No more Champagne?

Climate change is disturbing the Champagne industry. What is Champagne producer Taittinger doing to adapt to this new environment? Is it enough?

As the end of 2017 is drawing near and celebrations are coming, you may have started to look for the next great Champagne to taste… But what if I told you that you should consider a sparkling wine instead?

 

Taittinger:

Taittinger is one of the oldest and most traditional Champagne producers. Located in Reims, France, it was founded in 1734 and rebranded in 1932 after being bought by Pierre Taittinger. Today, still a family business, Taittinger produces 6 million bottles that sell for a total of 150 million euros[i]. Taittinger is “the smallest among the big ones” as it competes directly with the likes of Veuve Clicquot (part of LVMH group, 19 million bottles) and Moet & Chandon (30 million bottles).

To seduce, Taittinger relies on Champagnes strong on Chardonnay (40%) as well as the regular launch of exclusive products such as the 2014 World Cup Special Edition NV Brut [ii].

Still, Taittinger’s main competitive advantage is legal: the right to brand its sparkling wines Champagne. That right, protected by the European Commission, recognizes the Champagne region and its winery products as a Protected Designation of Origin and under that ruling, the name Champagne can only be attributed if both the growth of the grapes and the production process took place within the Champagne region[iii].

That ruling not only makes the land of that region very expensive but also very sensible to climate change.

 

So far, so good…right?

Global warming has so far been good for Champagne makers as increased temperatures reduced frost damage and acidity levels while increasing sugar levels, making it easier to comply with strict production ruling[iv]; however, Champagne makers should be concerned as they may be facing much harder consequences:

  • First, some reports indicate that the Champagne region “may be at or near [its] optimum climate for producing the best quality wine with current varieties[v], indicating that any further temperature increase would only have negative effects on yields.
  • Second, increased temperatures are allowing other regions historically too cold for sparkling wine production to jump into that market, as is being observed in Southern England. Some specialists even argue that “the grape producing areas of Southern England may in time be closer to the growing conditions for Champagne than the vineyards of Epernay [Champagne][vi]
  • Third, higher temperatures and alteration in precipitation are putting pressure on Champagne yields as producers must develop new methods to cope with droughts, weeds, soil erosion, disease outbreaks and pest infestations[vii].

The overall consequence is a shift in the competitive landscape fueled by rising competition from sparkling wine producers who benefit from “improved” climatic conditions. This was reflected during the 2016 Paris blind tasting session in which the £40 Nyetimber sparkling wine from West Sussex, England beat the £65 Billecart-Salmon Grand Cru Champagne[viii]. Such phenomenon should not be seen as an oddity but rather as the new normal, supposed that global temperatures keep rising, potentially rendering Champagne climate unsuitable for Champagne production.

 

A bold strategy?

In that scenario, Taittinger took a bold approach and decided to embrace the rise of sparkling wine by acquiring 69 hectares of land in Kent to start producing a premium English sparkling wine (to be first tasted in 2023)[ix].

This expansion strategy presents the long-term benefit of bringing geographical diversity to reduce the impact of climate change on the business but also presents some challenges:

  • 1) Increased competition among Champagne players may arise as producers feel threatened by the entry of a top Champagne producer into the sparkling wine business.
  • 2) Taittinger must balance its image of historical Champagne producer as it enters this new market: if not correctly promoted, sparkling wine will be seen as a cheap copy of Champagne and will tarnish Taittinger image. On the other hand, if too quickly upsold, the risk of cannibalizing Champagne sales, or even worse, of pushing customers towards other sparkling wine producers is predominant.
  • 3) Maintain of the first mover advantage. In 2015 Taittinger was the first to buy land for sparkling wine production but may not be the last. Taittinger will face difficult times if it must fight the bigger players over future lands acquisitions.

 

Next steps:

To maximize its chances of success, Taittinger should focus on two aspects:

  1. Right positioning of its products within its portfolio: differences  between Champagne and sparkling wine should be clear and consistent in order to reduce cannibalization risks.
  2. Maintain a conqueror approach by looking for the next lands to acquire to increase its sparkling wine production.

One question not addressed is the response that would have major Champagne producers if Champagne region became unsuitable for production. Would they turn towards sparkling wines? Then, would they advocate for a change in the definition of what is Champagne, by, for example, asking that grapes could be grown in other regions?

(798)

 

[i] Beghin Xavier «Nous traitons nos vignes avec le sens du luxe»; ENTRETIEN AVEC CLOVIS TAITTINGER, DIRECTEUR GÉNÉRAL ADJOINT DE LA MAISON ÉPONYME [Journal] // Trends-Tendances. – 17 June 2017.

[ii] Schmitt Patrick The Drinks Business [Online]. – December 12, 2016. – November 11, 2017. – https://www.thedrinksbusiness.com/2016/12/top-10-biggest-champagne-brands-2016/6/.

