French champagne loses its fizz

Published 2021년 2월 25일

COVID-19 popped the French champagne bubble, as celebrations and social gatherings have become limited, consumption reduced from its top importing country - the US. France has also been in danger of being subject to tariffs from the US, the same as still wines have, which could change with the US' new administration.

People are guzzling less champagne as COVID-19 restrictions have eliminated social gatherings, the main factor in champagne consumption. Travel restrictions also meant decreased sales in duty-free shops, and restaurant and bar traffic came to a halt. France, given that it is the world’s largest exporter of champagne, is bearing the brunt of plummeting consumption. In addition to the coronavirus, French champagne has been in danger of tariffs from the US due to the Airbus-Boeing dispute, which could exacerbate a drop in demand.

COVID Hurts French Champagne, US Loses Demand

French champagnes in 2019 contributed 22% of its wine and spirits exports, with a shipment of 297.6 million bottles, or a value of 5 billion euros (Comite Champagne, 2019). As the wine and spirits industry is the second-largest export sector, the loss will create a rippling effect on the entire economy. Exports of champagne decreased by 20.5% in 2020, from the culmination of the effects of closures and increasing tariffs from the US. France’s top export destination for champagne has been the US, taking up an estimated 20% share of its total exports.

From the looks of it, the US enjoys French champagne but has threatened to include champagne for goods facing punitive duties, like still wines, in light of the Airbus-Boeing spat. The US at one point threatened duties up to 100%, which was a shocking increase compared to the 25% which still wines were subject to. France, however, had managed to ease tensions with an unofficial cease-fire until the end of 2020.

Compared to wine, champagne holds a higher value, of 6.5% more than the average wine exports, making its drop in demand even more significant to the wine and spirits industry. Looking at exports to the US alone, (HS 22041011 Champagne with PDO), there is a noticeable drop from 2019 to 2020. For example, compared to May 2019 with May 2020, the export value plummeted by 76.6%. Exports experienced some recovery after hitting one of their lowest points in 2020 during the spring as the holiday season approached, but still not up to the same levels as the previous year. Despite being spared from duties, complications from the coronavirus have hurt exports to the same or more degree as still wines.

Champagne sees new lows

Source: ITC Trade Map.

What will 2021 Bring for French Champagne?

Unlike the mounting fears of the loss of the US market, France’s second-largest export market for champagne - the United Kingdom, has not been a subject of concern. The UK demand for French champagne has withstood hardships, and suppliers believe that it will continue to do so even throughout the Brexit and the pandemic. Additionally, with the coming of Brexit, instead of imposing stricter regulations on imports of wine, imports have become more simple, and prices will not see significant increases. For 2021, French exporters may see relief in the US market as well with its new administration, which has expressed interest in resolving the 15-year old Airbus-Boeing conflict, indicating that there likely won’t be an escalation of tariffs to French champagnes. With the wider implementation of vaccines, recovery is in sight for the US, hopefully, bringing a reason to celebrate.

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