CHAMPAGNECLUSTER_FINAL_3.20.11

Report
The Champagne Cluster
Presented By: Sasha Shapiro, Vala Goharbin, Mariya Minkova, Nishant Bangar
Agenda
• Overview of France
• History of Champagne
• Champagne Cluster
• Recommendations
2
Overview of France
General Overview
•
Largest EU country at 643,427 square kilometers
– Location
– Terroir
– 33.4% of the land is arable
•
GDP – from € 2.12 million in 2009 to € 2.16 million in 2010
– GDP per capita € 33,000
•
Inflation was 1.5% in 2010
•
Unemployment in 2010 was 9.5% (from 7.4% in 2008)
•
In 2010, there were 28.21 million people active in the labor force
•
Public debt was 84% in 2010 (from 68% in 2008)
•
Budget deficit in 2010 was 7.8% (from 3.4% in 2008)
– Exports were € 508.7 million
– Imports were € 577.7 million
– Germany was the main trading partner
4
The French Economy
• Transited economy to market
• Strong government presence in energy, military and public transport
• Focus on social equality through legislative and tax policies
• Agricultural policies
– € 12 million aid from Common Agricultural Policy
• Cereal producers main recipients for years
– New priorities include
• Livestock farming, organic farming, energy conservation, water management and
increasing biodiversity
• Focus on three things
– Forming competitive clusters
– Reforming higher education and research
– HR renewal in tech and scientific fields
5
Industries
% Contribution to GDP
Agriculture 2%
Industry 19.2%
•
Eight agricultural sectors and nine
industries
– Main revenue comes from tourism:
expenditures by foreigners in 2007
amounted € 39.6 billion
•
Transportation includes air, marine,
road and rail
•
Food Retail – France accounted for
13.5% of the entire European food
retail industry in 2009
•
Aerospace Industry
Services 79%
France Food Retail Industry Segmentation, 2009
– 40% of commercial communications
satellites market
– 50% of accessible market for launchers
6
History of Champagne
The Beginning of Bubbles
•
Romans were first to plant vineyards in the area of northeast France
•
Churches owned vineyards and monks produced wine for use in the sacrament of Eucharist
•
The Champenois were envious of the reputation of the wines made from their Burgundian
neighbors, and sought to produces wines of equal acclaim
•
However, the northerly climate of the region gave the Champenois a unique set of challenges
–
The wines were lighter bodied and thinner than the Burgundies
•
Cold winter temperatures prematurely halted fermentation in the cellars, leaving dormant yeast
cells that would awaken in the warmth of spring and start fermenting again
•
One of the byproducts of fermentation is the release of carbon dioxide gas, which, if the wine is
bottled, is trapped inside the wine causing intense pressure
•
The pressure inside the weak, early French wine bottles often caused the bottles to explode and
if the bottle survived, the wine was found to contain bubbles
–
Something the early Champenois were horrified to see
8
The First Champagne
•
Contrary to legend and popular belief, Dom Perignon
did not invent sparkling wine
•
The oldest recorded sparkling wine Blanquette de
Limoux
–
Invented by Benedictine Monks in the Abbey of Saint
Hilaire near Carcassonne in 1531
•
Over a century later, English scientist and physician
Christopher Merret documented the addition of sugar
to a finished wine to create a second fermentation
•
Merret presented the Royal Society with a paper in
which he detailed what is now called méthode
champenoise in 1662
•
Although Dom Perignon did not invent champagne,
he did develop advances in production of the drink,
including holding the cork in place with a wire collar
(muselet) to withstand the fermentation pressure
9
Modern Champagne Industry
•
The Champenois and their French clients preferred their champagne to be pale and
still
– But the British were developing a taste for the unique bubbly wine
•
The sparkling version of champagne continued to grow in popularity, especially
among the wealthy and royal
•
Champagne was for a very long time made by the méthode rurale
– No knowledge about controlling the process or how to make wine bottles strong enough to
withstand pressure
•
In the 19th century, these obstacles were overcome, and the modern champagne
industry took form
•
Champagne production had an explosive growth, going from a regional production of
