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 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.
To maximize its chances of success, Taittinger should focus on two aspects:
- 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.
- 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?
[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