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he

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hampagne

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luster

Presented By: Sasha Shapiro, Vala Goharbin, Mariya Minkova, Nishant Bangar

A

genda

•

Overview of France

•

History of Champagne

•

Champagne Cluster

•

Recommendations

2

O

verview of

F

rance

• • G

eneral

O

verview

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

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he

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rench

E

conomy

• 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

I

ndustries

% Contribution to GDP Agriculture 2% Industry 19.2% Services 79% France Food Retail Industry Segmentation, 2009 • 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 – 40% of commercial communications satellites market – 50% of accessible market for launchers 6

H

istory of

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hampagne

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he

B

eginning of

B

ubbles

• 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

T

he

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irst

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hampagne

• 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

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odern

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hampagne

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ndustry

• 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

T

he

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aste

• 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

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hampagne

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luster

• STRATEGY & RIVALRY Roles in champagne • production Law – barriers to competitiveness • • • • • • 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 • • • DEMAND CONDITIONS Local demand World market China & the emerging markets 13

• G

eneral

O

verview

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/km 2 • 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

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actor

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onditions

• Transportation & Logistics – Historic architectural legacy – 17 th – – 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

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he

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hampagne-

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rdenne

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erroir

• 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

V

ine

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rowing in the

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egion

• 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

• T

he

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overnment’s

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ole

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

D

emand

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y

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arket

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 The Italian market is also booming Drinking champagne at business and entertainment events has created a unique phenomenon and massive demand 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

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ncrease in

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emand

• 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

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elated

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ndustries

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

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lobal

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hampagne

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arket

Global Wine Market Segmentation: % Share, By Value Asia-Pacific 6.9% Americas 18.3% Sparkling wine 11.3% Champagne 4.3% 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

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op

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layers

• 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

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aurent-

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errier

• 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

V

ranken

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ommery

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onopole

• 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

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anson

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CC

• 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

R

ecommendations

R

ecommendations

• 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

T

hank

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ou

Q

uestions?