Champagne De Castelnau Facing Challenge

Champagne De Castelnau Facing Challenge


Champagne De Castelnau: Branding and Growth Strategies
Current and Future Challenges of a Champagne Brand


Louis Charles, newly appointed Marketing Manager of De Castelnau (DC) left the conference room and went back to his office. By the end of this month, he needed to provide the board with a strategy to achieve a sustainable sales growth for the champagne brand, both domestically and internationally.

  1. Champagne: Market Size and Trends

From 2000 to 2007, Champagne sales rose by 21 percent, with a record-breaking 338.7 million bottles sold in 2007. This growth was driven by strong companies which invested heavily in their brands; and conspicuous consumption of luxury goods.

In the 1990s, France accounted for more than 60% of sales by value, whereas now it is about half. In the mid-1990s, ten markets sold more than 1 million bottles a year; now there are 17.

The largest geographic market is France, followed by the UK. Sekt, a wine carbonated by gas injection, dominates in Germany. Everywhere Champagne faces competition from other sparkling wines, mostly of inferior quality. The United States remains the second export market by value.

The French spend over two and a half times more on Champagne than the second keenest drinkers, the British. Compared to these two countries, per capita spend on Champagne in Germany, Italy and Spain remains modest, partly due to the popularity of locally produced sparkling wine. (See Figure 1: Annual Per Capita Spend on Champagne, by Country, 2003)

Figure 1: Annual Per Capita Spend on Champagne, by country, 2003. Source: Mintelgraphic image 2

Total sales revenues of the industry in 2009 reached €3.7 billion, a decrease of 16.6% compared with the €4.4 billion sold in 2008. In countries like Germany and Switzerland, sales of Champagne have been in decline, partially due to the general trend away from alcoholic drinks towards healthier, softer options.

The average price (not including tax) of a bottle of Champagne in 2009, worldwide, reached €12.71 - a 7.7% drop from 2008 values. France, US and UK, the top three largest markets for Champagne, have been hit hard, with consumers tending to choose cheaper sparkling wines from Spain, Italy, and California. Particularly in France, which represents 50% of the Champagne market, where sales fell by 3.6%, while exports to EU countries and non-EU countries declined by 6.5% and 6.2% respectively.

Nevertheless, consumption of Champagne in emerging markets is rising. Exports to Russia, China and India have increased substantially. In 2007, the consumption of French Champagne in China hit a record of 660,000 bottles, increasing 9 times in 5 years.[1]


The industry Value Chain could be summarized as follows: The production cost for the growers is, on average, €2.50 per kilo of grapes. They sell their grapes to champagne producers at €5 per kilo (1.2 kg. of grapes are required to produce a standard 750 ml bottle). The average production cost of one brut non-vintage bottle of Champagne is considered to be €7.50. Distributors add their margin (around 2-5%), and finally the bottle reaches retail channels. There, a hypermarket traditionally charges between 0% and 20% margin, whereas a specialized shop might charge up to 80% margin.

There are basically three dominant sales channels: hyper and supermarkets, discount stores, and minimarkets and mom-and-pop stores (some of them wine specialists). Though hyper- and supermarkets completely dominate in terms of volume, there has been a strong tendency to buy on promotions, which has favoured discount stores.

List price to End Consumer by Distribution Channel in France (in Euros per bottle of 75 cl.)
Hyper and Supermarkets / Discount stores / Minimarkets
2007 / 17,68 / 12,33 / 18,26
2008 / 18,56 / 13,29 / 19,00
2009 / 17,67 / 11,10 / 19,50

3.The Consumer

In general, Champagne drinkers can be split in two big groups. The first is connoisseurs, the smallest niche of the market. They are characterized by a regular Champagne consumption pattern, and do not necessarily always favour the well-known brands. Many of these consumers can be found in the traditional Champagne markets such as France, the UK, and Germany. The rest of the market is composed of occasional consumers that tend to buy the heavily advertised brands as a way to show others their success in life. They are found in every market, with a major proportion surfacing in non-traditional Champagne markets, such as the emerging ones.

