As the premiumisation trend gathers pace in both mature and increasingly emerging markets, the Champagne industry has stood out as a driving force. LVMH, for example, has turned to a value-creation strategy to drive growth for their Champagne business. Pernod Ricard is helping to lead Champagne’s push upwards as well.
Pernod Ricard’s Champagne brands enjoyed a strong sales performance in their 2018/2019 fiscal year. The company’s Perrier-Jouët brand saw sales climb by 5% in the full fiscal year, thanks mainly to ongoing success in Japan. The brand had a strong price/mix led by Perrier-Jouët Belle Epoque. Mumm sales rose by 2%, driven by the Americas and Asia, most notably the US and China, which offset a decline in France.
Demand is most dynamic outside of Europe
Pernod Ricard’s Vice-President of Marketing Champagne, Quentin Meurisse, describes the Champagne market overall as “rather fragile”, with a volume decline of the most mature markets such as France, the UK and Australia, and an “uncertain” international economic context. He adds, “both the UK and the US are mature markets for Champagne. The UK declined in 2018, mostly due to economic uncertainty related to Brexit. The US is now the No.1 market for export.”
The domestic French market is contracting significantly. Champagne, perhaps more than any other product, is a barometer of economic well-being, and that is largely absent in France. The Egalim Law has led to a big reduction in promotional activities in the supermarket sector and a consequent impact on sales. Champagne’s leading export market, the UK, has also been contracting for several years. This big reduction in Champagne’s two largest markets should represent a major crisis for industry – but it doesn’t. Most of the volume decline in France and the UK is in the supermarket sector and lower-priced Champagne. Higher-priced Champagne continued to grow significantly in both markets, which are both premiumising.
Champagne, perhaps more than any other product, is a barometer of economic well-being.
Meurisse adds, “the French market has been declining in 2018, but Champagne appears to have retained its solid reputation with French consumers. The Egalim Law in France has [led] to the increase of prices in the off-trade circuit. The increase has impacted sales. The top-end – super-premium, ultra-premium and prestige cuvées – is still performing well.”
Demand is most dynamic beyond the European Union, particularly in markets further afield, such as the US and Japan. Champagne is also gaining a foothold in the emerging market economies, with China demonstrating real strength. Such is the growth that exports now exceed domestic market sales for the first time in many years. This diversifying export spread, particularly into status-driven emerging market economies and the US, also reinforces the other big underlying improvement in value.
Meurisse remarks, “overall, the domestic market remains a challenge for Champagne, but global exports are increasing. Perrier-Jouët is developing particularly well in Japan, and Perrier-Jouët Belle Epoque is performing well. The appreciation of Champagne’s methods and processes, as well as its heritage, is essential to understanding its unique specificity, which is well understood and well received in the Japanese market. The elegance and precision of the Perrier-Jouët vintages, as well as the purity of the decoration designed by Emile Gallé, are close to Japanese culture. China also has big market potential for Mumm and Perrier-Jouët. South Africa is a really promising market too. The recent launch of Mumm Olympe, a high dosage cuvée, caters to the South African market’s preference for sweeter Champagnes.”
“Consumer confidence in Champagne is good. The demand for our Champagnes continues to grow and we see great potential for the future. In many countries, Mumm and Perrier-Jouët outperform the [Champagne] category.”
The appreciation of Champagne’s methods and processes, as well as its heritage, is essential to understanding its unique specificity, which is well understood and well received in the Japanese market.
Quality, vintage and variety drive value creation for Champagne
Champagne is increasingly about premiumisation and value creation and less about volume. Most of Pernod Ricard’s gains in recent years have come from price/mix improvements as opposed to big volume increases. Meurisse says: “From a volume point of view, the Champagne market is stable. On the other hand, we must look at the value point of view, where we observe that internationally there is a premiumisation effect that allows categories to climb up the range and offer consumers better-quality products – as an industry, we continue to promote more elaborate styles and offer prestigious vintages.”
Meurisse says, “Pernod Ricard is also committed to this value strategy. Internationally, Pernod Ricard is moving towards a premiumisation of Champagne where we can see that the figures for higher-end styles are better than those of the overall Champagne category, because the other segments are suffering from a decrease in volume and value. There is therefore a re-allocation of grapes to premium, ultra-premium and prestige vintages – such as our new Mumm RSRV range, vintage Champagnes and Mumm Rosé Champagne.”
In terms of trends, rosé cuvées and prestige cuvées are driving growth and taking more and more share.
He adds, “consumer confidence in Champagne is good – as an industry, we continue to work effectively to promote more elaborate styles such as vintage Champagnes, prestige vintages and rosé Champagne. The ultra-premium segment is performing particularly well. In terms of trends, rosé cuvées and prestige cuvées are driving growth and taking more and more share. The success of the Perrier-Jouët Belle Epoque range is a good example of how American and British consumers are demanding very high-quality and prestige cuvées.”
An eye on experiential marketing, influencers and sustainability
Pernod Ricard’s Champagne houses are moving toward experiential marketing. “Consumers are increasingly interested in discovering our Houses by going beyond the products,” remarks Meurisse. Take L’Eden by Perrier-Jouët, for example, where the company carves out natural beauty spots in unexpected urban spaces. In 2019, Eden by Perrier-Jouët was brought to life in cities such as Miami, Tokyo, London and Shanghai.
Mumm’s marketing platform is based around sporting prowess, and the company has utilised Usain Bolt, the Maison’s C.E.O. (Chief Entertainment Officer), since 2016. In 2019, the company unveiled a new cuvée created in collaboration with Usain Bolt, Mumm Olympe Rosé. The company said Mumm Olympe Rosé reflects Bolt’s preference for sweet Champagne, with the addition of a liqueur de dosage aged in Cognac barrels.
Sustainability is becoming an ever-more relevant issue for winemakers and consumers alike. Leading Champagne houses such as Perrier-Jouët and Mumm are endeavouring to implement more sustainable production methods. Meurisse says, “we are obviously concerned to guarantee the sustainability of their terroir. While ensuring quality production, Maisons Mumm and Perrier-Jouët have gradually implemented new [winemaking] practices to make [winemaking] more sustainable. More than a technological revolution, these are changes in working methods that, by preserving natural environments and biodiversity, reconsider the landscape and the environment in the long term.”
Meurisse adds, “sustainability is not an issue, but an opportunity. We are now in a situation where our products will be purchased and [drunk] by tomorrow’s consumers. They will therefore judge them with the eyes of tomorrow and with what we imagine will be a heightened sensibility to sustainability issues. We have already innovated a lot in our vineyards, but we need to go further and collectively.”
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LVMH’s Champagne strategy drives innovation and new consumption occasions for the category
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