An increase in sparkling wine drinkers and interest from emerging markets has presented an opportunity for champagne and sparkling wine producers to increase their share of the alcohol market, according to research seen by Marketing Week.
Popping the cork on a bottle of bubbly has traditionally been seen as a sign of celebration. This perception is down to champagne being a luxury product with the high price tag to match – but the increased consumption of sparkling wines and an increased interest in emerging markets has created potential for growth on which brands can capitalise.
Research from TNS Global, which surveyed more than 39,000 people in 15 countries, reveals that the current alcohol market share of champagne and sparkling wine, which reflects what people say they buy, shows growth potential when looking at what consumers would like to buy (see charts below).
The results suggest that the greatest growth is likely to come from India and China. These two countries show the lowest alcohol market share for champagne and sparkling wine of the 17 territories surveyed, at 0.4 and 0.7 per cent, and the research shows these could almost quadruple to a potential market share of 2.3 and 3.2 per cent respectively if consumers felt there were no barriers to purchase. In more mature markets like the UK and US, the share could nearly double to 9.1 and 6.5 per cent respectively.
The research is based on data from TNS’ ConversionModel tool. It evaluates the two critical factors affecting brand choice: power in the mind – which is how people feel about a brand, and power in the market – which is influenced by factors like price and availability.
“We have an actual share for champagne and sparkling wine and also a figure for the share of preference, which is the growth potential – a power of the mind figure,” says Guy Kemplay, director of brand strategy at TNS Research International.
These figures suggest that if people could act purely on their preference, the market would see a strong growth for champagne and sparkling wine. Kemplay adds: “The demand is beyond the current market share.”
In the UK, the share stands at 5 per cent, and has a growth potential of 4.1 percentage point; in the US, the share is 3.5 per cent with the potential to grow by 3 points.
Kemplay says: “In terms of why there is that demand and interest in sparkling wine and champagne, it has always been an aspirational category, it has a unique combination of different values in terms of sophistication and indulgence, but also sociability. The combination of having those three is unique to the category.”
An explanation for the huge growth in the emerging markets can be linked to the economic growth of those regions and the taste for brands that might not have been available.
As Hugues Le Marié, Americas and Western Europe regional director of champagnes at Pernod Ricard, explains: “In emerging markets such as China, champagne was historically unavailable and currently has the status of being a ‘new’ product. For the emerging middle and upper classes champagne is perceived as a key social milestone and as an aspirational product that underlines social success.”
Le Marié adds: “Also, these new consumers are looking to escape from tradition and familiar tastes. Champagne is completely different to anything else that’s available.”
Despite this growth potential in emerging markets and the US and UK, there are barriers and factors that hinder champagne brands’ growth. Champagne is expensive, its brand story is often about the label and unlike wine, where guides in-store make it easier for consumers to match wine with food and occasions, champagne is strongly connected to celebration, making the opportunities to drink it limited.
Le Marié says that the high price of champagne is “a brake on people’s desire to drink more” but that this serves a purpose in the category, since champagne would lose some of its allure if it was consumed every day.
“Champagne is largely perceived as indulgent because of the price tag and was once reserved solely for the consumption of royalty and the nobility. However, we suggest that the rich imagery and history of champagne and its association with high society, decadent artists and authors, Grand Prix and glamorous stars of the stage and screen, has given champagne its unique positioning as the drink for times of celebration and indulgence.”
Kemplay agrees that the price is a barrier for champagne sales but the fact that it is a premium product adds to the experience that consumers are looking for. “It’s not about getting into the more everyday types of occasions,” says Kemplay. “It would be a mistake to say we are a champagne that you can drink any time of the day, because it takes away some of the reasons people are attracted to it in the first place.
“A big barrier is price, but [the market] has been growing because the category has allowed people to have more entry points and pick and choose things that are more affordable for them.”
There are aspects of buying champagne which, if altered, could provide people with that same experience without losing the high-end connotations attached to the category. Kemplay notes that brands could look to expand the occasions for champagne and perhaps offer different bottle sizes to add another way for people to have that experience, especially if they want a couple of glasses at the weekend rather than a whole bottle. This could help make the frequency of occasions stronger.
Le Marié says: “Champagne available ‘by the glass’ in outlets is also a growth opportunity and we are supporting this rate of sale mechanic in the UK with champagne preservation systems to ensure the quality of the product served.”
According to Paul Beavis, managing director of Lanson International, the trend is already appearing as “consumers are becoming much more engaged in champagne as a style.”
He says: “Consumers looking at champagne consumption are saying, it doesn’t have to be a wedding or a celebration, it can be just that it’s a Thursday night or I’ve made it to the weekend.”
The growth of sparkling wines has also given consumers more choice. Kemplay observes that the category has changed over the past decade to diversify from the choice between expensive champagne brands and cheaper sparkling wine substitutes. Sparkling wines, including Cava and Prosecco, are now valued “very much on their own merit.”