4.Main Industry Players: Supply Side

Three players can be identified in the Champagne business: Champagne Houses (Maisons), Independent Winemakers (Vignerons), and Cooperatives. There are over one hundred Champagne houses, 66 cooperatives, and 5,000 smaller vine-growers producing wine in the Champagne region. These companies manage some 32,000 hectares of vineyards in the region.[2]

Table 1: Top 10 Producers of Champagne in 2008. Source: CIVC

Champagne House / Sales (million bottles) / Revenues (million €)
Moët Hennessy / 59.9 / 1,687
Boizel Chanoine (BCC) / 21.0 / 311
Vranken Pommery / 18.7 / 248
Laurent Perrier / 14.3 / 237
Pernod Ricard / 9.6 / 180
Remy Cointreau / 9.9 / 126
CVC Nicholas Feuillatte / 8.7 / 116
Martel / 8.0 / 116
Roederer / 4.5 / 108
Taittinger / 4.5 / 92

Moet et Chandon developed a traditional way to classify Champagne Houses. It basically grouped brands into three different categories: International Brands (Marques International); French Brands (Marques Francais); and Other Brands (Outre Marques).

International Brands usually assign 50% of their shipments to the export market.

The second category of brands (Marques Francais) sells most of their production (75%) in France through supermarkets. They are especially well-known domestically.

Finally Other brands, whose houses are not heavily advertised and have low brand awareness even in France. They are definitely niche players. De Castelnau belongs to this.

5.The Company and its brand: CRVC and De Castelnau

COOPÉRATIVE REGIONALE DES VINS DE CHAMPAGNE (CRVC) is the second largest cooperative in Champagne. Their production facility has an annual production of 10 million. It has obtained both the IFS (International Food Standard) and the BRC (British Retail Consortium) certificates at the highest level.

CRVC acquired the DC brand in 2003, although the brand actually dates back to 1916. Out of the annual production yield, 2 million bottles are available yearly to CRVC for commercialization, 300,000 of them for the brand De Castelnau. The rest includes bottles the organization produces for third party brands. Around 80% of De Castelnau production is sold domestically. The rest goes to the UK (16% of total volume produced), Germany (2%), and Italy (2%).

6.The Positioning Strategy of De Castelnau

Since joining the company as Marketing Manager in September 2009, Louis-Charles Pluot had a clear vision for De Castelnau: “We are not mass-market product and we want to create the brand image of De Castelnau that takes it away from being common Champagne. We want to sell a premium product at a reasonable price.” That means that we should be able to sell our Champagne at an average retail price of €20.” As the current retail sales price of De Castelnau is around €17 to €18 (retail price in the UK is £18; in Germany and Italy, €18) it didn’t seem like a big leap. However, Louis-Charles warned: “it will mean a category change and it has to be justified. That’s the reason we need to improve our branding activities.”

Table 2: Overview of Global Average Manufacturing Selling Prices and Shipments of De Castelnau

Source: Internal Information of CRVC

Average mnf selling prices per bottle (in €) / Shipments (in # of bottles)
2007 / 2008 / 2009 / 2007 / 2008 / 2009
11.55 / 11.89 / 11.39 / 180,010 / 297,044 / 221,492

In Champagne there are different types of opinion leaders: the recommendation of a sommelier or a journalist will attract the attention of knowledgeable people, those that drink Champagne mostly as a self-indulgence activity. In the case of the status seekers, “a high-profile Hollywood celebrity could work better,” as Mr. Pluot pointed out.

Distribution channels used by DC are Hotel, Restaurants & Bars (on-trade, 68% of total sales), Direct Sales to Individuals (B2C, 15%), Direct Sales to Organizations (B2B, 9%), Specialized Retail Stores (4%), and Wholesalers

7.Direct Competitors

Mr. Pluot identified several kinds of competitors for DC:

a)Other Cooperative brands;

b)“Connoisseurs” Houses;

c)Elite winegrowers aiming for their own high quality (Premier or Grand Cru) Champagnes to be distributed domestically and internationally.

8.Challenges Ahead

When analysing the situation, Mr. Pluot knew he was facing a challenging situation. On one hand, he needed to speed up the growth of the company. The brand goal he defined was: “Toestablish De Castelnau as a recognized quality brand in Champagne and make it the flagship of the CRVC. Increase shipments from 300K to 500K in 2012, and to 1 million by 2020. The intention is to split those shipments 50-50 between the domestic and export market.”

But many questions still remained: how to grow the business to reach those volumes, which export markets to cater to, which type of consumers to appeal to and with which value proposition, on top of that, which marketing communication tools to use given the restricted budget available.

He felt some information was missing. So he decided to consult the latest reports of CIVC (the Champagne industry government body) at

Question 1: What are the challenges of setting up International operations?

Question 2:What positioning challenges are faced by De Castelnau in these two scenarios: Domestic expansion and Global expansion?

Question 3:To what extent are De Castelnau’s actions likely to have an impact on its competitors?

Question 4: What profile of consumers does De Castelnau seek to target?


[2]The Sotheby's Wine Encyclopaedia, 4thEdition, by Dorling Kindersley, 2005, ISBN 0751337404