The house of Champagne Pol Roger is directed by fifth generation family member Christian Pol-Roger (at far left), pictured with relatives Christian de Billy (right) and Hubert de Billy (front); he believes "Conglomerates have more financial weight than small firms, but they are not necessarily better."
Family Matters -A community of Champagne firmsholds on to its heritageBy Lyn FarmerAmong my many enduring images of Champagne, there is one that comes into view every time I drive from Reims to Épernay, leaving city life behind and crossing over the Montagne de Reims and into the heart of the vinegrowing countryside where villages and towns evoke a charm that easily recalls an earlier age. In keeping with this, the depiction is rendered in black-and-white and portrays a distinguished gentleman with a walrus mustache and a jovial, 19th-century air about him. In waistcoat and bow tie, he is a fin de siècle character straight from central casting. I have come to think of him as one of the people who, visit after visit, welcomes me back to Champagne.
Reproduced from a photograph of Eugène Mercier, the painting fills the outer wall of a building owned by the Champagne house he founded in 1858 at the precocious age of 20, and that remained in his family for several generations. Mercier proved a visionary figure in expanding the reach of the wine of Champagne, and rather than presenting it as only a beverage of the privileged, through his efforts he helped endow it with broader appeal and accessibility. He was among the first of the region's producers to introduce steam-powered mechanization and electricity within the winery. He showed the potential for winery capacity expansion with his 200,000-bottle vat made specially for the Paris World Exhibition in 1900, a then-unprecedented size for Champagne, though now not unusual.
The undeniable message the billboard intends to convey is the tradition and family nature of the Champagne business, at Mercier in particular. What the passerby doesn't realize is there is no longer a Mercier in charge at Mercier. In 1970, the house was sold to what became Moët-Hennessy, and a decade later merged with Moët's parent group, the huge conglomerate whose wordy name, Louis Vuitton Moët Hennessy, is invariably shortened to LVMH. It is the world's largest luxury products firm and in addition to the chic luggage, haute couture, perfumes and Cognac it markets, LVMH is also the largest producer of Champagne on earth.
On my last visit to the region in September, I half-expected the expression on Monsieur Mercier's face to have changed because the morning of my arrival, the Reims newspapers had carried headlines announcing that LVMH had just sold one of its houses, Canard-Duchêne, to entrepreneur Alain Thiénot. The reports all speculated that, because LVMH continues to focus on its highest revenue labels, Mercier would be next on the auction block. To wit, LVMH had sold Pommery to mass-market fizz maker Vranken the year before, so divesting itself of Canard-Duchêne was just the latest wave in the tide of consolidation that is engulfing both the wine world at large and, more glaringly, the comparatively compact Champagne region. Despite the recent sales, LVMH remains a powerful engine in Champagne, owning, in addition to Moët & Chandon, Clicquot, Ruinart, Krug and, for the moment, Mercier.
With so many brands, so many names and so much wine (cellars have been overflowing ever since a disappointing "Millennium"), Champagne has an image problem: How to market a luxury product for everyone, because if everyone drinks it, does it lose
its cachet? Just as few would purchase a Rolls Royce if they rolled off the assembly line by the thousands, Champagne has a certain mystique to uphold and perpetuate. To date, its makers have accomplished this tricky balancing act by charging a high price while simultaneously touting the industry's roots as a collection of family businesses with humble beginnings.
Family and tradition are convenient tools for marketing luxurious, artisanal products, yet in Champagne, small is good for image but bad for business. As the region's sales have jumped - from 100 million bottles per year in 1970 to more than 300 million bottles today - more and more Champagne houses (even the largest are still charmingly referred to as such) have been swallowed by corporations. The reality is that nearly half the Champagne produced in any given year is made by just ten large firms.
"Conglomerates have more financial weight than small firms, that is for sure, but they are not necessarily better," says Christian Pol-Roger, a fifth-generation director of the family-owned Champagne Pol Roger. "We are all a bit like fish in the sea: big and small. The small...must be careful not to be bitten." With an annual production of about 1.5 million bottles, Pol Roger is not quite a minnow, but nor is it a whale. And like other Champagne houses that are still family-owned, it must remain ever vigilant to maintain its independence.
