Luxury Goods

France Bets on Champagne Tastes in China


Chinese Premier Wen Jiabao (left) toasts Cambodian Prime Minister Hun Sen. China’s share of global cognac sales is 24 percent

Photograph by Tang Chhin Sothy/AFP/Getty Images

Chinese Premier Wen Jiabao (left) toasts Cambodian Prime Minister Hun Sen. China’s share of global cognac sales is 24 percent

Champagne has long commanded a special reverence in France, where half of global consumption occurs. But few get as excited over opening a bottle of bubbly as patrons of Bar Rouge, a trendy club on Shanghai’s Bund, the colonial-era waterfront boulevard. There, Champagne bottles are served with sparklers, and the bar offers a 10,000 yuan ($1,600) package of six liters of Champagne, a three-liter bottle of vodka, and soft drinks, delivered in a tub of ice by six employees accompanied by dancers. “Even people who are not willing to drink Champagne are willing to pay the money just to get the bathtub and the show,” says Mathieu Brauer, chief executive officer of Visual Orient, the club’s owner.

Now Champagne makers, who saw global sales slide 4.4 percent in 2012, according to industry association CIVC, have come up with a strategy to keep their business from going flat: boost sales in China—something others discovered a decade earlier. After all, another Gallic export, cognac, has become a huge hit there, with the Asian giant now accounting for 24 percent of worldwide shipments, up from 5 percent in 2000. “We think China could change the Champagne market in the coming years,” says Charles-Armand de Belenet, global marketing and communications director at Martell Mumm Perrier-Jouët, the Champagne division of Pernod Ricard (RI:FP). China is the second-biggest export market for Pernod’s Mumm brand and No. 3 for sister label Perrier-Jouët.

As the world’s top consumers of luxury goods, accounting for 27 percent of spending on high-end goods last year, according to consultants McKinsey, the Chinese could in theory make up for Champagne’s declining sales back home. Affluent mainlanders are no stranger to fashionable French wares, from Chanel sunglasses to Hermès (RMS:FP) handbags. And in China, Champagne sales already have jumped 33 percent on average in each of the past three years, according to market researcher Euromonitor International.

Depending on mainland drinkers to embrace the bubbly the way they have taken to cognac could be problematic: Champagne has to be consumed immediately after opening. Cognac, by contrast, can be kept for years and offered to special guests when the occasion warrants. It’s ideal for conspicuous consumption. Most Chinese sales of cognac come around the just-finished Lunar New Year holiday, when Chinese often give friends and business contacts expensive bottles of cognac or baijiu—a local sorghum-based spirit. These gifts are displayed “on a shelf, like a vase,” says Paul French, an analyst with researcher Mintel in Shanghai. “There’s a massive over-expectation about China” among makers of bubbly, he says. “Champagne is quite a hard product to push.” Chinese cognac sales have fueled profits and buoyed the shares of Pernod and Rémy Cointreau (FCO:FP), maker of Rémy Martin cognac. Pernod said on Feb. 4 that it’s in talks to buy another producer, adding to its Martell brand, and Rémy in December agreed to buy cognac maker Larsen.

Unlike cognac, first exported to China in 1859, Champagne only recently gained popularity in the nation’s $132.1 billion drinks market. While Chinese are still getting used to its mineral taste and fizz, there’s a strong appetite for the drink’s European cachet. “Chinese people love France—the sophistication, the luxury that comes out of the country,” says Martin Riley, chief marketing officer at Pernod. “It’s something quite deep-seated and puts products like cognac and Champagne in a fantastic position. It’s a way of drinking the luxury lifestyle.”

Nonetheless, Champagne toasting remains far behind cognac sipping. Drinkers in China bought 900,000 liters of Champagne in 2011, according to Euromonitor, while cognac hit 25.5 million liters. Champagne is an expensive passion in China, with bottles selling for as much as three times what they command in Europe because of import fees and hefty markups at bars, according to Mintel. That could become a hindrance with the growth rate in luxury-goods spending in China set to slow from 30 percent in 2011 to 7 percent this year, estimates Bain & Co. And unlike, say, vodka, which features new flavors every year, there’s less opportunity to innovate with Champagne because of tight controls in France on how it’s made.

To lure more drinkers, brands use endorsements from local celebrities, sponsorship of exclusive parties, and even iPhone apps to educate consumers on what some vintners call the “protocols of Champagne.” Mumm, owned by Pernod, holds tastings where consumers learn how to choose and serve Champagne. Brand representatives even demonstrate the art of “sabrage”—or slicing a bottle open with a saber.

The bottom line: French vintners are counting on Chinese consumers, who buy 27 percent of all luxury goods globally, to rev up Champagne sales.

With Liza Lin
Fletcher is a reporter for Bloomberg News in London.

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Companies Mentioned

  • RI:FP
    (Pernod Ricard SA)
    • $90.28 EUR
    • -0.66
    • -0.73%
  • RMS:FP
    (Hermes International)
    • $244.5 EUR
    • 0.90
    • 0.37%
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