Industry Champagne Report 2014 points to future value

Peter Shakeshaft - Vin-X blog Drinks Business published their 2014 Champagne Report earlier this month updating the market on the 2030 initiative launched in 2012 to improve the long term value of the region and its wines.

In response to the massive success of sparkling wines and the emerging power of this competition the two key organisations, the Union des Maisons de Champagne and Champagne’s Syndicat Général des Vignerons launched Project 2030 which would see both the growers and the houses improve Champagne together.

The report claims that Project 2030 is primarily a response to three major challenges for the region:

  1. a desire to distance champagne from an increasing number of high quality sparkling wines
  2. a need to develop consumer understanding of the key attributes of Champagne
  3. to eliminate the damaging effect of sur latte trading – which does not apply to the Grand Marque (investment-grade champagnes).

Champagne Champagne has therefore decided to consider further measures to make sure its output is better than sparkling wines from other regions of the world and to communicate its finer attributes more effectively.

Project 2030 aims to address quality through the introduction of tougher regulations on wine-making and protecting the long-term health of Champagne’s vineyards through continued improvement on the guidelines for viticulture.

Marketing Champagne is a critical component and the region will work harder to articulate its regional distinction and the fact that it is a designated area with strict quality controls. The consumer clearly needs to understand what makes Champagne unique. Without doubt this education would drive demand from certain aspirational markets and in particular create further recognition of the value of the investment-grade champagnes.

The ultimate aim in the retail Champagne market is to move from driving value from volume to creating value from growth in value itself. This process has started with the reduction in the supply of cheap generic Champagne. This is partly due to the price of grapes, currently at its highest level ever driving growers to sell their raw material to the houses.

Project 2030 also strives for greater transparency on production and labeling with the proposal that the winemaker’s name be added to the label, this would further aid the traceability of Champagne, i.e. provenance – all of value to the investor.

The growth in cheaper sparkling alternatives has certainly engaged new consumers particularly in recent more challenging economic conditions. With an improving environment the report questions whether there is an opportunity for Champagne to communicate with these new consumers positioning the wines of Champagne in a more aspirational manner than the sparklers they have become accustomed to drinking.

The entire plan for Project 2030 has been devised to improve the region’s profitability but in so doing it will further enhance Champagne’s cachet both to the consumer and the investor.

From an investment point of view the performance of Liv-ex’s Champagne 50 Index tells its own story – a solid performer, guaranteeing consistent returns providing a stable balance to more market sensitive wines. See the chart for comparison to Bordeaux and gold.

Chart: Champagne, Fine Wine + Gold

Liv-ex Power 100 Report 2013 ranked Taittinger, Comtes de Champagne 6th in the top ten wines measuring year on year market price performance at 35.34%. Liv-ex co-Founder, Gibbs explains the success of Champagne on the secondary market “The volumes are big enough for broad distribution, it is released ready to drink and once it’s gone, the price begins to drift up.”

Liv-ex Power 100 Report 2013 recorded Taittinger, Comtes de Champagne as 25th, Louis Roederer Cristal 28th, Krug 29th and Dom Perignon 34th in the 100 most powerful wine brands in the world.

Our view: Champagne, like Right Bank Bordeaux, is increasingly in demand from collectors looking for good value investment. The Champagne wines benefit from high critics’ scores, relatively low entry prices compared to the world’s most powerful brands, consistent returns and have continued to prosper from portfolio diversification away from Left Bank Bordeaux.

An essential element to a balanced wine portfolio.

To read full Champagne 2014 report click here: