* Champagne sales seen falling in volume with revenue flat
* Concern over British market turning to cheaper wines
* Most markets outside Europe still seen growing
By Pascale Denis
PARIS, Dec 24 (Reuters) - Economic woes in champagne's home market of France took the fizz out of global sales of the prestige sparkling wine for the second year in a row in 2013, with buoyant exports to new markets unable to compensate.
Industry estimates gathered by Reuters showed that sales by volume will drop between three and four percent this year after a 4.4 percent fall in 2012, leaving total revenues flat at best.
Tougher competition from cheaper Spanish or Italian rivals in the large British retail market has got the champagne houses of northern France trying to raise quality. This, they hope, will justify higher prices for a wine governed by strict limits on how and where it is produced.
"Over the past two years the situation has been difficult in Europe, mainly in France, while it remains solid outside Europe," Etienne Auriau, financial officer of Laurent Perrier , the world's third largest champagne brand, told Reuters.
Market professionals contacted by Reuters said demand in France, which still accounts for 51 percent of sales volume, was down more than six percent by October with no sign of improvement by the year-end.
France's economy, the second largest in Europe after Germany's, is expected to see growth around zero this year.
Official data released on Tuesday underlined the gloom, with French consumer spending largely flat in November and companies seeing profit margins squeezed to their tightest in nearly 30 years.
Although overall sales in Europe fell by a less dramatic 2.6 percent, industry players said concerns were growing about Britain, the largest market after France and which accounts for 10 percent of world sales.
"The (British) economy is doing a bit better but the market is quite mature," said one industry expert who declined to be named.
Official champagne figures for 2013 are not published until next February but market professionals fear a new drop in sales this year will take overall volumes below the 300-million bottle marker that is psychologically important to the sector.
That compares with a record 339 million bottles sold in the heady year of 2007 before the global economic and financial crisis began weighing on the market a year later.
Moreover, while industry efforts to promote more expensive bottles such as special export blends meant revenues rose from 4.1 billion euros to 4.4 billion euros last year, total 2013 revenues are seen flat at best, Auriau said.
QUALITY THE KEY
The world of champagne is dominated by luxury group LVMH , which owns best-sellers Moet & Chandon and Veuve Clicquot on top of Dom Perignon, Ruinart and Krug brands, and Lanson BCC, the second-biggest champagne group.
Specialist champagne-makers also include Vranken and drinks group Pernod Ricard's Mumm and Perrier-Jouet brands.
Champagne-makers are not optimistic about sales this year in the United States, the second largest export market.
However they hope that a growing taste elsewhere for rosé champagnes, special blends and fine vintages, as opposed to normal "brut" champagnes containing a mixture of years, will pull sales by revenue above highs notched up last year.
Producers hope for good sales in Japan, which became the fourth biggest importer last year, thanks to a rebound in its economy and an increasing number of local connoisseurs.
Australia, where sales jumped 11 percent last year, should also continue to grow while African countries such as Nigeria were seen as promising, they said. In China, even though the market doubled last year, sales remained in their infancy and mostly limited to Beijing and Shanghai.
"Only major exporters are seeing satisfactory growth," said Thibaut Le Mailloux of the Comite Interprofessionel des Vins de Champagne (CIVC) trade body.
Champagne, which can be produced only in the region of the same name, is facing tougher competition from Spain's cava and Italy's prosecco sold for as little as a third of the price. In Britain, for example, supermarket prices for champagne start around 25 pounds ($40) against seven pounds for the other two.
"Competition exists, it's not new, and quality is increasing. Champagne producers must be careful and maintain quality at its highest level," Laurent Perrier's Auriau said.
He and others interviewed said the champagne sector had to combat that by intensifying existing efforts to enhance the quality of its own product, notably with refinements in the winemaking process.
Some producers are also looking at better ways to judge the precise moment at which to begin harvesting grapes to maximise quality.