Sector insight: Champagne and sparkling wine

The UK Champagne market was worth £735m in 2009
The UK Champagne market was worth £735m in 2009

Champagne has managed to retain its lead in value sales, but sparkling wines are selling significantly more in volume terms.

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The practice of cracking open a bottle of celebratory bubbly has been in decline in the past year; no doubt the recession has given many people less to celebrate. When a bit of sparkle has been required, shoppers have traded down with gusto, so while Champagne sales have suffered, the sparkling wine market has remained strong.

For those determined to stick with the luxury of genuine Champagne, the supermarkets' fierce discounting policies have meant even the top brands have been on offer at cut-down prices - good news for consumers, but less good for the Champagne houses. 'Champagne for £10' offers filled the shops in the run-up to Christmas. Combined with the strong euro, this has been doubly hard on the producers - their costs have gone up as the retailers want to drop prices further.

The UK is the biggest export market for Champagne, so the recession and reduced consumption here have been keenly felt by the producers. Having boosted production to meet earlier demand, the sudden downturn has left the Champagne region awash with surplus. All this means promotions at the supermarket look set to continue, potentially eroding Champagne's status as a luxury item.

Volume sales of sparkling wine, with its varied styles such as Spanish Cava and Italian Prosecco, increased by 38% between 2004 and 2009. Last year Italy gained DOC designation (Denominazione di Origine Controllata) for its Prosecco-producing regions, so that only grapes grown there can be used in wine labelled Prosecco. Marks & Spencer discovered this to its cost earlier this year when Italian authorities seized 14,000 bottles of its Rosecco wine for breaching the DOC regulations.

While broader trends mean alcohol consumption in the UK is declining, in-home drinking is gaining at the expense of the on-trade; wine, sparkling wine and Champagne are all cheaper to drink at home, so benefit from this behavioural shift.

Champagne consumption in the UK has risen annually since the mid-90s, but for the past two years it has been declining, closely mirroring the state of the economy at large. Between 2008 and 2009 value sales fell by £160m to £735m. However, last year sparkling wine's value was estimated to be £590m, a 10% rise on 2008. In terms of volume, sparkling wine now sells more than twice as much as Champagne.

Moet & Chandon is the top-selling Champagne brand in the UK, followed by Veuve Clicquot. Both these LVMH labels have suffered value sales declines during the past couple of years. Of the major brands, only Heidsieck Monopole and Etienne Dumont increased their share of the market between 2008 and 2009. This was mainly because they kept their prices low; Etienne was cheaper than many own-label Champagnes.

Among sparkling wines, Australia's Jacob's Creek is the leading label, followed by Codorniu, a premium Cava. Jacob's Creek has become a strong brand across the wine sector, so it is a familiar and reliable name for uncertain shoppers to turn to when looking for some affordable fizz.

The ageing population is not an issue in this sector, as Champagne and sparkling wines tend to appeal more to the older palate; consumption peaks among 45- to 54-year-olds.

Champagne and sparkling wine are two of the only alcohol categories (cider and ale/stout being the other) to have increased their penetration among consumers in the past five years. They also benefit from being popular with both men and women.

Mintel predicts the Champagne market will make a steady recovery, with sparkling wine's volume sales growth set to continue over the next few years. By 2014, the Champagne market is expected to be worth £853m, a 16% rise on 2009; however, when inflation is taken into account, this is a mere 1% increase. In comparison, sparkling wine is predicted to reach £828m - a 40% increase, or 22% in real terms.


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