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09.20.2010

Where is All the Deeply Discounted Champagne?

ChampagneEvery day, I get e-mails with wines being offered at more and more outrageous prices. What you can get for $20 now astounds me, from Napa and Washington State Cabernet to Brunello di Montalcino. Hell, I got a 1978 Brunello di Montalcino for little more than $20 recently. That's just a little bit insane.

It's not just the flash sale web sites. It's everywhere. While the newspapers are printing stories about how the wine world is weathering the recession pretty well, the offers that I am getting (and I'm subscribed to maybe 5 or 6 retailer's e-mail lists) tell a slightly different story. Or they at least suggest that many top-tier wineries are not willing to sit around and hope that things get better. I'm seeing big name global wineries dip into their library stock to generate cash, I'm seeing wineries that would usually never attend large public tastings start to do so, and my conversations with insiders in Napa suggest many elite wineries are trying to broaden their distribution as much as possible.

The one thing I'm not seeing? Steep discounts on Champagne. Now maybe I'm not looking in the right places, but it's quite unusual that I keep running across wines from pretty much every other wine region in the world at crazy prices, but nary a top Champagne in sight.

This is quite amazing to me considering that the top Champagne houses make millions of bottles of the stuff. And I've seen some reports that say sales are down as much as 26% in America. Of course, you can find a report that says just about anything these days, but if the cult Cabernets are hurting, you can bet the $150-a-bottle Champagne crowd is hurting too, and they probably have in some cases literally 100 times more wine to sell.

The big Champagne houses have always had strong aversions to discounting. Forget recession, think about the last time you saw a top Champagne on sale at anything more than a nominal discount. Dom Perignon? Nope. Taittinger? Nope. Roederer? Nope. The Champagne establishment and their academics (who knew they had academics) think that discounting Champagne is tantamount to suicide. Like the Bordelaise these days , it seems that they think their prices should only ever go up, forgetting for a moment that of all the products we buy, fine wine is the one that we most expect to change in price from year to year.

So I've been doing a little asking around whenever I meet someone who knows a thing or two about French wine markets in general and Champagne in particular, and I've learned a little bit about how the big Champagne houses might be playing this particular swing of the market, given their fear of forever tarnishing their brands with the scourge of a discount.

Some of the houses will no doubt just sit on their stocks and try to ride it out. The nice thing about Champagne is that until you disgorge it and slap a label on it, it keeps pretty well. Especially the non-vintage stuff which doesn't have that pesky problem of being perceived as not the right current vintage in the marketplace.

The trouble with this strategy, however, is that you have an awful lot of money tied up in inventory that you would normally be able to spend on, say, paying your workers for the harvest that started last month, or buying more bottles, etc.

I had the chance to ask a wine broker that flies all over the world buying bulk wine for bottling under other labels whether there was a glut of Champagne wine for sale on the bulk market, and apparently there's very little. We (sadly) won't be seeing a $9 Cameron Hughes Champagne anytime soon.

It also looks like the Chinese are too obsessed with First Growth Bordeaux to buy enough Champagne to make much of a difference.

According to two industry insiders I talked to there does exist a way for Champagne houses to unload their stocks at reduced prices without damaging consumer perceptions of the brand. I was reminded of their predictions when I noticed the following line in Lettie Teague's recent blog post about luxury wines by the glass:

"...if you do want to buy a luxury wine by the bottle, there is a great deal at Landmarc Tribeca, where wine director David Lombardo has just started offering 2002 Roederer Cristal for $200- the same price as many New York retailers!"

According to the folks I talked with: Champagne houses will use the on-premise channel (that's fancy wine industry talk for restaurants and hotels) to sell their stock rather than discount it directly for the consumer. I have no idea whether this is what's going on at Landmarc, but I wouldn't be surprised.

It's not a bad idea as far as it goes -- it definitely allows the Champagne houses to sort of have their cake and eat it too, and I won't mind paying retail price for great Champagne in a restaurant if given the opportunity. But I really wish that the top Champagne producers would come off their high horses a little bit and join in the realities of the market. Restaurants with any sense of self preservation and accounting principles are probably dramatically cutting back their wine inventories for the same reason that the Champagne producers need to sell theirs. Too much dough tied up in bottles that are just sitting there. So while I'm sure it's appealing, it might not make enough of a difference.

The top Champagne houses need to take a little bit of a leap of faith. I'd jump at the chance to buy a bunch of really good bubbly at Flash-sale prices and I know a lot of other people would as well. They could sell a lot of wine. And I mean a LOT of wine. It would help with the cash flow and might even win them more customers that, once they got a taste of the good stuff, would have a hard time going back to $15.99 California Sparkling Wine.

And just like with everything in our lives it seems these days, from gasoline to the interest on our mortgages, to the price of oranges when there's a frost, we'll suck it up and pay more when the prices go back up when the market recovers.

Whaddya say? Do we have a deal?

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