Investing in Champagne in 2023

Champagne performance in recent years

Despite the global pandemic and repeated lockdowns, the year 2021 is a huge boom in the fine wine market. The significant trends, according to Liv-year-end ex's report, were the expansion of the secondary market and rising prices, particularly for Champagne and Burgundy.

The Champagne 50 sub-index, which was the best-performing sub-index at the end of 2021, concluded the year up 40% and at a new high. After rising by 8.1% in November, the Champagne 50 rose by 5.8% in December, bringing the year to a close with a flourish. Rising prices for multiple vintages of Salon (2007, 2006, and 2002), Dom Pérignon's 2005 Rosé, Taittinger's 2006 Comtes de Champagne, and Bollinger's 2005 Grande Année drove the performance of the category.

Traditionally dominated by the reds, the fine wine market is shifting with the rise of Champagne. According to the Liv-ex index, in the past five years to October 31, 2021, the Champagne 50 index has climbed 62.45%, second only to Burgundy's 82.87 % gain.

Why the market favors champagne

Quality rise

In the past two decades, grower champagne gradually became the love of sommeliers and chic wine bars and restaurants around the world, coveted by even the most ardent Champagne connoisseurs. The growers, in pursuit of the quality and personality of Champagne, often offer a better value than those big Champagne houses, which are historically marketing-focused. However, high prices were achieved by top champagne growers such as Egly-Ouriet and Jacques Selosse. Récoltant-Manipulant, or grower Champagne, became a symbol of status, over the Champagne big names produced by big Champagne houses. The Champagne houses took notice, being motivated to use more sustainable viticultural practices, more innovative approach to vinification, and the creation of specialty cuvées to reflect the unique characteristics of single crus and vineyards. The trend of grower champagne pushed the quality rise of the Champagne houses, as well as the region overall.

Rising demand

Based on the statistics of Comité Interprofessionnel du Vin de Champagne(CIVC), 2021 was a record-setting year for Champagne sales, resuming at a sales value of 5.5 billion euros. Overall shipments, which include the domestic market, totaled 321.8 million bottles, up 31.8% from 2020's total, 8.2% higher than that in 2019, and just shy of the 322.9 million bottles sold in 2011, claiming the second-best year in the past decade.

The increase in demand came from both the domestic market and the export market. Before Christmas, which is the peak season of sales of Champagne, French wine merchants saw a shortage of Champagne, due to the booming of international markets. The traditional export markets, such as the United States, the United Kingdom, Germany, and Japan, performed well. The rising demand from new markets with the rise in awareness drove the increase even further.

Aging potential

A huge factor that determines the market value of fine wine is its aging potential. Many believe Champagne doesn’t age because it is a celebratory drink that should consume immediately. That is a general misconception. Champagne, by default, ages well, thanks to the acidity and carbon dioxide. Compared with still white, Champagne evolves slower and with time, it loses the bubbles and develops like a still white. A bottle of good champagne can easily last for 15 to 20 years with proper storage.

Key factors that determine the value of Champagne

Scarcity

In the fine wine business, scarcity is always the primary driver of investment returns. Investment-worthy wines are made in limited quantities and, when bottles enter the drinking window and are being consumed, become increasingly scarce. As a result, prices will naturally go up as the available supply decreases. The investment in Champagne is mostly driven by this factor as well. Despite the fact that the production volume of Champagne is greater than many other premium wines, the demand is vast, global, and growing. Investors should concentrate on “vintage” champagne or the top quality “prestige cuvee”, which are made from grapes harvested in one single year, usually, the weather condition is optimal, or grapes from the best vineyard plots. These bottles are produced in significantly lower quantities and will guarantee a bigger gain in long term. Take Salon le Mesnil 2002 for example, the exceptional bottling from the prestigious Champagne producer surged more than 80% in 2021, surpassing Bitcoin’s 75% rise.

Vintage

Because of Champagne's northern location, the quality of different vintage varies more than wine produced in warmer climates. A vintage Champagne will only be produced in years when the grapes have reached the perfect ripeness. The vintage reflects not only the characteristics of the vintage but also the producer's style. Vintages like 2012, 2008, and 2006 stand out in the market in recent years, for their supreme quality. Like all wine regions, Champagne is threatened by climate change. With the unpredictable changes in the weather patterns, previous great vintages become more and more valuable.

Critic scores and celebrity endorsement

Critics' scores and celebrity endorsement often drive consumer and investor demand. There is often a price impact where there is a consensus or particularly positive view from several renowned critics. Unlike in other wine regions such as Bordeaux, critics' ratings of Champagne appear to have less of an impact on price. On the other hand, Champagne is heavily endorsed by celebrities, whether it is a historic figure like Sir Winston Churchill’s fondness of Pol Roger, or a fictional figure like James Bond on Bollinger, or celebrities of popular culture like the American rapper Jay-Z, his complicated story with Louis Roderer Cristal and his investment in Champagne Armand de Brignac, all these contribute to the awareness and the demand for those specific bottlings.

Bottle size

Bottle size is a factor that is often overlooked. The size of the bottle will also influence the price. When Champagnes are first released, a larger format often commands a 10 to 20% premium over a standard 75cl bottle. This premium can fluctuate dramatically over time, with collectors or consumers looking for trophy assets paying significant premiums for extremely rare and very large bottles. Moreover, a larger format provides greater longevity.