300,000 bottles a year in 1800 to 20 million bottles in 1850
10
The Taste
• In the 19th century, champagne was
noticeably sweeter than the champagne of
today
• The trend towards drier champagne began
when Perrier-Jouët decided not to sweeten
his 1846 vintage prior to exporting it to
London
• The designation Brut champagne, the
modern champagne, was created for the
British in 1876
11
Champagne Cluster
STRATEGY & RIVALRY
• Roles in champagne
production
• Law – barriers to
competitiveness
DEMAND CONDITIONS
• Local demand
• World market
• China & the emerging
markets
FACTOR CONDITIONS
• Location, climate, terroir
• Champagne vine growing
• Capital availability
• Infrastructure
• Government
• Institutions: CIVC & INAO
RELATED INDUSTRIES
• Glass bottles
• Packaging
• Corks
• Tourism
• Agriculture
• Education and R&D
13
General Overview
•
Four regions make up Champagne – Aube, Marne,
Ardennes, Haute-Marne
–
–
–
•
150 kilometers east from Paris
Trade routes from North Sea to Italy
1.3 million people at 52/km2
GDP - € 31 million in 2009
–
–
–
–
Agriculture (8.2% of GDP)
Industry, including smelting, metalworking, mechanics,
textiles/clothing, craft (2.5% of GDP)
Services, including tourism, retail/wholesale, banking, real estate
(1.6% of GDP)
Exports, including champagne and machinery
•
R&D expenditures are €238 million
•
Top French region for investments
–
–
–
–
–
Number one region for producing cereals
53,960 companies operating
€ 16,000 per year average salary
Best business include packaging, logistics, timber, textile,
metallurgy, automobile and medical instruments
25% of activities dominated by champagne production
14
Factor Conditions
• Transportation & Logistics
–
–
–
–
–
–
Historic architectural legacy – 17th century
Distribution coverage includes North-East France
Major transport network is the Channel Tunnel to South-East Europe
Five key airports with one for freight logistic hub
Three key ports are Rotterdam, Antwerp and Le Havre
Railways include the Chalindrey hub, TGV, Scandinavia-Rhine-Rhone-West
Mediterranean "rail highway" and Paris-Basel
• Capital Availability
– € 7.7 million to agriculture in 2011 and € 11.73 million (2007-2013)
– Champagne-Ardenne operational program – € 186 million
• Infrastructure
– Scientific and technological – CARRINA
– Administrative – Regional Council
15
The Champagne-Ardenne Terroir
• Geography
– North-East France
• Geology
– Subsoil deposits of 300-metter think chalk from 90
million years ago when the Atlantic ocean stepped
back
• Temperature control, drainage, underground
champagne cellars
– Creation of belemnite sediment from an
earthquake that occurred 10 million years ago
• Climate
–
–
–
–
Mild oceanic and harsh continental
Annual temperature of 10 degrees Celsius
Snowy winters and warm summers
630 millimeters of rainfall each year with 45
millimeters in September
16
Vine Growing in the Region
•
Vines in Champagne represent 4% of all vines in
France, but bring in 1/3 of total revenue from export
•
33,077 hectares of vine growing
– 22,107 hectares in Marne
– 7,740 hectares in Aube & Haute-Marne
– 3,230 hectares in Sainte-et-Marne
•
Yield in 2009 was 12,276 kilograms per hectare or 352
million bottles
•
In the region there are 4,776 vine growers, 66
cooperatives and 293 negociants
•
Grapes produced include:
– Pinot Noir – 39%
– Meunier – 31%
– Chardonnay – 29%
17
The Government’s Role
•
1852 – 1868, Werlé (Veuve Clicquot) was the mayor of Reims
•
Law in Champagne
– 1891 Treaty of Madrid to protect the product of champagne
– Échelle des Crus (ladder of growth)
•
•
Fixed pricing for vine ranking; Premier versus Grand Cru (100pt)
17 villages with Premier Cru rank
– AOC: Appellation d’Origine Controlee
– 2003 – 1010 Revision of the Champagne Area
•
•
Due to the program’s delay the first plantings will happen as early as 2015; expected first yield will be in
2020; first quantities to be released around 2021-2025
Started in 1908 when, with a decree, the Aube area was added
– Taxation regulations on export and import
– Production methods
•
15 months aging for NV champagne
– Strict regulations on alcohol advertising
•
•
Up to 2.5% alcohol volume
Institutions
– CIVC: Comité Interprofessionnel du Vin de Champagne 1941
– INAO: Certification system to protect the French geographical indications for agricultural
products including wines, cheese and butters
18
Demand By Market
Main Markets
