Final Thought: Champagne — A Market Without Bubbles

  • Anthony Maxwell, Liv-ex Director

  • 22 Nov 2018 | News & Views

Champagne has long been an on-trade favorite, but in recent years it has also established itself as a key player in the secondary market for fine wine. Previously purchased predominantly for consumption, it is now bought, stored and resold for a profit later on as common practice. 

Steady, Growing and Broadening 
Compared to the broader market, price movements for Champagne have been without any sharp upward or downward movements in the past decade. Some of the major events that unsettled Bordeaux have had little impact on the Champagne 50 Index, which has steadily risen almost every year, as the chart below shows. Since its creation, the index has shown a compound annual growth of 9.52%. This makes Champagne the second-best performing region after Burgundy, which has risen significantly more than any other.

Moreover, Champagne’s market trade share has risen from 1% to 8% by value in recent years, and the number of different wines trading has multiplied. The average spread—the difference between the bid and offer—has shrunk to the second lowest after Bordeaux, making price discovery more efficient and the cost of trade lower.

All of these factors indicate a growing confidence for Champagne as an investment asset, and as a serious contender to other fine wine regions.

Vintage Dominates
While the secondary market for Champagne has broadened, vintages dominate, accounting for 95% of trade by value. Despite the high price and quality of many non-vintage Champagnes, they remain largely outside the investment portfolio. This is due to their perceived fungibility and, hence, seemingly endless supply.

All of the Champagne 50 sub-indices have risen in the past decade. Salon (+163%), which has declared the fewest vintages, has considerably outperformed the broader index.

Age Matters
Age stands out as the most important price determinant when it comes to Champagne vintages. Prices tend to plateau for the first few years after release, then gradually appreciate as the wine gets drunk and becomes harder to find. Unlike Bordeaux, critic scores do not appear to influence the price significantly, except in examples of extreme quality. Bottle formats and the color of the wine also contribute to its price performance over time. 

Champagne — An Investment Asset
Champagne is famous for celebration, luxury and excitement. It is perhaps ironic that as an investment, it has been characterized by calm, steady reliability; “a market without bubbles.” In recent years Champagne has transformed from a fringe to a key element of the fine wine market, and the fundamentals look strong. Time will tell whether this will continue; what history taught us is that it is a market mostly insusceptible to unsettling events.

Readers should take note that the views of this author represent those of a company with an interest in the wine trade. Liv-ex operates the global marketplace for fine wine. It offers trading, data and settlement services to professional buyers and sellers of fine wine. Private collectors can view Liv-ex prices and value their portfolios using Cellar Watch and find regular market analysis on the blog. The opinions of Liv-ex are their own and do not represent those of Robert Parker Wine Advocate or Wine Journal. Liv-ex contributes articles to Wine Journal that we feel are of market relevance to readers, but we do not specifically endorse this company.

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