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Words by Antoine Hugot
In recent years the prices for a kilogram of grapes has reached new heights, so far ahead of the rest of the World. Yet, the so-called golden grape is seen to be doomed for the next few years, facing a drastic decrease of sales in Champagne caused by COVID-19. The first onset was during the last harvest, resulting in a decrease of the total weight of cut-off. When the average yield had been around 10 tons per hectare, during the harvest of 2020, only 8 tons per hectare were harvested and could be used to produce champagne. The aim of this is to offset the massive stocks ageing on hand; close to a billion bottles are currently ageing quietly underground which represents three good years of sales, or five years of COVID level sales.
Considering the overstock and lower yields, it seems that this trend will continue, and the situation will be just as bad for the subsequent harvests. Basically, it’s all about perspective. If you sell less wine, you stock up more and eventually the négociant will purchase less grapes at a lower price.
So what’s really hiding behind the price of the most expensive kilogram of grapes ?
Let’s have a look at the timeline of the growing prices of these expensive grapes
1907 - 1910
At the dawn of WW1, the situation was critical for many houses and winegrowers. Growers were affected by many crises such as four years of poor harvests due to phylloxera, rainfall, hail and dark frosts between 1907 and 1910. The French government also announced the delimitation by decree of the exact geographic area to be granted an economic advantage and protection for champenois winegrowers in 1908.
1911
Even though this early development should have benefitted Marne and Aisne districts but ended up excluding Aube, which includes the town of Troyes. This structure benefitted the winegrowers, who could now sell grapes at a higher price. Nevertheless, négociants preferred to buy cheap grapes from the Aube district rather than the expensive grapes from Marne or Aisne districts which caused the riots in 1911. This was the first step which brought a balance of power between négociants and winegrowers to arrive at a decent price of the kilogram; which was at its lowest price, priced between 1 Francs to 3 Francs maximum, during that period.
1918 - 1919
After WW1, an international crisis took shape, marked by many various events: prohibition in the USA and UK, the birth of USSR, poverty in Europe; leaving to a massive decline in consumption. So to face this terrible situation, the Champenois rapidly structured the vineyard economically, especially in terms of the price of a kilogram of grapes which was going to be implemented after a meeting in September 1920 between the SGV (Syndicat Général des Vignerons) and the négociant unions. They landed on the first common agreement for the price of a kilogram of grapes to be priced at 4.50 Francs.
Source: Bloomberg
Source: Angel Champagne
1935
The creation of the Appellation d’Origine Contrôlé in 1935 observed a significant increase of the price of a kilogram of grapes in Champagne. For instance, from a price of 1.30 Francs in 1935 to an increase of 8.40 Francs in 1935.
“Until this time, the context of the crisis became all the more painful as the winegrowers were in a relationship of dependency with the négociant, and it lacked collective organisation. When the harvest was abundant, they would not always find a buyer, and when the grapes were sold, they were sold at a price defined unilaterally ... often low!” (La Champagne Viticole hors série, 2004)
1944 - 1946
After WWII, unions were reborn and development plans were set up. The objective was to pursue the emancipation of the vineyard by relying on the maintenance of inter-professional institutions as well as the development of cooperatives. This would contribute to the first surge in the price of the kilo of grapes : from 18 Francs in 1944 to 37,50 Francs in 1945 and eventually to 70 Francs in 1946.
1950s
This was the beginning of a new era for the Champagne region. The time had come to build long-term projects and to establish a balance in Champagne.
August 1954 - The SGV developed an organisation for the next harvest to avoid the collapse of prices due to the expected abundance of the 1954 harvest.
March 1956 - Jean Nollevalle, permanent secretary of the SGV, evoked the wine reserve, and put a limitation on yields as a reliable and punctual measure to guarantee a balance at a time when sales were going well.
1958 - The first inter-professional contract was put into action.
And finally, at the end of the 1950s, a kilogram of grapes cost 245 Francs.
1960s - 1980s
This period saw a huge bump of sales from 50 million bottles to 100 million sold at the beginning of the 70s. These were also the first days of the Francs and the “Trente glorieuses" - the glorious thirties, an era of great cultural and economic change in France. Demand led to an increase in the price, from 2.60 new Francs in 1960 to 10.91 new Francs in 1979. However, the vines had been completely overcropped so in 1978, 1979, 1980 and 1981growers could only get the equivalent of two and a half harvests instead of four. The lack of grapes added to the decrease in bottles caused by the very strong expansion of the previous period. This forced the négociants to purchase grapes at a higher price than ever in order to build up a new stock.
1990s
A few years later, Champagne was hit hard by the recession. Marc Brugnon the president of SGV explained that “The crisis is global, overproduction is everywhere”. Gulf War, opening borders to the East, war in Yugoslavia and Europe tomorrow. Everything became a topic of concern, a matter for rebalancing. The prices went from 32 Francs in 1990 to 24 Francs in 1992 when a 20% decrease in the price of a kilo of grapes took place due to the recession.
Moreover, the inter-professional contract was not renewed and left room for a semi-liberal organisation: from the 1990 harvest and for 3 consecutive years, the prices of grapes, clear wines, bottles on lees were freely discussed between seller winegrowers and buying négociants. The commitment provided the winegrower with a security of outlet and fixing the price per kilo guaranteed him income security.
April 1996 - the SGV proposed a regulation system. The consumer would no longer accept the price variations that marked the champagne of the 80s/90s. This is why, on the eve of the year 2000, the SGV proposed to engage Champagne for 4 years in a system of regulatory organisation with the objective to control the volumes and the evolution of the price of grapes.
Source: Epicure & Culture
2000s
With the beginning of the 21st Century, we entered a new economic era. Once again, the price of grapes were going to increase. On one hand, it was because of the demand caused by globalisation of exchanges and on the other hand, it was the consequence of the change of currency from Francs (Fr) to Euros (€).
However, twenty years and two big crises after - Subprimes and COVID-19, sales in Champagne has suffered from a huge decrease of 337 millions bottles sold in 2007 to around 200 millions bottles sold at the end of 2020, according to estimates.
If we go back to 1992, the point where they were obliged to lower the price of grapes : there was more supply than demand and négociants had to support a big amount of bottles in their cellars. In this scenario, they need to sell bottles and lower the amount of grapes purchased during the harvest from the winegrowers. Consequently, if they need less grapes they have more power to fix the price for a kilogram of grapes later.
In 2020 with a kilogram of grapes priced between 6.20€ to 7.20€ depending on the “échelle des crus” - the scale of crus, we wonder what 2021 has in store for us. It is currently stated as the most expensive in the world. With the gloomy economic situation, winegrowers will be forced to vinify their grapes instead of selling them to négociants. How many growers will add to their cellar? Well only 2021 will tell...
- Antoine Hugot
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