I was struck by this quote when I stumbled across it in yesterday’s Times newspaper.

Here’s the full quote – “We deplore this practice because the price is part of the dream. By cutting the price, you destroy the dream. We’re being treated like washing powder and that does not improve the image of [our product].”

Can you guess the product, and the practice to which someone is objecting so strongly?

I picked it out because it’s the sort of sentiment that I have often heard (and sometimes felt) during my 14 years in the diamond business.

The practice being referred to is selling too cheap, and the product is… champagne.

The quote came from Monsieur Daniel Lorson, spokesman for something called the Champagne Producers’ Professional Committee, and his specific gripe is with champagne producers who are selling their product at ‘accessible’ prices rather than, say, stockpiling it in their cellars and waiting for demand (and prices) to recover.

As a result one can buy a bottle of champagne (the real stuff from the authentic region of France, not a bottle of fizz from some other part of the world) for less than €12 in France and less than £10 in the UK.

It’s fairly obvious why this is happening: the recession has hit demand for champagne hard, and according to one study cited by the Times piece, around half of the Champagne region’s 5000 vineyards are in danger of going bankrupt.

The big famous names can afford to hold on to their stock until the world economy picks up (there are about 1.2 billion bottles in the region’s cellars – that’s four years’ supply!) but the lesser producers are faced with little option but to slash prices to make sales as they try to stay in business.

As a champagne consumer I’m delighted that I can buy a bottle of champagne for less than £10 (of course one can already get very good sparking wine for less than £10), and there must be countless millions of consumers who agree, but for the ‘brand’ of champagne I can see the problem, and I recognise it from my own world of diamonds where promotional selling, discounting, selling on the Internet, and other such practices have long been frowned upon by some within the industry.

It’s true that there is always tension between the salesmen who want to make sales to hit this year’s targets and the marketers who are concerned with positioning in the marketplace: image, values, associations, perception – things that must be built to last beyond this year’s sales target.

Indeed, marketers – at least the good ones – are often just as obsessed with excluding people from their target market as they are with including people. Who not to sell to can be equally important as who to sell to, and price is a very good signpost to postioning in the marketplace: premium price –> premium value –> premium customers… This is especially true of luxury goods.

So is M. Lorson from the Champagne Producers Professional Committee right?

Well, he probably is right to think in this way, but wrong to articulate it for public consumption. The public don’t like to be told that they really shouldn’t be able to get a bargain and that they really ought to be paying more, especially in these difficult times.

This just makes the Champagne Producers appear to be arrogant and out of touch, and the plucky young New World producers and small independant champagne houses of France will probably pick up some business and respect as a result of this sort of intervention, so the statement will have backfired.

And there’s another danger: if this chap is speaking for a group of independent businesses, i.e. the big name champagne houses, and he makes a statement such as this about price, then to a regulator it could look like collusion or cartel-like behaviour designed to artifically support prices (including by limiting production: all those stockpiled bottles…), which would contravene Article 81 of EC Competition Law!

Anyway, that’s a debate for the lawyers. For a consumer perspective I’ll leave the last word to one of the people who commented on this article on the Times website:

“The price is part of the dream? Depends if you’re buying or selling.”

Read the Times article here.