stay healthy when you party afterwards?  Are we going to have to revise the protocols for working together not just this year but for the mid-term?

There may be a different issue in the vineyards of California.  Traditionally these many of these were worked and harvested by hand, because cheap Hispanic labour needed less capital than machines.  This has been changing in the last few years; the obvious reason for this may be the xenophobic policies of the current President yet there is another cause too.  The boom of the now-legal cannabis industry has caused many agricultural workers to shift from vineyards to cannabis plantations.  The money is at least as good and the work is less back breaking: cannabis plants are easier to work.  Again, it may well be that the plague will accelerate this trend, thus producing the more rapid mechanisation of the vineyards.

Meanwhile, the fledgling UK wine production industry thinks it is in crisis.  As a comparatively new entrant to the world of wine making it is less secure than most other wine regions.  Additionally, its wines – while excellent – are comparatively highly priced, in a country where price points are culturally very important for wine consumers.  (Wine there, although quite cheap generally, still has connotations of luxury for some consumers – especially sparkling wine which is the main focus of the local industry.)  This is compounded by fears for the coming harvest.  As in Champagne, much has to be picked by hand, and following Brexit the supply of harvesters from eastern Europe is even more under threat than it is in France.

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One group in the production process often overlooked by wine lovers is the grower.  Many people assume that wine makers own all their vineyards, but of course that is not the case.  If there is a declining wine market then smaller and medium-sized producers use their own fruit first and cut down on bought fruit, so growers suffer disproportionately during a vinous downturn.  A report in California has predicted a difficult year for growers in the Central Valley – the powerhouse of the State’s wine production. 

Champagne growers, dependent on the large Houses for their market, also have specific problems.  Sales, having been stagnant for around six years, have dropped dramatically this year.  As a result the CIVC may well reduce the overall yield for the year; so will growers in the region be able or willing to continue.  The slow but noticeable move by some houses to buy land or tie growers in to long-term contracts may accelerate, thus consolidating further the Houses power in the bipartite management of the industry.

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Covid-19 is also forcing wine producers to change the way they engage with their consumers.  Many have had to think about selling more wine directly in the future as distribution, and especially the hospitality sector, has collapsed.  Those producers who have already been active in wine tourism have often – with temporary pauses – been able to respond with some flexibility.  Others, particularly those who do little but receive clients into their house may have lost markets. 

There is a cultural context to this: many (especially in Europe) practice wine tourism by receiving guests – but don’t believe it is a tourism activity; they are just farmers, after all.  Thus, they just welcome customers.  When those customers can’t come they don’t realise that they should react, maintain the link, and create a sense of community for past visitors.  Many of these also are uncomfortable with the technology required to reinvent wine tourism.  I’ll explain this with a story.

One of my colleagues at work teaches a course on Wine Tourism to MBA students.  This normally includes visits to wineries and wine regions.  In April, of course, that was impossible, so my colleague arranged some virtual wine tourism for the students, using Zoom.  One of her regular visits, a small domaine in Beaujolais was really uncertain about this.  He wasn’t sure about talking to students on his smartphone when he was used to taking them round the place he works.  How could he convey what his place was like?  Yet my friend persisted and so he started talking.  Then, as he talked about his winery, he realised that he could in fact use the smartphone to show them the cellar.  Even better, he could walk out into the vineyards and show his special terroir.  He became more and more enthusiastic.  By the end of the virtual visit he realised, very happily, that he could offer the same to his loyal clients with an online wine tourism service.  Without being challenged, however, he would never have seen what was possible.

Other parts of the world, where wine tourism is culturally much more part of the wine experience, have responded much more proactively. 

There has already been pressure to reduce intercontinental travel because of its environmental impact.  Covid-19 seems likely to strengthen this change.  Some in the wine industry have already seen this so that the owner of the Chateau de Pommard in Burgundy has started talking about launching a new vintage of wines with a virtual campaign, then creating a specific digital platform to allow purchasers of their wine to get full, visual wine experiences wherever they are in the world.  It’s also worth pointing out that the Chateau de Pommard is owned by an American who will perhaps be more attuned to what is possible than some of his more conservative neighbours. Other countries have managed the pandemic better than the USA or some parts of Europe.  By early June New Zealand was seeing resurgence of wine tourism and a chance for the industry to revive as social distancing restrictions eased a little.  However, at just the same time in South Africa sales of alcohol were being resumed but there were warnings that small producers, with limited space, would struggle to meet the health and safety conditions for allowing visitors, and with restrictions on restaurant and other hospitality services.  It’s important to remember that the country was much stricter towards alcohol – banning all sales as it went into lockdown.

So, what do we make of this?  Successful businesses may thrive, or at least survive; less successful ones – which in our world means those which only focus on the style of wine rather than their market – will suffer; as I’ve suggested before, Covid-19 will accelerate this change in the short to medium term.  Yet, as always, culture, social expectations and history all pay a major part in creating the environment and the individual approach which explains where and who is likely to be more successful.

