Investing

Champagne industry bubbling with investment opportunities

Champagne could be a better investment than gold and the S&P 500, having outperformed both in 2022.

The London Internation Vintners Exchange (Liv-Ex) reported that, between January and September 2022, a case of all-Chardonnay 2012 Salon Le Mesnil soared 232%, from £3,800 to £12,600.

The Liv-Ex Champagne 50 Index tracks the price performance for recent vintages of a dozen top brands. This index outperformed gold, the FTSE, and the S&P 500.

The Champagne 50 was up 21.6% last year and, for five consecutive months, was the best-performing sub-index of the Liv-Ex 1000. The number of Champagnes traded also rose 13.5% in 2022.

While the prices have since cooled down and even decreased, there is still hope for the Champagne market in 2023.

Tom Gearing, chief executive officer of Cult Wines, told the Economic Times that he’s positive but cautious about the Champagne market for 2023.

According to Gearing, there is continued strong global demand and the region’s serious brand power and wide distribution bodes well for the product.

Why Champagne? 

Roland Peens, director and business development manager at Wine Cellar, said the growth of Champagne is largely driven by brand appeal.

He told The Money Show with Bruce Whitfield that Champagne houses have successfully sold wine with incredible brand appeal, which feeds into the fine wine market and appeals to the luxury end of the market.

“There are more and more wealthy people today who are all finding a taste for Champagne, and there’s only a finite amount of it.”

There is an innate geographical scarcity with Champagne, as a product can only be classified as such if it was made in a particular area of France.

Champagne needs to be produced in the Champagne region of northern France.

This scarcity keeps the product’s price – and the demand for it – high.

In addition, because Champagne may need to age for anywhere between 15 months and 10 years, there are many costs involved in the production that drive the price up further.

Which bottles should not be popped?

Peens described the LVMH brands as “clear winners” in the Champagne market, as they have multiple brands and wide distribution of their products.

LVMH owns several Champagne brands, including Moët & Chandon, Dom Pérignon, Krug, Ruinart and Veuve Clicquot.

LVMH Moët Hennessy Louis Vuitton is a French holding and conglomerate specialising in luxury goods, including Champagne.

Its subsidiaries include Hennessy, Dior, Louis Vuitton and Moët & Chandon – one of the world’s largest Champagne producers.

LVMH reported good growth in its wine and spirits division in 2022, with profit from the recurring operations of this group up 16% – to which Champagne contributed 6%.

LVMH is listed on the Euronext Paris Eurolist, and its share price is up more than 220% over the past five years and 26.83% over the past year.

One of its brands, Dom Pérignon, is particularly valuable due to its “P2” and “P3” labels.

A Dom Pérignon P2 is a late-release vintage cuvée aged for around 15 years in a cellar. The bottle marked P3 has aged for about 30 to 40 years.

A Dom Pérignon Brut 1961 costs around $2,200. However, a Dom Pérignon P3 Plentitude Brut 1969 is priced at around $8,700.

Vineyards in the Champagne region of France.

Some tips

Below are some things to look for on a Champagne label to know whether it is valuable.

  • Producer: Champagne from well-known producers such as Krug, Dom Pérignon, and Cristal tends to be more valuable.
  • Vintage: Vintage Champagne (made from grapes harvested in a specific year) is generally more valuable than non-vintage champagne.
  • Age: Champagne that has been aged for longer periods is typically more valuable, although this is not always the case as some champagnes are designed to be enjoyed young.
  • Rarity: Limited-edition or rare Champagnes produced in small quantities can be more valuable due to their scarcity.
  • Condition: The condition of the bottle is important as well. A bottle that has been stored properly in a cool, dark place will be worth more than one exposed to heat or light.
  • Provenance: The history of the bottle can also impact its value. Bottles that can be traced back to their original source and have a documented history of proper storage will be worth more than those with an unknown or questionable history.

Below are some ways to invest in wine, according to Investopedia.

  • Buy, store, and sell individual bottles.
  • Invest in stocks of companies involved in the wine industry (such as beverage distributors and makers).
  • Invest more broadly in mutual or exchange-traded funds targeting “sin stocks”, the consumer staples industry, or other themes which may include wine.
  • Work with a service that manages, stores, and insures a wine collection for you.

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