Certainly, the trend toward increasing consumption translates into more money in the till and a seller's market, prompting some of the contraction, but it is French law that has made much of the current consolidation in the region (and the country) necessary. And therein lies a monumental problem.
"We have a crisis in Champagne," says Jean-Marie Barillère, CEO of two of the region's best known brands, Mumm and Perrier-Jouët, both now owned by international drinks giant Allied-Domecq. With full awareness of the irony, he notes, "Everyone in France has a dream of owning a bit of property, but the law makes it very difficult to pass the land from one generation to the next."
The reason is the 200-year-old Napoleonic Code. Still enshrined in French law, it requires property to be divided equally among the heirs of an estate. This condition, a carry over from the anti-aristocracy laws enacted after the French Revolution, applies to estates of any type, but its application is most evident in the struggle to keep plots of farmland together. Constantly splitting parcels among descendants makes it difficult to maintain control of land, especially should some heirs want to sell and cash in on the investment, while others scramble to raise the money to buy them out and retain family ownership.
For example, the house of Alfred Gratien changed hands two years ago when the Gratien family, also owners of a sparkling wine firm in the Loire Valley, was forced to sell all of its holdings when it could not equitably divide the estate among the firm's twelve heirs. The house was purchased by Henkell, an Austrian sparkling wine company, but in a different sense, it remains a family operation. "My family has stayed with the company even though the Gratiens have gone," says Gratien winemaker Jean-Pierre Jaeger. He is the third generation of his family to serve as chef de cave at Alfred Gratien, and when he retires in a few years, his son Nicolas will inherit the position. "It is unusual, I suppose," admits the younger Jaeger, "but why should a winemaker not feel tradition as strongly as an owner? In most cases, we are closer to the grapes and to the wine."
Bollinger President Ghislain de Montgolfier, a great-grandson of house co-founder Jacques Bollinger, says it is the cellar masters who often play the crucial role. "I ask in other houses who makes the key decisions, and in small houses it is usually the owner, but in most of the big, international conglomerates, it is the chef de cave and not the CEO because the executive doesn't know anything about wine, only about business." At Bollinger, Montgolfier employs four winemakers to make two million bottles per year but he makes the final decisions. "It must be this way to maintain our style," he explains, "but that is a family approach."
Bruno Paillard, who comes from a family of growers, but only established his already prestigious eponymous house 20 years ago, concurs. "The advantage of having a family house is that the style is maintained by a single nose and a single palate - I can take responsibility and don't have to share it. It reflects the personality of the house."
Perhaps the most striking example of the importance of personality is at Krug, one of the region's most revered houses. Four members of the Krug family are involved with the company in very visible positions: Henri is winemaker and his brother, Rémi, is the spokesperson for the brand; Rémi's daughter, Caroline, is involved in sales, and Henri's son, Olivier, works with his father in the vineyards and cave. And yet, the Krugs no longer own the venerable house. Another casualty of the difficulties of transferring property between generations, Krug was sold to Remy-Amérique in the mid-1970s and more recently to LVMH.
"We do control production, however," asserts Rémi, who vows that the Krug name must stand for a certain style, and that members of the family will assure the value of the name continues. "The personality of Krug is an important part of the wine."
Indeed, for much of its history, Champagne has been a wine more identified with personality than place. For many years, the appellation "Champagne" didn't even appear on the bottles of sparkling wine that graced tables and punctuated celebrations around the world. Generally, négociants simply bought grapes, pressed juice or even still wine from the many small growers and blended the resulting cuvée in centralized facilities, guaranteeing the quality of the wine in the bottle with their own name or the family name of the founder of the specific house.
As the international market for Champagne developed, brand identification with a family name became ever more important because it was less possible for the firm to have the direct, personal contact with customers that it had when the wine's reach was limited to a fairly small area. The family name, if not the person bearing it, can guarantee what wine historian Kolleen Guy calls "a form of personal assurance as to the quality and uniqueness of the product within the distinctive bottle."
