How does Champagne compete successfully against other sparkling wine?

Champagne has been successful in competing against sparkling wine by creating a luxury product with a unique terroir, implementing quality-oriented production methods, protection of its appellation and a high-end marketing focus. It is the combination of quality product and effective marketing that has made the region so successful. The soil and climate with use of varietals contribute to Champagne's unique terroir. Vigilant and specific production methods focus on a quality product, heightened by the blending skill of the chef de caves. The role between the Houses and the Growers continues to evolve and rewards Grand Cru and Premier Cru sites with the highest prices. The Champenois have worked diligently to protect their distinct appellation, from lobbying with world trade organizations to taking legal action, when necessary. The investment in premium marketing has further cemented Champagne's pre-eminent role in the world of sparkling wines; there are no substitutes at this level. Champagne is the pinnacle of sparkling wines and other sparkling wines are not as successful in total sales, brand recognition and prestige. Today's current economic situation, however, creates challenges to that pole position as consumers are more price sensitive. However, only Champagne will ever be Champagne.

Champagne, located in France's northernmost vineyard land, has a unique terroir. Champagne's 35,000 hectares have a harsh, marginal climate and erratic sunshine. Located on a subsoil of belemnite chalk, the soil absorbs heat from the sun and slowly releases it during the night, challenging the vines to burrow for water, in addition to providing good drainage. Only Chardonnay, Pinot Noir and Pinot Meunier are authorized grapes, each imparting a specific character to Champagne. Chardonnay adds backbone, pinot noir gives body, while pinot meunier brings fruitiness and aromas. Strict controls restrict yields to 99hl/ha and grapes can only be hand harvested. There is no other place like Champagne.

Modern vinification focuses on quality and contributes to the Champagne premium. Temperature controlled fermentation of the base wines is common to retain fruit flavors and freshness. Champagne vinification is not extractive and the base wine contains only the cuvee and first tailles, vinified separately. Second tailles can not be used. A slow second fermentation in bottle adds to the complexity and a long maturation on lees adds fullness and richness. Aging requirements are 15 months for non-vintage(NV) champagne and to three years for vintage wines, however serious houses allow for two years for NV and up to six years aging for vintage. Blending is pivotal to Champagne. As a marginal climate, the quality of wines varies from vintage to vintage. Champagne is traditionally blended, from not only different villages such as the Montagne de Reims, Cote des Blancs or Vallee de la Marne but from different vintages and the three allowed varieties. Some houses use up to 20% of reserve wine to mitigate the quality and quantity differences from the year to produce a house style consistent with previous vintages. The blending skill of the chef de caves is paramount and arguably, one of the most important roles, to achieve consistent high quality Champagne, especially for non-vintage wines.

The role between the House and Grower has changed over time and currently, rewards the highest prices to the classified sites. On average, major houses only grow about 13% of the grapes needed for production. The remainder of this is purchased from the thousands of small growers. As prices increased in the 80s, the balance of power shifted to the growers and fixed pricing gave way to indicative pricing. Site classification has been the distinguishing mark of the region's crus, from a range of 80-100 percent of the maximum price, with the maximum price set by a committee of growers and house. The "Echelle des Crus," the ladder of growths, is a prorata system for determining grape prices. 17 Grand Crus receive 100% while the other 47 premier crus receive 90-99%. This is upwards from a revision in 1985 that was previously 50-100%. In 2008, the Growers agreed to supply a sufficient number of grapes to the houses, while the Houses agreed to share some of the economic upside with the growers. Growers, in line with the Houses, are committed to quality.

The Comite Interprofessionel du Vin de Champagne (CIVC) has worked diligently to protect the brand of Champagne from improper use by limiting the use of the word Champagne from other countries outside France. Champagne is, by definition of the World Intellectual Property Organization(WIPO), a GI, or geographical indication, qualities or reputation specific to that defined area. The EU protects this GIs. In 2008, over 3,000 bottles of illegally labelled Andre "California Champagne" bound for Nigeria were confiscated and destroyed by the EU. Under strict EU labelling laws, only sparkling wine from the Champagne region maybe labelled Champagne. An exception to this is the US, where sparkling wine not coming from northwest France can be labelled as Champagne but cannot be imported into the EU.

Champagne is marketed as a luxury product and more effectively, as part of a lifestyle. Champagne houses and the CIVC have spent significant money on marketing to the long-term customer. The seven biggest houses account for 70 per cent of the total champagne production and have focused on premium marketing. Few other beverages have the associations with wealth, power and luxury. Champagne is a symbol of glamour, good times and celebration. A high marketing spend is made possible by the high margin realized from Champagne. In 2003, Remy spent over 40% of gross margins on sustained marketing expenditures and recorded a 13% operating margin. In 2003 and 2004, the Office of Champagne spent multi-million dollars on a regional US campaign that asked “Champagne, not from Champagne?" in an effort to distinguish Champagne from other sparkling wines. In a recent study moderated by the Reims Management school, American Millenials(aged 21-31) perceived that champagne was more expensive and a higher quality. Moreover, they stated that champagne called for very special occasions. The Millenials focus group study underscores the effectiveness of Champagne’s marketing, even within this less sophisticated market segment.

Champagne, with 8% of the global sparkling wine market, has competed effectively against other less expensive sparkling wines such as Cava, Prosecco, Sekt and other tank or method tradionelle-produced wines by making and marketing the world's pre-eminent sparkling wine. However, as the recession takes hold, challenges abound. Recently, in key markets such as the UK and US, consumers traded down to less expensive sparkling wines. Moet Hennessy's champagne sales fell 35% in the first three months of 2009. Remy Cointreau fell 12% in the fiscal year ending March 31, 2009. In 2008, the value of Champagne exports, according to CIVC, fell by 5%, a change from the 7% increase in 2007. In contrast, Spanish sparkling wine and cava, for the nine months ending September 2008 increased by over 35%. In March 2009, Waitrose commented that champagne sales were up 5% year on year, while cava and other sparkling wines saw an increase of 35%. The Champenois claim to have seen historic decreases in exports, with the last significant decrease following the dot.com downfall and this current downturn is part of the ebb and flow. Depending on how long worldwide economic challenges persist, other sparkling wines could gain considerable traction in the category. Growth in Champagne sales from emerging markets such as China and India could offset some of the current decrease.

In conclusion, Champagne, with its unique geology and climate, produced in a specific method, vigilant protection of its appellation and emphasis on premium marketing has made it successful in competing against other sparkling wines. Chalk, a marginal climate and the use of chardonnay, pinot noir and pinot meunier are unique to Champagne. Quality control in the vineyards and in vinification ensures a quality-oriented product, made consistent by the art of blending. Protecting the use of word Champagne, has helped to distinguish the unique and special attributes of the appellation that can only be found in northwestern France. Benefiting from higher margins, the Champenois have marketed aggressively, and combined with a quality product, are drivers of Champagne's success. Today's current economic situation, however, creates challenges to that pole position as people become more price sensitive but only Champagne will ever be Champagne.