Wine in the Time of Pestilence V

My last few posts have explored how the Covid-19 pandemic is intersecting with different cultural and social norms to change people’s attitudes to and behaviour with wine.  The danger hasn’t passed but many countries are at the point of leaving lockdown or confinement.  Thus, although we aren’t at that point yet, in the next few posts I’m keen to explore how the world of wine may change in the post-pandemic world. However, first I want to ponder a little bit of history.  This isn’t just because I like history; I’m hoping it may also set a bit of the framework for the next three or four posts I’m planning (so for those who really don’t like history, stay tuned for my next post). I’ve already written briefly about Phylloxera in the context of the Covid-19 pandemic – but I think that a further exploration of how it changed wine, wine consumption and the wine industry, may be helpful in thinking about how the current plague may reshape our world.  Phylloxera, of course, was an insect and not a disease, and whilst it devastated vineyards it was never dangerous to humans as Covid-19 is; no one died from its activity.  Nevertheless, within the very limited world of wine production its impact was overwhelming, undermining established businesses and transforming everything from viticultural methods to regional reputations and market preferences.  However, I would suggest that its major impact was not revolutionary; it overturned nothing.  Rather it was a catalyst; it did nothing new but accelerated what was already happening.

This is best explored by looking at the Champagne region (although it had a similar impact throughout Europe).  Phylloxera arrived in the southern part of Champagne in 1888 but it took another four years for it to get to the centre of the vineyard area.  It spread slowly there, so only reached its peak a little before the First World War.

In 1888 champagne was produced from a large area – somewhere around 50,000 hectares of vineyard land (but down from perhaps 80,000 a few decades before).  Despite the success of the fizz on international markets over the previous 40 years wine production in the region was of predominantly still, red (or deep pink) wine.  It might be made for local consumption or sold quite cheaply, mainly locally and in northern France, including Paris, as well as Belgium.  Yet, it was comparatively expensive to produce in a cooler climate; yields were much lower than now and the cold meant that vintage variation was substantial, both in quality and quantity.  Since the railway link between Paris and Languedoc had been finished less than 40 years before southern French wine producers, blessed with sunshine that offered consistent, large volumes, had been selling cheaper, red wine to the metropolis, made from high-yielding varieties like aramon and carignan.

The vineyards in Champagne were owned by small-scale growers (sometimes farmers rather than just vignerons) and they would have seemed – to modern eyes – a mess, with vines planted higgledy-piggledy in the vineyard at many more plants per hectare than the current 10,000.  When you needed a new vine, you buried the shoot from an existing plant, let it root, then cut it off from the mother (the same system is still used in some parts of the world – notably Santorini).  The grapes included all the ones known today (though without so much chardonnay) but also such lower quality varieties as alicante and gouais.

Sparkling wine, although the minority of production, was growing, produced by the négociant elite who became wealthy on the back of its success.  The vignerons, of course, could not afford the capital needed to produce fizz, nor could they afford to leave it in their cellars for a few years to mature.  Increasingly there were disputes between the négociants and the growers: the former focusing on branding (and willing to be fuzzy about exactly where ‘champagne’ came from in order to keep the raw material cheap) and the latter seeking to defend the economic territory from which their grapes came and concerned to push the price up given the success of the sparkling wine.

So, what changed after the insect destroyed the vineyards?  The first thing was that many small growers – already impoverished as the négociants were paying them so little – gave up.  Planting new vines from cuttings cost nothing: buying Phylloxera-resistant rootstocks was expensive, and they could not afford it.  The contraction of the vineyard, already taking place, was accelerated.  Many sites became arable or root-cropped and if land had good potential as vineyard it was bought by those with money: négociants and richer growers. 

Much of the land given up was planted with red grapes, and the supply of cheaper red wine, both locally and to Paris and Belgium, dried up – Languedoc had won the battle for the Parisian working man’s throat.  The focus in Champagne evolved to be entirely on sparkling wine.

In turn, this augmented the power of the négociants as they had the capital to make, age, and export sparkling wine.  And with that power they could press down even more the price paid for grapes from the growers – whose sole role now was to supply the négociants.  In the longer term, moreover, it accelerated the development of grower cooperatives, which were being founded just as Phylloxera arrived.

What also happened, though, were a series of changes which were used to reinforce the quality and reputation of champagne – and thus justify the high price charged for it.  The first of these was a long struggle (only really completed in the second quarter of the 20th century) to rely only on the ‘quality’ grapes (chardonnay and the two pinots – noir and meunier) and push out the lesser varieties.  This has become part of the mythology of champagne – that only these three will do for great wine.

Alongside this was the battle – again one which pre-existed Phylloxera – to determine what champagne is; that is, what it represents.  Was it a style of wine, made by a well-known House, or was it wine made from a specific and clearly marked place?  The latter view was that of the growers, because limiting the origin of the grapes preserved their scarcity and thus enhanced the growers’ bargaining power.  In the end this was a battle the growers won (with the support of some of the more perceptive négociants who saw that to underline the reputation of the place Champagne would add other forms of value to their wine).  Ultimately this focus on place as the defining character of wine (which was being articulated at the same time in some other French wine regions) led to the appellation system in the 1930s and the modern world’s focus on origin as a defining label for a wine (unlike, say, beers, or many spirits).

Thus, a pestilence changed champagne, and in turn shaped the modern world of wine.  (For those who want to know more about this evolution there is a great book by an American historian, Kolleen Guy, When Champagne became French: Wine and the making of a national identity.)  Phylloxera changed viticulture, industry structure, image management and wine styles.  Yet the key point I’m making – and one which will give the context for my next posts – is that in the end the louse did nothing new; what it did was just accelerate the pace of change which was already happening.  It was not a cause, it was a catalyst.