To Christian Pol-Roger, the Champagne business is all about personality. "Tradition here is to talk of the captain, not the boat. In Bordeaux, wine comes from specific territory around a château. But Champagne is a blend. It is distinctively created by taste as much as the land. Our mission is to be sure our taste is marrying many elements. It's like the conductor of an orchestra bringing together many individual performers into a cohesive unit." To many, that cohesive unit is family.
The issue of family ownership has a particular application in Champagne because of the unusual structure of the wine industry there. One morning I drove to a favorite spot above the town of Aÿ with Daniel Lorson, the public relations director of the Comité Interprofessionnel du Vin de Champagne (CIVC), the region's quasi-governmental trade organization. Our destination was a small church on a hill with a vantage point that enables one to take in a broad panorama of the region's three most important growing areas: the Marne River Valley, the Montagne de Reims and, stretching to the south, the gentle slopes that outline the curve of the Côte des Blancs.
"This is the heart of Champagne," Lorson gestures, "and to see it from here is to see it in its homogeneity. It is like a tapestry, and it has many, many threads." Its proverbial threads are the people who grow the grapes, and after years of estates being divided and subdivided, the fabric may be wearing thin. There are now more than 15,000 registered growers in Champagne, a region that by law, and the confines of suitable terrain, can only accommodate 34,000 hectares (84,000 acres) of vineyard. Expansion is out of the question, but subdivision of existing land remains an option.
Pierre Larmandier is both a grower and a winemaker with property in the prestigious Côte des Blancs, where much of the region's chardonnay is grown. "My grandfather had what was, for Cramant, one of the grand cru villages, a big property. He had 20 hectares [nearly 50 acres], but he had five children, so each child inherited four hectares." To keep the entire vineyard together would have either required all members of a family to work together, or for some members to buy out the others, putting a financial strain on the family unit. In the end, each child took their parcel and grew their own wine from it. Larmandier laughs as he says, "this is one reason you see so many different labels with Larmandier on them."
In addition to the requirements governing division of property, there is an even more onerous problem borne by family estates: an inheritance tax that can climb above 50 percent of the value of the property being transferred. "The duty can be crushing, even for families that have every intention of keeping their property together and have no difficulty with the provision for equal division among heirs," says Nicolas Chiquet, winemaker at the small Gaston Chiquet house.
Chiquet's father, Claude, died in August, leaving the winery and vineyards to his three sons. They have kept it intact. "We began organizing this succession in 1975 - if we hadn't done all this work beforehand, from both the business and financial perspective, we would have had no alternative other than selling off part of our property to pay the taxes."
On the surface, the complex issue of birthright might seem only problematic for the 2,200 family growers who also make and sell their own Champagne from at least part of their harvest. Actually, it is merely the tip of an iceberg. Even the huge, publicly held companies are affected. As chairman of both Mumm and Perrier-Jouët, Barillère sums up succinctly: "This isn't only about the system of transfer from one generation to another, but about the very future of the Champagne industry."
Some 284 houses, whether owned privately or by a conglomerate, rely on the more than 15,000 growers, who hold small vineyard plots as family property, for the very fruits of their labor. By extension, skyrocketing vineyard prices, on which the death duties are calculated, pose a dire problem for all concerned. In short, death taxes drive up the price of fruit; alternatively, the sale of a vineyard from one grower to another prompts questions about the level of expertise possessed by the new owner. >
For all of its consolidation and 21st-century challenges though, Champagne is still rooted in a rich heritage born of generations of vignerons. So it is not surprising that the house of Pol Roger in Épernay looks from the outside like a large, gracious home. Inside, a sense of family tradition enrobes even an infrequent visitor. Upon entering, one is never led into an office. Indeed, I have never even seen an office. There is a bright, white room used for tastings down the hall, but discussions are invariably held in a parlor where, seated on a plush sofa, the family's history is palpable. The walls are filled with photographs, the oldest of founding patriarch Pol Roger. In 1848, he rejected his father's profession as an attorney to enter the wine trade at the tender age of 17. The scion of the family is surrounded on the walls by a supporting cast of descendants who passed the company down through the centuries to its present owners.
