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T he C hampagne C luster Presented By: Sasha Shapiro, Vala Goharbin, Mariya Minkova, Nishant Bangar.

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Presentation on theme: "T he C hampagne C luster Presented By: Sasha Shapiro, Vala Goharbin, Mariya Minkova, Nishant Bangar."— Presentation transcript:

1 T he C hampagne C luster Presented By: Sasha Shapiro, Vala Goharbin, Mariya Minkova, Nishant Bangar

2 A genda 2 Overview of France History of Champagne Champagne Cluster Recommendations

3 O verview of F rance

4 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

5 T he F 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

6 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 % Contribution to GDP I ndustries France Food Retail Industry Segmentation, 2009

7 H istory of C hampagne

8 T he B eginning of B ubbles 8 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

9 T he F irst C 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

10 M odern C hampagne I ndustry 10 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

11 T he T 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

12 C hampagne C luster

13 13 STRATEGY & RIVALRY Roles in champagne production Law – barriers to competitiveness DEMAND CONDITIONS Local demand World market China & the emerging markets RELATED INDUSTRIES Glass bottles Packaging Corks Tourism Agriculture Education and R&D FACTOR CONDITIONS Location, climate, terroir Champagne vine growing Capital availability Infrastructure Government Institutions: CIVC & INAO

14 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

15 F actor C 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

16 T he C hampagne- A rdenne T 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

17 V ine G rowing in the R 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

18 T he G overnment’s R 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

19 D emand B y M arket Main Markets The French a little over half of the world’s champagne (56%) Britain is the second largest consumer of champagne The Italian market is also booming Demand in emerging markets such as India, China and Russia, is also growing Emerging Markets Fine wines and champagnes have become a status symbol for the Chinese 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 Though a status symbol, the Chinese are becoming more sophisticated 19

20 I ncrease in D 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

21 R elated I ndustries 21 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 Glass Bottles 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 Packaging France has only 4% of the world production of cork Use of cork has dropped from 95% to 70% in the last 15 years Cork 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 Tourism Accounts for almost 38% of the region’s total exports Employs almost 25,000 people in over 2,000 companies Agriculture 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 Education & R&D

22 G lobal C hampagne M arket 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 Global Wine Market Segmentation: % Share, By Value

23 T op P 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

24 L aurent- P 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

25 V ranken P ommery M 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

26 L anson B 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

27 R ecommendations

28 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 28 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 R ecommendations

29 T hank Y ou Q uestions?

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