champagneWhile Champagne faces serious challenges, sparkling wine goes from strength to strength.

New research from Mintel finds the recession has encouraged as many as three in ten drinkers of sparkling wine or Champagne to switch to sparkling wine because it is cheaper. What is more, the recent popularity of sparkling wines is evident in the fact that today, seven out of every ten bottles sold in the UK are sparkling wine compared to three in ten that are Champagne.

The recession has accelerated the decline of pubs/bars and therefore weakened Champagne’s on-trade sales. This has played into the hands of the supermarkets, which have used heavy discounting to maintain consumer interest in the category. This has provided supermarkets with a valuable marketing tool to compete for footfall against each other, but the fallout has been the tarnished image of Champagne as a luxury brand. For example, Mintel’s research shows that a small – but significant – number (2.7m) of sparkling wine/Champagne drinkers think that discounts/promotions in supermarkets mean that champagne can no longer be considered a luxury item.

Supermarkets now account for 46% of all volume sales of Champagne in the UK, and with this bargaining power it will be difficult for Champagne houses to protect their higher price-points. Champagne on-trade sales declined by 31% in volume sales in 2009 due in part to declining pub revenues but mainly the product’s high price-point at a time of recession. Key to protecting the category’s luxury status will be formalising the two-tier system of non-vintage Champagne (currently drunk by around 8 in 10 of the UK population) and vintage or “proper Champagne”.

In contrast to Champagne, sparkling wine has continued to perform well over the past couple of years. Consumers are getting wise to the fact that not only is it a cheaper alternative to Champagne, but the quality is also improving. For example, four in ten drinkers of either Champagne of sparkling wine agree that “Sparkling wine is almost as good as champagne but a lot cheaper”, while a third think that ‘the quality of sparkling wine has improved in recent years’.

However, despite growing its UK on-trade sales in recent years, sparkling wine sold only a modest 13m bottles in this sector in 2009 – around a quarter of its total sales. Part of the problem is that consumers often do not think of sparkling wine when ordering a drink in a pub and bar. Also, when pubs offer it, they invariably do not add value to the serve despite sparkling wine being served in smaller flute glasses, but at a higher price point than many wines.

Climate change means that conditions are increasingly amenable to producing good English quality sparkling wine. This is something consumers here are starting to pick up on e.g. almost 3m people agree that the English make good quality wine these days.

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