"We remain an independent house," says Christian Pol-Roger, "owned and managed by the descendants of our founder. Pol Roger had two sons, Maurice and George, and their family lines, named Billy and Pol-Roger, are maintained to this day." Christian de Billy is president of the Family Supervisory Board that technically owns the company; Christian Pol-Roger is a director on the board and manages exports for the company, along with Billy's son, Hubert, who handles the domestic sales. "We have hired an excellent managing director from outside the family, but the house is still very much in our hands," Pol-Roger says.
Most Champagne houses began as family enterprises primarily because in the 18th century the family was the basic unit of nearly all business. Even as late as the early 19th century, members of the aristocracy did not publicly involve themselves in what they considered the menial work of business. Though the Comte de Villermont owned vineyards and a winery, he would never permit his name to appear on a wine label, and so bottles carried the name of his German-born cellar master, Jacques Bollinger. When Bollinger married the Comte's daughter, the family line - maintained to this day - was clearly established.
Louis Roederer, which, like Bollinger, is widely considered one of the most financially solid of the family-owned houses, has been run for more than 20 years by Jean-Claude Rouzaud, a descendant of Louis Roederer and a trained enologist. He has strengthened the company's base through diversification, adding vineyards and wineries in the United States, Bordeaux and Portugal to the portfolio. His son Fredéric has recently begun to play an active role in the firm's management as well, continuing the family line at the house. Jean-Baptiste Lécaillon, cellar master at Louis Roederer, says there are advantages and disadvantages to family ownership. "Finance can be difficult for small houses, but I think something most of the family houses would agree on is that family management is a long-term management or a sustainable management: All the decisions are made to preserve - and improve - the assets like vineyards and reputation for the next generation."
Deciding how and what to preserve is difficult when transfer of assets between generations is so complicated, a situation made even more difficult in recent years by the rapid rise in land prices in Champagne. Nicolas Chiquet, whose family first planted vines in Champagne in 1746, says that even in 1935, when his grandfather decided to build a winery, he was able to expand the family's vineyard holdings at what was then deemed a reasonable cost. "When my grandfather bought land, it was the best, and land could still be found in places like Cumières, Aÿ, Mareuil and so on. It's old ground and old vines, so production is low but the quality is high," he says.
Bollinger's Montgolfier says growers who purchased property in the 1930s had a distinct advantage. "The vineyards of Champagne were first classified in 1911, and in 1927 a law was passed allowing for 31,000 hectares to be planted with vines [today, the size of the entire appellation is fixed at 34,000 hectares]. But in those days, I don't think more than 5,000 hectares were actually planted. The Champagne market was small, we had just been through the First World War and the economy was not in great shape." The situation could not be more different now.
"The land values today are ridiculous," observes Barillère, and the CIVC's Lorson echoes this sentiment: "The entire region is completely planted and because there is no room for expansion, prices go up; the more they go up, the higher the tax rises as well."
Prices have skyrocketed, especially in grand cru areas of the Côte des Blancs, where Anselme Selosse makes 40,000 bottles per year from about seven hectares of land. Sitting one afternoon in his cluttered office in Avize, the very heart of chardonnay country, Selosse showed me a letter offering him a vineyard plot for 50,000 euros. "It doesn't seem so much money for land," he says, "but look how small the plot is - about 500 square meters [just under 5,400 square feet]. That means that land here in the best areas is now costing a million euros per hectare," or about $430,000 per acre. "That makes Napa look inexpensive, doesn't it?" he asks with a wry smile.
Yet demand continues to increase. At Alfred Gratien, where cellar master Jean-Pierre Jaeger and his son are perpetuating their own family winemaking heritage, the new owner is laying a fresh foundation. "They [Henkell] believe we need to have some land, even though it is expensive." The company has already purchased one hectare [2.47 acres] and wants to add another three in the next few years. In Champagne, where everything revolves around the land, ten acres is significant. "Our quality and style depend on having up to 60 percent chardonnay in our vintage wine," says Jaeger, "but it is difficult to find good grapes from the Côte des Blancs on the open market, so we intend to buy [land] there." By contrast, the cash-strapped Gratien family would never have been able to afford prime chardonnay vineyards.
