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Champagne producers worry coronavirus will close promising Asian markets

Champagne producers worry coronavirus will close promising Asian markets

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EPERNAY, France — Producers from the world’s most exclusive wine region fear that the spread of the coronavirus could stifle business opportunities in Asia, a massive and largely untapped market for Champagne.

“It impacts dramatically,” explained fifth-generation Champagne producer Evelyne Roques-Boizel when asked whether the virus could threaten her family’s ambition to expand into new markets.

“I mean everything has stopped in China completely,” she added, sitting alongside her eldest son, Florent Roques-Boizel, whom she tapped a year ago to succeed her as CEO and president of Champagne Boizel.

France exports several types of products to China, including automobiles, pharmaceuticals and wine. According to the French finance minister, China is the No. 2 market for the European country’s wine. Champagne exports to China have also recently increased.

This growth is reflected in the strategy at businesses such as Champagne Boizel. Florent Roques-Boizel, now at the helm of the 186-year-old Champagne house, said his focus has been on growing the brand’s footprint in Asia.

“Obviously now the timing is not ideal with the virus,” he told CNBC during a tour of Champagne Boizel’s grounds.

“But it’s an interesting market because it’s growing for Champagne and has opened up to small producers and more boutique houses. And when I was there maybe about two years ago, we saw that the level of education among the professional sommeliers in the restaurants was increasing.”

Since its emergence nearly two months ago, the deadly flu-like virus, named COVID-19, has killed more than 2,700 people and sickened more than 79,000 worldwide. Markets plunged this week as fears about the contagion spooked investors after a surge of new cases over the weekend.

Last week, France’s finance minister said the government estimated that the coronavirus epidemic would trim 0.1% from the nation’s economic growth, citing a heavy Chinese reliance on auto and pharmaceutical sectors.

“We also have another sector that’s heavily impacted, which is wine production. Let me remind you that China is now the second market for French wines, and so for wine production, to which I am a very attached, it’s a double penalty,” French Finance Minister Bruno Le Maire said Friday during a news conference referencing the U.S. tariffs on French wine.

Last year, the Trump administration imposed 25% duties on a plethora of European goods including French still wine, in response to aircraft subsidies. Following those tariffs, the industry braced for another round of duties in retaliation for a French tax on digital services. Those negotiations are ongoing, adding another layer of uncertainty.

And back in the famous white soils of France’s Champagne region, approximately 90 miles northeast from Paris, producers saw a slight drop in exports amid this growing cloud of economic and geopolitical anxiety.

Champagne exports declined from 301.9 million bottles in 2018 to 297.5 million in 2019, according to the latest figures published by the Comite Champagne, a trade association that represents growers and Champagne houses.

Read more: Amid Brexit and US tariff concerns, French wine and spirits exports hit a record high in 2019

Despite the dip in exports, the Comite Champagne estimates that the region brought in $5.4 billion in sales.

The Boizel’s produce approximately 500,000 bottles of Champagne annually and export nearly half of their output overseas. Outside of France, Japan is their second-largest market followed by the United Kingdom and Italy.

Behind the United States and the United Kingdom, Japan represents the world’s third-leading export market for Champagne. In 2018, Japan saw nearly 14 million bottles at a cool $345 million, according to the latest figures from the Comite Champagne.

Meanwhile, the Chinese market for Champagne has a potential base of 29 million consumers and saw a 9.1% rise in exports to 4.7 million bottles in 2018.

So while coronavirus may be hurting demand, there’s still a foundation for Champagne producers to build on. Champagne Boizel, for instance, has been assessing business opportunities in China for three years.

“We think for the future it will be an important market,” Florent Roques-Boizel said.

This article was originally published by CNBC.

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