[iii] European Commision – Directorate general for agriculture and rural development [Patent] : PDO-FR-A1359 Article 107 of regulation (EU) 1308/2013. – France, 18/09/1973.

[iv] Hamaide Sybille de la Global warming has been good to champagne makers, so far. – [s.l.] : Reuters, 2015.

[v] Gregory V. Jones Michael A. White, Owen R. Cooper, Karl Storchmann CLIMATE CHANGE AND GLOBAL WINE QUALITY [Report]. – [s.l.] : Research Gate, 2005.

[vi] Blakeney Geographical indications: What do they indicate? [Revue]. – [s.l.] : The WIPO Journal , 2014. – 1 : Vol. 6.

[vii] Lisa F. Clark William A. Kerr Climate change and terroir: The challenge of adapting geographical indications [Revue]. – [s.l.] : The Journal of World Intellectual Property, 2017. – 3-4 : Vol. 20.

[viii] Allen Peter English sparkling wine beats champagne in Paris blind tasting [En ligne] // The Telegraph. – 20 April 2016. – 10 November 2017. – http://www.telegraph.co.uk/news/2016/04/20/english-sparkling-wine-beats-champagne-in-paris-blind-tasting/.

[ix] Smithers Rebecca The Guardian [En ligne] // French champagne house Taittinger plants first vines in English soil. – 7 May 2017. – 10 November 2017. – https://www.theguardian.com/business/2017/may/07/champagne-taittinger-plants-first-vines-english-soil-sparkling-wine

 

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9 thoughts on “No more Champagne?

  1. Thank you, Jonathan, for an interesting article dealing with a topic that makes me nervous… in 2016 I visited Champagne for two weeks and became aware of the power of this brand as well as to the quality difference the Champagne makers try to emphasize.

    I don’t think that major Champagne producers will be able to move to other regions if production becomes unsustainable. The capital expenditure that has been invested in their plants and the synergies between the villages in Champagne region and the producers seem impossible to duplicate. On the contrary, I think that turning towards sparkling wines might be the least worst option for the producers. If we assume that global warming is also a significant risk for wine producers (see HJ’s article), it seems plausible that the Champagne region will still keep its uniqueness and superiority over the next decades, even if the average quality of the beverage will, unfortunately, deteriorate. As it is hard to imagine the proud people of Champagne produce any other beverage, this may also be an opportunity to expand the market and reach millions who cannot afford drinking a lucrative Champagne.

    Anyway, I think that the main merit of the article is that it makes us understand how global warming affects all aspects of our lives (including the quality of the bubbles in our glass).

  2. While I am of course very happy to hear that England may one day make beautiful wines and champagnes, one defense that France may have was to use selectively breed grapes that would grow well in the region post-climate change. I’d be curious how climate change will affect competitors (such as prosecco) whilst bringing additional competitors into the market.

    I think the marketing issue is also a consideration for Tattinger- if the taste isn’t materially worse they might not sully the brand. They may consider sub-branding if they’re worried about cannibalization.

  3. Fascinating blog post – Jonathan! This is one of the only articles that mention some of the marketplace benefits some competitors may have over their peers regarding the effects of climate change. Well done capturing a healthy discussion.

    I have forever been intrigued by the Champagne region and respective branding efforts, so much that I have watched several documentaries and read a few books. It’s important to ask: Do you think Champagne’s appeal is solely superior product quality or the successful branding and awareness prestige that drives product sales?

    The reason this answer is key for Champagne, regardless of any product quality change it may experience because of climate change, consumers may continue to flock to the well-built brand they have learned to love and adore over the past decades. And there has been some proof of this. So that being said, brands can’t last forever with inferior quality, but I would be interested to see the short-term and long-term consumer demand shifts as the region experiences impacts of climate change (assuming they didn’t change their production or marketing strategy in any way).

    It must also be considered, are their scientific or technological solutions for improving product quality given the change in growing conditions? And so the question becomes: How far should Taittinger go to preserve the current way of doing things until it moves or shifts production in the pursuit of superior product quality?

  4. Thanks, Jonathan. This is a provoking piece and it’s interesting to consider some of the creative approaches champagne houses are going to have to take to tackle this threat to their livelihood. I’m intrigued by Taittinger’s move to acquire land in England, which if the Company can get the branding and positioning of a good product in place, may be a smart move to make up for lower production volumes in France. I agree with Darrin’s comment that the Company may have a loyal brand following irrespective of the challenges it faces but if grape yields continue to decline, a smaller house like Taittinger will need to find other ways of making up for lost volume. So, it seems like the 69 hectares in Kent added ~25% more land to the Company’s 290 hectares in France [1], which is a positive step. To agree with your point, I wonder whether the Company can continue to acquire land in England ahead of others in a more competitive market. The backdrop of uncertainty we now have is what Brexit might look like and how this, and a weaker pound, impacts an expansion to England?

