Partly due to the demise of Bordeaux en primeur, which experienced lacklustre campaigns in 2012 and 2013, and partly due to increased consumer awareness of Champagne as an investment coinciding with the release of the best wines from the outstanding 2002 vintage, Champagne’s investment popularity has soared.
But what, if anything, makes it a good investment? Which brands and vintages yield the best returns? What is considered a worthwhile investment term? We answer the basics below.
Why invest in vintage Champagne?
In recent history, Champagne has witnessed a staggering increase in popularity – with demand rising from 50 million bottles in the 1970’s to an astounding 300 million bottles today – and houses cannot increase their output to meet this demand. With production and therefore supply restricted, it is a finite commodity – once drunk, a bottle cannot be replaced.
With such a strong consumption market (nightclubs, restaurants, hotels, the retail industry), vintage Champagne leftover in the market is limited, typically going to private collectors. Bought within a few years of initial release, the investment avails in the future, when the collector either pays considerably less to drink it, or might be able to sell it for a profit.
And with prices for top Bordeaux and Burgundy wines becoming prohibitive and the market volatile, vintage Champagne offers relative affordability and reliability in comparison. The average price of a case of vintage Champagne is £1,500 compared to £4,000/case for one of the First Growths (Bordeaux) and £22,000/case for DRC’s Burgundy. Champagne therefore offers first time investors a lower entry point, and seasoned investors value for money when expanding their portfolios.
How has Champagne performed recently?
The London International Vintners Exchange (Liv-ex) is a leading fine wine ‘members only’ exchange for merchants, brokers and négociants. Collecting thousands of prices on a daily basis from its member merchants and the wider wine world, Liv-ex possesses the world’s largest and most current standardized database of fine wine prices; we use their figures due to their neutral market position.
Liv-ex’s Champagne 50 Index shows the excellent performance of vintage Champagne in recent years, steadily outperforming the Burgundy 150 and Bordeaux 500 indices. Between January 2005 and January 2015, the Champagne 50 has experienced a 137% Mid Price increase:
Value is continuing to rise, as Liv-ex reported that the Champagne index increased 11.9% between 2011 and 2013 alone and its share of trade more than doubled, from 1% to 2.3%. Furthermore, vintage Champagne’s already consistent returns are likely to increase, as the market expands beyond the traditional favourites, and as the Asian market continues to increase their education in fine wine, Champagne’s interest will likely broaden in the East.
Which Houses and vintages perform best?
The Liv-ex Champagne 50 Index comprises the following leading prestige cuvées:
These wines form the foundation of investing in Champagne and have consistently shown great appreciation and growth over the years. The importance of vintage can also not be overstated, with three top Champagne vintages, 1988, 1996 and 2002 collectively rising 10.2% in the two years leading to August 2014.
What is ‘vintage premium’?
Interestingly, vintage Champagne displays a premium, considerably increasing in value as it ages, signaling that younger vintages will reach the equivalent price of similar quality older vintages with age. Take Dom Pérignon for example (which makes up 28% of the Champagne Index): the 2002 vintage is currently valued at £1,080 whilst the similarly rated 1996 vintage is valued at £1,700 – 57.4% more.
Where should my Champagne be stored?
Storage is imperative when it comes to vintage Champagne – the number one rule is your Champagne must be stored ‘under bond’; this is the only way to guarantee provenance.
With an estimated £1.5 billion of wine stored in its bonded warehouses, the UK is one of the largest centres of fine wine in the world. As our Champagnes are purchased direct from producers, provenance can be guaranteed, thus increasing the efficiency of sales. Further, as wine stored ‘under bond’ is not subject to duty or VAT either on purchase or resale (only when released for consumption), bonded warehouses are the principal storage option for investment wine. All wines stored with The Finest Bubble are held at Vinothéque, one of the foremost storage warehouses in the country.
How much should I buy and how long should my investment term be?
Needless to say, Champagne for investment must be bought in full cases. Obviously the purchase quantity will depend heavily on your budget and on how much is available in the market. We typically recommend a minimum investment term of 5 years to generate a worthwhile return, however this varies significantly depending upon which brand and vintage you are investing in; short-term returns can be seen with some Champagnes, whereas as others may need cellaring for up to 10 years for worthwhile market appreciation.
This may seem like an overwhelming amount to consider, but the lesson here is to be careful. Don’t ignore the facts and figures popularly quoted by merchants and brokers in the wine industry, but take them with a pinch of salt. Investing in Champagne is fairly simple and can yield high returns, but only specific brands and particular vintages will accrue value. Do your research, read around the subject carefully, and seek expert advice on the areas you don’t fully understand. Once you feel comfortable with the topic and you’ve looked at the relevant and representative figures, it’s time to start investing.
The Finest Bubble are able to help you with our opinion on what champagnes and which vintages we believe offer the right qualities to consider cellaring for 5-10 years and help with up to the minute market data showing valuations, trends and transaction quantity for every champagne. We are not able to offer financial advice or advice on investments.
You can find information on Champagnes we think show investment potential here. To discuss further please contact Nick or Chris 020 7359 1608 or email us via the contact page.
