AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 64 – Business

 

What future for the Champagne industry?

Aurélie Deluze

Introduction

France is one of the largest and most ancient wine producers in the world. Even if its leading position has been challenged over the past decade, France remains a reference in terms of terroir and quality (Anderson, 2001; Berthomeau and al., 2002). Among the different well-known French wine regions, Champagne has a very unique status. Champagne covers less than 4% of the French vineyard whilst representing more than 1/3 of the total of French exports in value (37%).

Several economists (Barrère, 2000, 2001 et 2003 ; Ménival, 2007 ; Rasselet, 2001 ; Viet, 2003) think that Champagne’s economic success is due to its particular institutional model, composed of an interprofession, the Comité Interprofessionnel du Vin de Champagne (CIVC)1 and an AOC (appellation d’origine controlee)2, two separate institutions which work together quite effectively. This model enabled Champagne producers to adapt their offer to the evolving international demand, both in quantity and in quality, and to maintain the equilibrium between grape-growers and Champagne Houses thanks to a fair sharing of the added value. Thanks to the mid-term interprofessional contracts3 that existed between 1959 and 1989, the CIVC was able to control prices and quantities for a long time. However the liberalization of the markets in the 1990’s led to the end of the interprofessional contracts and grape-price control, which considerably reduced the regulation power of the CIVC. Nowadays it can only control the quantities produced through the management of planting rights and yields at the harvest, which is completed by a “reserve mechanism”.

This model of economic growth has now reached a dead end with the total surfaces of the Champagne area planted. The situation is unique in the world4 and leads to the following paradox: between 2000 and 2007, sales increased much faster than the production. At first, it allowed to reduce huge stocks, but very quickly it resulted in the inflation of the grape and wine prices. This situation, characterized by a lack of control on prices, was called the prosperity crisis. It led Champagne producers to launch a big project to revise the production area, the homogeneity and coherence of which had long been discussed. This working paper aims at answering the following questions: What led the Champagne producers to launch the revision project? How are they going to proceed? What will be the consequences?

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