    I’m interested by Peter’s comment on whether more climate change resistance grapes might be grown, as we’ve seen the advent of this strategy in hops cultivation for beer. From a quick dig around, it seems like the champagne industry is working on 4-5 grape types that could fit the bill but that it may take 15 years to get these into production [2]; seems like a long putt to deal with a medium-term problem but I’d love to hear your thoughts!

    [1] – https://raddingtonreport.com/tattinger-more-images-available/
    [2] – https://www.ft.com/content/990ac582-76d7-11e7-a3e8-60495fe6ca71

  5. I believe that this new English sparkling wine will need a lot of education to be adopted. Indeed, consumers are used to Champagne / Cremant (France), Prosecco (Italy) and Cava (Spain) for sparkling wines and they might be suspicious about a new sparkling wine, especially coming from England. Moreover, I believe that this new English sparkling wine won’t be able to command a price as high as Champagne’s, which is seen as the Rolls-Royce of sparkling wine. As a result, I believe this new wine will target a different set of customers. I think Taittinger should be very careful of using its name for a sparkling wine that is not Champagne because its name is closely associated to it and some customers might be fooled.
    Finally I am not very worried for French Champagne producers as I believe the Champagne region’s soil is unique [1] and it will be very difficult to reproduce a sparkling wine that will have exactly the same taste and features. Consumers tend to stick with what they are used to and unless this new sparkling wine is really exceptional in quality, they will keep trusting the Champagne brand image and its long history.

    1. https://www.champagne.fr/en/terroir-appellation/champagne-terroir/limestone-subsoil

  6. Everyone seems to love discussing champagne and sparkling wine.

    It seems that unlike Chateau Margaux, Taittinger is in the sparkling wine business. The diversification itself with the acquisition of land in England indicates that the family has long-term thinking. In reference to Peter’s comment, I believe there are many opportunities to breed certain types of grapes that could do better in a world post-climate change.

    In regards to the blind taste test, I believe that the brand/label itself of Taittinger will make consumers want it and perceive it to taste better. The name “champagne” goes beyond simply taste and quality, it is a brand. As we have seen in Marketing, there are many circles with the inner circle being, sparking wine. There is taste, status, and marketing all as outer circles. Taittinger is not just sparkling wine, it’s a brand.

  7. Very interesting blog post about the threat to a very loved brand. However, I agree with Darren that the situation may not be as gloomy as we think – I may come across as a philistine while saying this, but my feeling is that Champagne is distinguished more by its ‘brand’ as compared to its actual difference or superiority to other sparkling wine products. Therefore, Taittinger’s attempt to increase its domain to other sparkling wines could actually backfire – if they themselves bring attention to slight changes in their core champagne product (which, as Daniel pointed out in class a few days ago may barely be recognized by the vast majority of people) or start associating themselves with other wines, then they risk diluting their brand themselves. This could become a self-fulfilling prophecy – so I think it’d be a better idea to sit tight and as Peter suggests, try to focus on climate resistant grapes and similar methods.

  8. Jonathan, thank you for this thought-provoking and thirst-inducing article.

    One desperate solution for the champagne-producers of France would be to negotiate to change the European Commission’s definition of champagne to only include the processing of grapes within the region. This would allow growing the grapes in other regions, but preserve at least those manufacturing jobs in the Champagne region.

    Another idea I had is to figure out a new branding for sparkling wine grown in England. The Italians have prosecco, and the Spaniards have cava, so perhaps the English can create a name too. Though, for heaven’s sake, please don’t let the name sound like the product is from England.

    I appreciate that your post suggests that climate change will not be all doom-and-gloom. There will be losers and winners in agriculture, though probably more of the former as the increased variability of the climate will make planting everything more difficult. Suddenly, I need a drink, though Champagne feels inappropriate.. maybe I’ll find some British sparkling wine.. goes well with all of those famous British dishes..

  9. I tend to agree with Azeez (who evidently agrees with Darren) that generally speaking wine is more about stigma and perception than it is about taste. That may be partially a result of my uneducated palate, but it seems that brand and label have a disproportionally large impact on the wine industry (again, this coming from someone who can’t contemplate anyone buying a $100 bottle of wine – so take my comments for what they are worth).

    I feel that in addition to drawing attention to Champaign’s subjective definition–raising the question of if geography is truly that differentiating of a factor–the move to sparkling wines could substantially dilute Tattinger’s brand. Particularly given Champaign’s posturing as a superior product, associating their name with a “sub-par” brand could have significant implications for Tattinger. I think it is highly possible, that even if global warming decreases Champaign’s ability to produce quality champaign, that this could actually have a positive impact for Tattinger. An overall decrease in the yield of those vineyards may decrease volume of product, thus increasing the price for those products.

    In a similar fashion, I believe that pushing to redefine what can be considered Champaign will significantly effect the name value of the product and the overall price it can fetch. And overall, it will not affect the customer. If it tastes the same, but goes by a different name, is it really any different to the drinker? Objectively no, but we aren’t all that subjective of animals . . .

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