Kemplay says: “There is always going to be demand for the high-end status champagnes in terms of those celebrations, but beyond that, what we have seen is that products within this category are going to be judged more on their merits than their label.”
The education that exists in the wine category, with advisors and in-store information in aisles, has created savvy consumers. Extending knowledge into sparkling wine and champagne will be an important part of tapping into the growth potential in the category.
In 2010, Lanson International created a free Little Black Book of Champagne, which was sent out to consumers who requested it; so far it has sent out 55,000 copies. Beavis says: “Often people say to me that consumers don’t care too much about the taste, message or learning about champagne, which, if I’m honest, is a little bit silly. Because of the high number of books sent out, we now have a large amount of people that want to engage with us on an eight to 10 week basis where they are interested in the harvest and vintage of our champagnes.”
Gareth Birchley, champagne buyer at European fine wine merchants the Bordeaux Index, says: “From day one, brands wanted to build up marketing around champagne as being something different. For so many years it was about, ‘this is what we do but we can’t tell you any more because it’s all about the magic in the bottle’. Now people see through that.”
There are opportunities at the premium end of the market. The Bordeaux Index has seen an increased uptake in the more prestigious ‘grower’ champagnes, which are made from the same estate that owns the vineyards, as opposed to the larger champagne houses that use grapes from different vineyards. Birchley says: “Essentially people want something that is rarer and more interesting and those champagnes are the ones that people will go after.”
Pernod Ricard, which owns champagne brands GH Mumm and Perrier-Jouët, say that limited edition variants of its brands will be a key part of its strategy over the Christmas period. Meanwhile, Charles-Armand de Belenet, global marketing and communications director for GH Mumm, says the business will not be discounting to boost sales. Instead the business is using its premiumisation strategy, where customers are encouraged to trade up to premium brands, to boost sales over the festive period.
Beavis at Lanson International advises brands to work with retailers to “create a more compelling category story, so certain champagnes are good with certain foods, and perfect party champagnes, creating the occasion based on the taste proposition rather than a label proposition”.
“Its about innovation but not trying to be too clever. It’s more about substance and style rather than style over substance.”
Paul Beavis, managing director, Lanson International
These figures do match my experience, but it’s too early to say whether they will hit those levels, although we are seeing value growth in the marketplace, which is really encouraging.
The UK and US are very mature markets. The UK is the oldest export market but the US is coming through at a much faster pace in terms of volume and value growth. In the US marketplace, there is a lot of head room at the moment, when you look at the sheer number of people that live there, and the consumption of champagne.
What you see is that the UK is a champagne market that is veering along the sparkling route, whereas the US is a sparkling market veering towards champagne. The UK has a big and stable market, but you have two different consumer profiles.
In the UK, sparkling wine has done a brilliant job from enticing consumers from light wine into sparkling, but what we also have from research is that those consumers then move onto champagne, which is encouraging. So we are not losing share to sparkling, if anything people are evolving into sparkling and then into champagne.
Gareth Birchley, Champagne buyer, Bordeaux Index (European fine wine merchants)
Our largest market for champagne and sparkling wine is the UK. In India and China we have seen little interest so far, but I think that it would be an area where growth is possible knowing what the two economies are capable of, but it’s coming from an almost zero base.
In terms of figures, last year we sold around £1.9m worth of champagne, this year we sold just over £5m.
From day one, brands wanted to build up marketing around champagne as being something different. For so many years it was about ‘this is what we do but we can’t tell you anymore because it’s all about the magic in the bottle’. Now people see through that.
We have seen a more intelligent clientele buying, cellaring, storing and drinking champagne, so there is nothing to say they will not develop further and start looking for less expensive, but equally good, sparkling wine.
Champagne is seen as a generic term. People will offer a glass of sparkling wine and say ‘would you like a glass of champagne’, because it sounds better. It’s not to say that wines from the Champagne region should be better than other quality sparkling wines from around the world.
Hugues Le Marié, Americas & Western Europe regional director, champagnes, Pernod Ricard
We agree that there is still great potential for champagne to increase its overall market share of the global alcoholic drinks sector. China in particular is a rapidly growing market and we do not foresee any halt to this growth on the horizon.
The potential of India is enormous, however the extremely high level of import duty placed on alcoholic beverages is slowing the expansion of the champagne sector and for this reason the growth is slower than in China.
The UK, currently the number one export market, is the most mature and sophisticated of all the export markets. In my opinion, further value growth in the UK market will come from consumers trading up to higher styles. In the UK, we have been witnessing a luxury upward trend for a while.
Today, champagne is still largely perceived as a luxury product for the celebration of special moments. This is set to continue, but in more established markets the second role of champagne as the perfect wine for gastronomy will continue to grow. Champagne is one of the world’s greatest food wines and can work with everything from French to Chinese to Indian cuisine.