What Champagne Teaches About Economic Trends

Wine aficionados say they’re ready to crack open a bottle of Champagne to ring in the new year.

That hasn’t been a sure thing in recent years. With the recession weakening the wine market, the famous (and costly) sparkling wine hasn’t always been the first pick on New Year’s Eve. But a recent study by Karl Storchmann, a New York University professor who edits the Journal of Wine Economics, suggests Champagne is a consistent indicator of future income.

“If you consider [C]hampagne [sales] to be an economic indicator as some do, it … has been growing significantly up since the 2008 recession, and we expect that growth to continue in 2013,” Sam Heitner, director of the Champagne Bureau USA, told Reuters  (opens in a new tab).

Other fun facts about wine and economics:

Demand up, prices up: At more than 17.6 million bottles per year, U.S. imports of wine produced in Champagne, France, were the second-highest in the world, according to a 2012 fact sheet  (opens in a new tab) [PDF] on the industry. That’s despite a steep price tag. David White, a wine blogger and the founder of Terroirist.com, writes for Grape Collective  (opens in a new tab) that the specific definition of Champagne drives up the price significantly. “Under European Union trade laws, wine can only be sold as ‘Champagne’ if it comes from the Champagne region of France and is made in the ‘traditional method,’ which is a very expensive process,” White explains. “While real Champagne is a treat, it’s expensive—even ‘budget’ options cost upwards of $35 per bottle.”

International trends differ: The U.S. may be showing an increased demand for Champagne, but that growth isn’t matched everywhere. As The Independent notes  (opens in a new tab), demand is up in China as well as the U.S., but the U.K. (the largest export market) and France in particular are seeing a significant drop in demand. “As soon as you reduce purchasing power, you reduce Champagne sales,” Pascal Férat, the president of Champagne’s Syndicat Général des Vignerons (a Champagne-producer’s union), told the British newspaper. “Champagne is not something you can give away. When people are down in the dumps, they don’t feel like drinking [C]hampagne.”

Wine vs. stocks: Beyond Champagne, there’s economic insight to be culled from premium wine of all types—sparkling or not. In a 2012 paper  (opens in a new tab) [PDF], Storchmann points out that the economics of wine often match those of the stock market. That’s especially true in the case of the recession, when (based on the Liv-ex 50 price index  (opens in a new tab), a market for wine merchants) fine wine prices dipped at roughly the same rate as the Dow Jones Industrial Average. But wine market trends don’t always echo the general market. “[S]ince the spring of 2011, the Liv-ex 50 index has experienced a major correction,” Storchmann writes, noting the variance over a decade: “From June 2001 to March 2012, the wine index declined by more than 22 percent while the Dow Jones increased by 6 percent.”

So what do you do if, despite the positive indicators, Champagne’s prices are still a little outside the budget for your New Year’s celebration?

White, the wine blogger, has a few suggestions for people seeking cheaper options for their holiday festivities—cava, a Spanish sparkling wine, is a good alternative, for example—and he notes that plenty of adventure is to be found in less expensive choices.

“Wine is agricultural,” he writes. “So if you and your guests crave the iconic, you don’t have a choice. But your wallet will thank you if you leave your comfort zone.”

(photo by Justin Sullivan/Getty Images News/Thinkstock)