Is Champagne the new Bordeaux?

Champagne has always been the drink of celebration. And now, investors are celebrating a combination of rising prices and tightening grape supplies, finding their wines are becoming more valuable. But, says James Lawrence, not everyone is celebrating.

Max Lalondrelle, fine wine buying director, Berry Bros & Rudd
Max Lalondrelle, fine wine buying director, Berry Bros & Rudd

For decades, prestige Champagne brands have been predominantly marketed as a superior choice for lavish celebrations, rather than as an investment option. Of course, a small percentage of buyers have always purchased to resell, but promoting Champagne as an investment was alien to most of the major houses.

That was until the past decade, when a string of excellent, media-hyped vintages encouraged fine wine merchants globally to diversify their offerings beyond Bordeaux First Growths. The result: a select number of Champagnes are now seen as both fine wines and an investment in their own right, with some brands adopting pre-release campaigns that carry more than a whiff of Bordeaux en primeur about them.

A different investment

Or perhaps semi-en primeur would be a better description, as on closer examination this current trend has major differences from the Bordeaux en primeur model. The Bordeaux system is built on the notion that buyers can purchase their wine many months ahead of time, securing their stock in favourable years and also benefiting from a slightly lower price. In contrast, brands like Dom Pérignon are released nine or ten years after harvest. Merchants, once given their allocations, can only begin selling the wine to consumers once the release has been announced. 

According to Max Lalondrelle, fine wine buying director for Berry Bros & Rudd (BBR), UK merchants are typically now told of an upcoming release three months before its set date, allowing them and the brand in question plenty of time to get the hype machine rolling.

“Dom Pérignon possesses all the qualities required of an investment wine which makes it perfect for ‘en primeur’ style sales,” says senior brand manager Richard Beaumont. “We are very comfortable with Dom Pérignon being seen as a vehicle to make a good return.”

On the day of the 2004 vintage release to merchants in May this year, UK wine merchant Bordeaux Index reported sales of over £1m ($1.55m) after just three hours. Looking back to the start of this phenomenon, BBR’s Lalondrelle explains: “We have always had some success in selling top brands of Champagne for maturing, but consumers have really only bought Champagne as an investment since the release of the best wines from the 2002 vintage.” He adds, in chorus with the rest of the fine wine trade, that the demise of Bordeaux en primeur is also responsible for the increase in Champagne sales.

As for which are the most sought-after Champagne labels, Justin Gibbs, director of fine wine exchange Liv-ex admits, “the spectrum of brands that attract investment is small.” The group includes Krug, Louis Roederer’s Cristal, Taittinger Comtes de Champagne Salon and Dom Ruinart. According to Liv-ex data, all the above continue to see impressive price rises in 2013; over the past five years, the indices for top Champagnes have experienced a price rise of 33%. “Prestige Champagne has always been a good investment – but perhaps only recently has the market begun to recognise this,” says Gibbs.

Adding vigour to the ‘en primeur’ movement has been the highly publicised, lower-than-average yield harvests the region experienced in 2011 and 2012. In June, Krug announced that despite the ‘excellent potential of the vintage’ they would not declare a vintage from the 2012 wines. The house admitted that, due to increased Asian demand, they simply wouldn’t have enough reserve wines for future releases of the flagship Grand Cuvée. “The priority for the House of Krug has always been the annual recreation of the Grande Cuvée. This year’s blending will use more than half the total volume of wines from 2012,” said Eric Lebel, Krug’s Chef de Caves.

The trend of rising prices and lower yields in 2011 and 2012, which put pressure on grape supplies, will likely strengthen the market and could be a good thing for consumers purchasing wines as futures. Whether this is sustainable in the long term remains to be seen. “After a while consumers get bored of buying the same wines and when they have 10 vintages of it in their cellars they might become harder to convince,” says Lalondrelle. “The Champagne houses will have to hold and allocate parcels wisely to avoid flooding the market which may collapse prices.” He says it’s a classic Catch-22 situation. “They need to make it rare but also need to sell it. This is what is happening currently with Bordeaux – they have killed the golden goose and it will take time to recover.”

Caution required

Not everyone in Champagne has welcomed this development. “We don’t tend to nurture or drive speculation on our wines and do not consider an en primeur campaign as having much legitimacy for Champagne,” says Dominique Garreta, Taittinger’s communications director. “Until now, the prices of vintage Champagnes were not dependent on the reputation of the harvest or scores as they are in Bordeaux. Introducing an en primeur approach and speculation may unbalance the market. Does this fit with the tradition of balance which has been at the origin of the Champagne industry’s success year on year?”

It is unlikely, however, that the majority of the trade will pay much attention to her concerns, as they have welcomed this development in the wake of weak Bordeaux 2012 sales. All the cards are in their favour: unlike young Cru Classé Bordeaux, the top Champagnes are prestige wines that are ready to consume on release, yet are also capable of improving for at least a decade and which may increase in value over that time. Taittinger’s own Comte de Champagne has increased in value over the past five years, partly because top Champagne tends to be consumed more quickly than fine Bordeaux, leading to reduced availability and pushing prices up in a relatively short period.

This issue will undoubtedly be debated amongst the Champagne industry for months to come, but considering that prestige Champagne is viewed by collectors as a safe and relatively affordable investment, leading brands are likely to remain – at least in the short to medium term – in high demand.

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