The "fine" champagne market increasing the fizz

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Jack Hibberd, Head of Data and Marketing at Liv-ex, explores Champagne's place in the fine wine market and ways in which the region can take advantage of new opportunities.

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The "fine" champagne market increasing the fizz

  1. 1. Jack HibberdHead of Data & MarketingLiv-ex.comTuesday 28th February 2012“The „fine‟ Champagne market – increasing the fizz”Harpers Champagne Summit
  2. 2. What is Liv-ex?Established in 1999, Liv-ex is the global exchange forfine wine merchants:• More than £100m of wine was bought and sold on the platform in 2011• Sunday Times Fast Track 100 three times in the last five years• 400+ members in 33 countries• Online marketplace• Price data, info and analysis• Storage & transport• Setter of standards
  3. 3. What is fine wine?A wine with: • Secondary market trade • Ability to improve in bottle • Long track record • Critical acclaimA recognised secondary market price and a liquidtrading environment are the crucial factors.
  4. 4. The fine wine market• The fine wine market is worth US$4billion annually (up from US$1bn in 2004). 4.5Global market turnover (Billion USD) 4 3.5 3 2.5 2 1.5 1 0.5 0 2004 2005 2006 2007 2008 2009 2010
  5. 5. The fine wine market• Merchants account for 90% of trade.• New markets have led to strong growth. US$3.6b US$245m US$408m US$163m Merchants Auctions Hong Kong Other
  6. 6. “Fine” ChampagneAlthough Liv-ex traded 23 different Champagne brandslast year, the vast majority of trade (90%+ by value)was in three key products:• Dom Perignon• Louis Roederer Cristal• Krug VintageAverage bottle price in 2011 was £130. (Incomparison, AC Nielsen off-trade average was £18 forNV and £23 for vintage.)
  7. 7. A declining share Champagne: Average monthly share of trade on Liv-ex 4 source: liv-ex.com% of trade on Liv-ex 3 2 1 0 2006 2007 2008 2009 2010 2011
  8. 8. “As for Champagne it‟s [2.4%]percent of our business. In thegood times of three years ago itmade up 10% of our business.”Stephen Browett, Farr VintnersHarpers, 10th February, 2012 8
  9. 9. Index level 100 120 140 160 180 200 220 240 280 300 80 260Dec-03Mar-04Jun-04Sep-04Dec-04Mar-05Jun-05Sep-05Dec-05Mar-06Jun-06Sep-06Dec-06Mar-07Jun-07Sep-07 The Liv-ex 25 Champagne IndexDec-07Mar-08Jun-08Sep-08Dec-08Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10 Yet, prices remain firmSep-10Dec-10Mar-11Jun-11Sep-11Dec-11
  10. 10. Index level 100 120 140 160 180 200 220 240 260 280 300 320 80 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06Dom Perignon Sep-06 Dec-06 Mar-07 Jun-07Krug Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 The Liv-ex 25 Champagne Index by brand Mar-09 Krug outperforms Jun-09 Sep-09 Dec-09Louis Roederer Cristal Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 source: liv-ex.com
  11. 11. Index level (31 Dec 2003 = 100) 50 100 150 200 250 300 350 400 450 500source: liv-ex.com Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Liv-ex Champagne 25 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Liv-ex Fine Wine 50 Apr-10 Aug-10 Dec-10 Champagne v Bordeaux Apr-11 Liv-ex Champagne 25 v. The First Growths ( 2004-2012) Aug-11 Dec-11
  12. 12. An opportunity?If not Bordeaux... • Collectors looking for something new? • A defensive stock for investors? • Asian opportunity?Historically strong in the on-trade andretail, Champagne now has an opportunity to buildsales amongst highly-involved private clients andwine investors.
  13. 13. % share of trade 0 2 3 4 5 6 7 8 9 1Jan-11Feb-11Mar-11Apr-11May-11Jun-11 Jul-11Aug-11Sep-11 Burgundy: Share of trade on Liv-exOct-11Nov-11 Burgundy leads the wayDec-11 source: liv-ex.comJan-12
  14. 14. Avg RP score (last five vintages) 80 82 84 86 88 90 92 94 96 98 100 Guigal E Lafite Rothschild Yquem Krug Haut Brion Salon Mesnil Ornellaia DRC Sassicaia Leflaive PinDom Perignon Champagne to follow? Cristal Average score of leading fine wines across last five releasesLeoville Barton Beychevelle source: liv-ex.com
  15. 15. Exploiting the opportunity• Laissez-faire works Release some control and get the market behind you. Exclusivity doesn‟t mean scarcity.• Build a profile on the secondary market Liv-ex, merchants and auctions can help build a fine wine brand.• Act like a fine wine, not a luxury brand Leave something on the table for the consumer.
  16. 16. www.liv-ex.com

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