In the end, conglomerates will continue to purchase small, independent houses and groups, but others will remain sovereign or work out innovative partnerships. "You need a crisis to change anything in France," Barillère observes, alluding to the nation's pension system's well-publicized woes. "We know we have to change our system in Champagne, too - the question is how?" The region has finite limits; not only are the number of hectares under vine limited, so, too, is the maximum yield from the land - specifically 26 million cases per year. " In 2002, the industry produced 24 million cases. We're nearly at capacity, so the question is, what do the growers do now?"
The answer depends on which grower one asks. Shortly after the harvest ended in the Côte des Blancs, I posed that question one sunny afternoon to Pierre Larmandier at his small winery in Vertus, a town just south of the grand cru-designated area of the Côte. "Do you want to see where I make my wine?" he asks. We got in his car and in a few minutes we were in the rolling chardonnay vineyards that mark the slope, the côte that gives the area its name. "This is where wine is made, in the vineyard," Larmandier says. "You can drink my wine, but you can't understand it if you don't start here, in the chalky soil of Champagne."
It is the varying amounts of chalk in the soil that give not only the chardonnay of the Côte des Blancs, but the entire Champagne region, its character. To Larmandier, it is also a controlling factor that needs to be managed, and he does it meter by meter on his small plots of land.
"Low yields are important," he says. "The chalk here is good if you have a good place with good exposure. I don't worry so much about increasing revenue, I worry more about making good wine."
His neighbor, Anselme Selosse, says, "Preserving the terroir, the uniqueness of the area, is important, but that takes time and hard labor. Some growers use chemicals to increase yields because they think it will increase their income. It may, but it decreases quality."
Larmandier kicks the soil, demonstrating how shallow the dirt is, and how hard a vine has to work to get nutrition. His approach to farming this valuable patch of earth is respectful. "I don't use herbicides to keep back the weeds - you don't cultivate soil with chemicals." Instead, he plows his vineyard four or five times per year to keep down the weeds. He points across the slope to a barren vineyard plot. "There was a virus in those vines, so they wanted to replant it, but first they sprayed it
with Roundup [a commercial herbicide] so now everything there is dead. Not just the vines; the soil has lost something, too. That's what happens when people follow a formula dictated by someone else rather than being in touch with their land."
Not all growers are winemakers, or in the parlance of Champagne, a récoltant-manipulant, designated by the letters RM on the wine label, a grower who independently makes wine from his own grapes. Most are simply vineyard owners who sell their entire crop to one or more houses (the labels of the houses carry letters NM for négociant-manipulant), or to a local coopérative-manipulant, CM.
Cooperatives account for a substantial amount of the Champagne made and sold around the world, and represent one way small growers under financial pressure try to stabilize their investment. The relatively well-regarded Union Champagne cooperative has a combined membership of 1,200 growers, who collectively own well over 1,000 hectares, easily making the co-op one of, if not the largest "landholders" in the region.
The union produces several million bottles each year, but the figure is deceptive, because as much as 90 percent of its output is sold sur latte (finished wine bottled and aged on the lees after its secondary fermentation) to large houses such as Moët and Clicquot. The buyer then applies its signature style to the wine when it is disgorged and a dosage is added. By contrast, a few family houses, including most forcefully Bollinger and Roederer, who have issued public statements in this regard, never buy sur latte, but do purchase grapes from cooperatives.
Roederer's Lécaillon explains that, "When co-ops started, relations between the houses and the growers were year to year, and the growers wanted more protection for poor years. Today we have long-term contracts with growers. Co-ops are losing some of their control over growers who come to the négociant for a long contract and to be part of a family."
"In some cases, co-ops are a problem because they're working in a volume market rather than a quality market and encourage growers to increase yield, which we know decreases quality," adds Paillard. When it comes to making wine, "some are top quality, but many are not."
By their nature, co-ops deal directly with the growers and can encourage them to harvest at a certain time or to follow standardized cultivation practices. "The houses cannot approach growers as easily," Paillard notes, adding that, "Growers can also save taxes by selling their grapes and taking their wine back later from a co-op because they don't pay tax as long as the wine is there. This gives co-ops a competitive advantage [over négociants] and lets them build huge stocks of grapes and wine," Paillard asserts. "The problem any small Champagne house faces is maintaining stocks of wine."