Emerging Markets
The French a little over half of the world’s
champagne (56%)
Fine wines and champagnes have
become a status symbol for the Chinese
Britain is the second largest consumer of
champagne
Drinking champagne at business and
entertainment events has created a
unique phenomenon and massive
demand
The Italian market is also booming
Guests are expected to be impressed by
the price of expensive wine and
champagne, not by the taste
Demand in emerging markets such as
India, China and Russia, is also growing
Though a status symbol, the Chinese are
becoming more sophisticated
19
Increase in Demand
• There is an increase in demand of champagne due to:
–
–
–
–
Limited supply
Marketing success of the region
Image of quality, tradition, exclusivity and luxury
Positive image conveyed by France as the country of origin
20
Related Industries
Glass Bottles
•Located around Haute-Normandy and Picardie
•65 companies, employing over 7,000 people
•Produce over 75% of world’s luxury perfume bottles, spirits and pharmaceuticals
Packaging
•230 enterprises, employing 11,700 people
•€ 1.8 million in sales, 10% of the entire packaging industry in France
•60% of products are for food processing industry
Cork
•France has only 4% of the world production of cork
•Use of cork has dropped from 95% to 70% in the last 15 years
Tourism
•283 registered tourist hotels providing 9,168 rooms in the region
•Another 207 facilities offering guest rooms
•Five sites recognized by UNESCO as World Heritage Sites
Agriculture
•Accounts for almost 38% of the region’s total exports
•Employs almost 25,000 people in over 2,000 companies
Education & R&D
•Regional council spends almost 42% of their budget on education (approximately € 256 million)
•Almost 4,000 students enrolled in business schools, 2,500 in engineering schools and 22,000 in
other university programs
21
Global Champagne Market
Global Wine Market Segmentation: % Share, By Value
Asia-Pacific 6.9%
Sparkling wine
11.3%
Champagne
4.3%
Americas 18.3%
Fortified
wine 3.9%
Europe 74.8%
Still wine 80.5%
• During the 2008 crisis, there was an increase in stocks
– CIVC set yield limit for 2009 and 2010
• Stabilizing short-term cash flows
• In 2009, the global wine market was € 263.8 billion
22
Top Players
• Top three companies hold more than
30% of the champagne market
• Benefits:
– Vineyards and grape purchases
– Old versus new technology in
production – funds for modernization
of the production process
– Brand positioning
– Distribution system
– Marketing and advertising
• Moët & Hennessy (LVMH Group)
– The biggest group holding premium
champagnes and spirits
– In 2010, sold 19.3 million bottles of
champagne
– Started in 1991 with the acquisition of
Pommerchy Champagne
23
Laurent-Perrier
• Established in 1812 as the Laurent Perrier Champagne Maison
• Champagne and alcoholic beverages through own subsidiaries
• Seven key brands, including the iconic Laurent-Perrier Brut
• € 242.9 million in sales in 2009
24
Vranken Pommery Monopole
• Established in 1976 as Maison Vranken
– In 1978, became Veuve Monnier champagne brand
• € 269.8 million sales in 2009
• 10% market share with five key champagne brands
• 19.8 million bottles of champagne in production
– Porto producer with 1.7 million bottles
25
Lanson BCC
• Lanson BCC (Lanson International & Boizel
Chanoine Champagne) produces and sells
champagne
• Acquisition and grouping of Champagne
Maisons
– 1991: Chanoine Frères et Champenoise des
Grand Vins
– 1994: Champagne Boizel (1834), Champagne
Chanoine Frères (1730)
– 2006: Maison Burtin (1843), Champagne
Lanson (1760)
• € 276 million revenues in 2009 with an
operating profit of €16.1 million
– 21 million bottles sold
26
Recommendations
Recommendations
STATE LEVEL
• Governmental incentives for the
champagne producers
– Redistribution of funds from the
Common Agricultural Policy
– Taxation policy – common EU
market
– Encourage students to stay in the
area after graduation
CLUSTER LEVEL
• Sustain collaboration between local
government, research centers and
Maisons
• Keep the Champagne area size
after the enlargement
– Helps ensure scarcity and luxury
• Improvement on the national level will build the foundation for upgrading the
Champagne cluster, as well as stimulating the full development of supporting
industries around it
28
Thank You
Questions?

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