Bruno Paillard's modern cellars are just outside the French city of Reims in Champagne, France and while he is confident in his ability to pick out aromas of citrus and apricot in his champagne, he is less sure about his future as a small independent producer.
Mr. Paillard is one of the owners of champage group Lanson-BCC, but he also produces the sparkling wine under his own name. And he is concerned that the ubiquitous LVMH - Louis Vuitton Moet Hennessy - to give the luxury group its full name, is taking over the industry.
LVMH, owned by Bernard Arnault, is one of France’s biggest luxury conglomerates and one of the world’s most important champagne brand owners including Moet and Dom Perrignon. Mr. Paillard suspects that Mr. Arnault is now buying up land in the Champagne region to expand his market dominance.
The champagne industry has always been fraught, but conflict appears to be intensifying. Newcomers are clashing with traditionalists, and small cultivators run up against companies with billions to spend.
In terms of demand, the market for sparkling wine is growing. Some 30 percent more fizzy wine is being consumed globally today than 10 years ago. But this growth has benefitted mainly German sekt, Spanish cava and Italian prosecco. Champagne sales have increased by only 0.1 percent during the same time period.
I don’t want a situation in 20 years, where there are only the top brands and cheap, no-name Champagne on the market. Dominique Pierre, General director, Nicolas Feuillatte Champagne
The period just before Christmas is high season for the champagne industry. The whole of France celebrates with the sparkling bubbles and no self-respecting newspaper fails to run a list of its top 50 or 100 champagne recommendations.
Prices vary hugely, from a few euros to hundreds for a bottle. But industry experts say the enormous price differences between brands are not a signal that France’s sparkling wine industry has something to offer all tastes and budgets, but rather that the industry is going through a spasm. Large, multi nationals with powerful advertising campaigns get to name their prices while other champagne producers are forced to compete for the bottom of the market. There appears to be little room for small, exclusive, artisinal producers.
"I don’t want a situation in 20 years, where there are only the top brands and cheap, no-name Champagne on the market,” said Dominique Pierre, general director of Nicolas Feuillatte, a cooperative society.
The champage industry's tottering business model that has developed over centuries is also changing. In the past, countless winegrowers operated small vineyards and sold grapes to the big producers, whose job was to make and mature the wine and then sell it.
Nowadays, though, big companies are buying their own land. They are the only ones who can afford to pay the enormous prices commanded for vineyards in the Champagne region. The prices can reach €1 million per hectare (2.47 acres).
Arnault is a predator who won’t be happy until he’s finished us all off. LMVH competitor
Champagne has always been a high-end product, but today it is increasingly becoming just another stylish product among many in the very tightly run French luxury industry.
That applies particularly to the LVMH concern of France’s wealthiest man, Mr. Arnault. His two bestselling brands, Moët et Chandon and Veuve Cliquot. The brands are said to have sold 49 million bottles in 2009, and today, experts put that figure at about 60 million.
"Arnault is a predator who won’t be happy until he’s finished us all off," said one competitor who fears there will be merciless competition.
Mr. Pierre said "the financial power of a few giants is too dominant" in the champagne business. The champagne industry, as a whole, has not got a voice.
The CIVC, a government-directed body for champagne growers, traders and the industry insists it promotes the drink worldwide, and does not favour individual brands, but it is clear some champagne makers are more able to promote themselves than others.
Christian Josephi, head of the German branch of the Comité Champagne, an industry body, said tensions were rising over acccess to the all important terroir, or land, that defines French wines. "There is very intense competition for pieces of land and good grapes,” he said.
Grapes from slopes on the Montagne de Reims and on the Côte des Blancs are especially popular, as they mature slowly and produce the typical champagne taste.
Champagne is an extremely capital-intensive business. Each big company sits on large volumes of reserve wine, to be able to create its own characteristic taste regardless of the quality of a particular year’s grape harvest.
Only vines planted in villages and on plots of land included in the list of the protected designation of origin can have their grapes made into champagne. Wine cultivators and the big companies have called for years for these regulations to be eased but so far there has been little change.
Small producers worry they are being crushed. Valérie Delagarde, whose family grows champagne grapes in the small village of Serzy-et-Prin, said growers like here are at the mercy of larger businesses.
"At the moment the big companies are still paying us high prices for grapes," she said. At €5.80 per kilo, prices are 25 percent higher than 10 years ago. But because the plots of land are tiny – on average, less than one hectare each – producers are dependent on such high prices.
Ms. Delagarde fears this model will collapse as the big companies consolidate their market position and dictate conditions: "In a few years they could starve us out."
Thomas Hanke is the Handelsblatt correspondent in Paris. To contact the author: [email protected]