What champagne to invest in 2023

Salon le Mesnil

Champagne Salon is a one-of-a-kind story. It is a story of the singular: there is only one wine of one variety from one vintage, sourced from one region, Côte de Blancs, the best terroir of Chardonnay, and one village, Le Mesnil-sur-Oger Grand Cru. Founded in 1911 by one man, Eugène-Aimé Salon, a champagne connoisseur enchanted and seduced by the terroir of Le Mesnil. Leading the Champagne investment in recent years, the 2002 vintage of le Mesnil was described by the producer as “captivating like a samurai sword”, and was rated full scores by Wine Enthusiast and Richard Hemming from JancisRobinson.com. Despite having a higher market price average than the 1999 and 1997 vintages, the 2002 vintage has the lowest price-over-points ratio due to its astonishingly high ratings. This indicates that it is currently the most affordable vintage. The prestige of the house and the rarity of the cuvee will ensure a strong performance in the fine wine market.

Louis Roederer Cristal

Louis Roederer is one of France's last remaining family-owned champagne houses. The Cristal, the iconic cuvée of Louis Roederer, with a one-of-a-kind marriage of delicacy, smoothness, and chiseled aromas. From 2017 to 2021, the price of 2009 Cristal has increased by 43%, while the price of 2008 Cristal has increased by 28% from April 2020 to early 2021. The 2012 vintage, has had a steady increase over the past months. It is well appreciated by the connoisseurs, as well as the pop culture, pretty much a guaranteed high demand in the wine market.

Dom Pérignon P1 & P2

As anyone who knows a bit about the history of Champagne may know, Dom Pérignon invented Champagne. Today, the prestigious Champagne belongs to the LVMH group, as one of the luxury Champagne brands. Although all the vintage Champagne from Dom Pérignon are investment worthy, P2 and P3 are among the greatest Champagnes in the world. In 2014, Dom Pérignon replaced the former Oenotheque collection with Plenitude scales, which signifies the evolution of Champagne. These are the late disgorged

Champagne with long bottle aging with the lees. P2 and P3 represent the highest expression of Dom Pérignon and are extremely rare in the market.

Krug Clos d'Ambonnay

Another luxury Champagne house of the LVMH group, Krug is considered to be one of the best Champagne houses in the world. Performing well in the fine wine market for almost all its cuvees, Clos d’Ambonnay is a rare gem from Krug. Grape harvested from Grand Cru Ambonnay, one of the best terroirs in Champagne for Pinot Noir, Clos d’Ambonnay is the ultimate expression of the single cru. The house only produces around 5,000 bottles of Clos d’Ambonnay for each vintage, which sets the overall quantity of this wine at 25,000 bottles in total since 1995.

Boërl & Kroff

Boërl & Kroff is a must-have if you dive into Champagne investment. Not well-known by the general public, this unique and young brand found a place among the most expensive Champagne bottles in the world, with several record-setting sales. In less than 30 years, Boërl & Kroff has become the darling of the dining tables of French president’s residency, the wine lists of top Michelin restaurants around the world, and a symbol of exclusive, luxury Champagne brand.

Armand de Brignac Brut Gold

Often referred to as “Ace of Spade”, Champagne Armand de Brignac remains a pioneering brand in luxury champagne, distinguished by the pewter ace of spades affixed to the distinctive, label-less bottle. As the emblematic cuvee of Armand de Brignac, Brut Gold was served at Queen Elizabeth II’s dining table and praised by wine critics like Jancis Robinson. Its excellence in winemaking is seldom discussed whereas the brand receives the image of extravaganza in pop culture. Besides Jay-Z, the shareholder of the house, In celebration of the Dallas Mavericks NBA championship, Mark Cuban spent $90,000 on a 15-liter bottle (10 magnum bottles) of Armand de Brignac in June 2011. A week later, the Boston Bruins paid $100,000 for a 30-liter bottle of Armand de Brignac dubbed the "Midas”, which was one of only six bottles released worldwide.

Pol Roger “Sir Winston Churchill”

Apart from those rare bottles mentioned above, for more modest and patient investors, Pol Roger’s “Sir Winston Churchill” will be a perfect choice. The celebrity effect lasts for decades of the flagship cuvee of Pol Roger, the quality at the same time, conquered the palate of the wine critics. According to the market prices on Liv-ex, for recent vintages of Sir Winston Churchill, from vintage 2002, the prices haven’t caught up the high critics scores. In the meantime, older vintages traded at higher prices, despite the more modest scores compared with the newer vintages. It is safe to say, with time passing by and the evolution of the wine, plus the decrease in supply for the older vintage, the prices of the more recent vintage will go up.

Bollinger Grande Année

Coming from James Bond’s favorite Champagne house, Bollinger Grande Année is undeniably delicious Champagne to drink and easier to acquire in the market, contrary to the exclusive and rare bottles. In terms of investment, early indications imply that it provides exceptional value for money, and its relative affordability compared to other prestige cuvées may make it more approachable for first-time investors. Since Grande Année is usually drunk rather than stored, stocks don't last long, and older vintages are more difficult to find. Looking at the price-over-points ratio of previous La Grande Année vintages, the cuvee, like Pol Roger’s “Sir Winston Churchill”, offers excellent value for money, and will provide considerable gains in the long run.