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Majestic profits down, Champagne sales falling
November 10, 2008
By Giles Fallowfield
Majestic Wine said today that a 6.4% fall in sales of Champagne, led by a cutback in corporate spending, has hit profits.
Pre-tax profit for the six months to 30 September was down a quarter to £5.6m.
'Customers have not had much to celebrate over the past six months and business customers have not been doing as much entertaining,' Steve Lewis, Majestic's chief executive, said this morning. 'When times are tough people don't want to be seen drinking Champagne.'
The overall Champagne market is suffering too and the position is similar to that of the early 1990s. While costs are rising, with 2008 grape prices up by around 4%, exports to the end of July were down in the four major markets UK, USA, Japan and Germany by between 5% and 17%.
Domestic shipments have also dropped since April with sales in French hypermarkets down by more than 10% in the first half of 2008.
There are growing sales in countries like India, Russia and China but as these account for less than 3% of Champagne's volume, they will not compensate for the decline in sales elsewhere.
Prices are now starting to fall in supermarkets both in France and the UK, though whether UK supermarkets will offer markedly cheaper Champagne before Christmas is not clear.
The recession is worsening the problem for those Champagne companies with the largest debts: they are under more pressure to sell stock to service this debt just as prices are slipping.
At the same time the cost of replacing those stocks is rising. The average grape price is up from 5.05 to 5.25 per kilo.
UK sales are being propped by heavily discounted supermarket exclusives. Tesco is offering its Andre Carpentier brand with £10 off, while Sainsbury's equivalent brand Etienne Dumont is also discounted.
The major brands are unlikely to remain immune from the discounting though recent large price rises may soften the blow. Majestic has already increased the discount on Veuve Clicquot NV to a third off.
In France, hypermarket chain Carrefour dropped the price of Vranken Pommery's Charles Laffite brand to 10 a bottle in a six pack compared to its more normal price of around 14.
Since the start of October the price for sur lattes Champagne bottled but undisgorged and unlabelled has fallen and it is expected to drop further. So far, few French prices have dropped below 12.
Have your say...
To post your comment on this story, email us at news@decanter.com, making sure the relevant headline is in the subject field
I was told once by a Majestic sales that the mark up on Champagne was so high compared to other wine that it was a wonder people were buying. Maybe now is the time to review some "old" pricing list and acknowledge that the boom in consumption driven by an unprecedented period of wealth creation is well behind us... In my opinion, this is true for most "premium" wine.
David Roux
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