Celebration, luxury and exclusivity are just a few words that may pop in your mind when thinking of champagne. The sparkling drink has featured in French royal traditions for over a thousand years, but it wasn’t until the 19th century that champagne started to gain wider popularity. From that moment on, demand has grown exponentially, with producers only being able to produce in limited quantities. Naturally, investors realised how these dynamics make champagne an interesting asset to invest in. In this article we’ll go over a few of the key reasons why champagne prices have increased and why you might want to consider investing in champagne.
Producers have been struggling to keep up with champagne’s growing demand - from 20 million bottles in 1850 to 300 million bottles today. Production is heavily restricted as champagne can only be produced in the Champagne region of France. The region encompasses roughly 34,300 hectares of vineyards and the production limit is regulated to 6600 litres per hectare, meaning with today’s demand, production levels today are already at their maximum.
In addition to having to come from the right region, champagne needs to meet a lengthy set of requirements around the grape variety and viticulture, with the Comité Interprofessionnel du vin de Champagne (CIVC) tightly controlling its trademark. To top it off, champagne production is more labour intensive than wine production, which is one reason that even the cheapest bottle of champagne you’ll find in the supermarket is far more expensive than low-cost wine.
You can imagine that as production capacity is stretched, the price of both investment-grade champagne and champagnes in general have gone up. It is no surprise that investments have been picking up across all parts of the value chain. Champagne vineyards, for instance, have gone up in price five times over the past 25 years and grape prices have increased by 80% in 15 years.
While production in general is limited, particularly the champagne from the top champagne brands is in short supply. Some of these brands include household names as Cristal and Dom Perignon, but the even more exclusive brands such as Salon and Boërl & Kroff are not to be overlooked and have increased in value quicker than the more well-known brands over the past few years.
When it comes to investment-grade champagne, it’s mostly “vintage champagne” from these top champagne houses that would be of interest. The difference between a vintage and a non-vintage champagne is that vintages only get produced in the best years and only contain grapes from that specific year. They are typically of higher quality and there will only be a limited number of bottles produced.
As champagnes get consumed, the supply and availability of vintages of a particular year decreases and as a result, the price increases. The reason why champagne lovers might want to drink an older vintage or one from a certain year is that, like fine wine, the best champagnes improve with age. Top champagnes can improve and develop in the bottle for up to 20 years or more and can be consumed long after that.
As a result of the limited supply, scarcity and growing demand champagne has increased in price. The Liv-ex Champagne 50 index has risen nearly 60% over the past 5 years (while remaining stable), making it an interesting addition to your wine and alternative investment portfolio.
What makes champagne an investable asset is its limited supply and growing demand. As the supply of certain vintages naturally decreases with bottles being consumed, their price may go up. It is important to keep in mind that like with wine investing, not all champagne is appropriate for investment purposes and champagnes you’ll find in the supermarket will need to be consumed within a short time frame. If you get your hands on the right vintage champagne, however, it can appreciate in value over a number of years and make an interesting addition to your investment portfolio.
Want to learn more? Have a look at Alternative Asset Club’s beginners’ guide to champagne investing
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The articles and information made available on Koia are provided for information and educational purposes only and do not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances.