Hold The Corks

By Benjamin Ivry/Paris

GRAPE PICKERS SLOGGING THROUGH the muddy fields of Champagne's rain-moistened vineyards this harvesttime have had an unusual mission: for the first time in memory they have been told to pick fewer grapes. The decision was made by growers who, until recently, were happy to bottle anything that could conceivably qualify as champagne and sell it to an apparently insatiable public at steadily rising prices. This season, instead of aiming for the usual yield of 12,000 kilos of grapes per hectare, the pickers have been given a target of around 8,000 kilos. "It hurts the heart of a vineyard owner not to collect all the grapes," says Philippe Pascal, director general of Mumm's Champagne, "but it's best for quality."

These days it's also best for business. Champagne houses like Mumm may be talking quality, but what they are really worried about is quantity. Since the heady years of heavy champagne consumption in the late '80s, sales have dropped dramatically, and profits with them. In 1989, 249 million bottles were sold; by 1992 the number had slumped to just over 214 million. Part of the problem is cyclical: the sluggish world economy has provided little incentive to pop champagne corks. But the French producers are also paying for aggressive pricing in the days of high demand. Prices nearly doubled during the '80s. Champagne drinkers started looking elsewhere -- notably to Australia, the U.S. and Spain -- for acceptably priced bubbly, even if it did not contain the right stuff.

The result has been a buildup of unsold stock, which now amounts to an estimated 1 billion bottles, or more than four years' worth of sales, compared with a normal buffer stock of less than three years. By reducing the grape harvest by a third, the producers are aiming for 15 million fewer bottles. Against current surpluses, that may seem like a drop in the bucket, but it is widely viewed as a step in the right direction. The new agreement worked out by vineyard owners and union workers also provides for lowering grape prices from an all-time high of 32 francs ($5.66) per kilo to 20.50 francs ($3.62) per kilo, which should make the price of a bottle of this year's French champagne more attractive for most consumers.

Not only prices are being cut. Despite almost $60 million in profits last year on turnover of around $460 million, Moet & Chandon, the largest producer, announced last May that 245 employees would be laid off for economic reasons -- the first time in living memory that the industry had shrunk its work force. Then, in June, Moet Hennessy Louis Vuitton, which owns Moet, announced 457 layoffs. An employee backlash has since forced the producers to rethink their cost-cutting strategy, and a regional labor court ruled in August that employees cannot be fired summarily. But the pressure to reduce costs is still on.

So is the pressure to boost sales and move surplus stocks. The good news for consumers is that this is already translating into lower prices, particularly for top-level champagnes. "I haven't seen much of a drop in sales because the best brands have been continuously on sale, with prices permanently lowered by 10%," says Roland Vella, who manages a Nicolas liquor store on the Rue Rambuteau in Paris. Instead of paying the usual $26.50 for a bottle of Mumm's top-of-the-line Cordon Rouge, Vella's customers can buy one for $23.70. Anticipating this year's 250th company anniversary, Moet & Chandon last year even offered two free champagne glasses to anyone who bought two bottles of medium-priced Brut Imperial. Less expensive brands are also being heavily discounted, with the result that sales are showing signs of recovery -- perhaps as much as a 6.7% increase for the first half of the current year.

Carried away by the excitement of the harvest, some champagne pros are bubbling over with enthusiasm about the future. "I think the crisis is behind us," says Roland Chaillon, director of the Champagne Producers' Union. "By next year we may not even have enough champagne left in stock." Others suggest that such optimism may come from drinking too much of the product. Analysts Gerard Morin and Jean-Francois Cotier of the Bank of France in Chalons-sur-Marne, the heart of champagne country, detect only "a slight ripple of improvement" this year. Larger champagne houses more dependent on exports will continue to be held hostage by the performance of the global economy, and analysts like Sylvain Massot, of the U.S. brokerage house Morgan Stanley, are not looking for a speedy recovery. "We are not far from reasonable prices now," he concedes, "but it will take three or four years for the industry to pick up again." And for the harvesters to resume picking everything in sight?