On New Year’s Eve, while the Senate was debating Fiscal Cliff Deal, many Americans were making last minute stops to their local wine shops for that special bottle of champagne to celebrate with. Naturally, wanting to put a topical spin to their New Year’s Eve broadcast, Bloomberg Radio ran an interview with Michael Letter, managing director of Pernod-Ricard-owned GH Mumm and Perrier-Jouët. The discussion was geared primarily around the brand and New Year’s Eve; however to a brief divergence into the economics of champagne. Part of Letter’s opus to champagne was the insinuation of “Champagne as a leading economic indicator.”

Could this be true? Is champagne truly a leading economic indicator? This topic is certainly a worthy of a closer look, preferably with a glass of bubbly in hand.

What is a “Leading” Economic Indicator?

Simply put, leading indicators are those which are believed to change in advance of changes in the economy. Analysts look to these indicators for a preview of what is going to happen before it happens, thus allowing them to make moves in policy or capital allocation prior to a change.

Some typical examples of leading indicators are: changes in unemployment, inventories, building permits; however does champagne fit into this realm of foreseeing?

Does Champagne Offer Insight into Economic Changes?

Before breaking down the criteria of how to approach this, it is important to realize why looking at champagne is appropriate. It is believed that when economic times are improving, aspirational items (homes, cars, watches, etc.) are purchased more frequently and champagne represents an aspirational item that most can afford to partake in with some regularity.

Now, in order to quantify whether or not champagne sales are a sign of economic foreshadowing, it is important to first understand how to approach this topic.

  1. We must look at the Champagne through the spectrum of the importing (or consuming) nation, not through the spectrum of origination (Champagne Region of France).
  2. We must consider the periphery factors that could impact growth (i.e. tariffs or duties, loss of potential market share to other sparkling wines). Although, losing market share to Prosecco and Cava, the sparkling market itself is growing, as is champagne, just not as fast.
  3. We will be isolating the discussion by focusing on two major corporations that are responsible for the large-volume distribution of marque brands of champagne: Pernod Ricard and Moët Hennessy Louis Vuitton (LVMH).

Spanning the Globe for Reaffirmation

In the U.S., the economy had seen a pick-up since September, with home sales and consumer sentiment showing the surest signs of progress. LVMH during the half ending June 30 foretold this incremental progress in economic activity and change in outlook as “volume growth continued…and performance in the U.S. was particularly strong” (2012).

Champagne, and fine wine in general, is a remarkable measure of economic conditions in China. Most are familiar with the Chinese growth story; however not everyone is aware that the fine wine market foretold the “growth recession” that economy recently endured.

As of the quarter ending this in September, Pernod Ricard stated in their quarterly report, that “in [a] less favorable environment, new growth drivers [emerged] (including Perrier-Jouët)” thus foretelling the pick-up in activity during the last quarter of 2012.

In Europe (ex-France), “champagne is a reliable indicator of the state of the economy. Sales of Champagne can be directly measured against changes in consumption,” according to Steve Charters, chairman of Champagne Management at Reims Management School.

With nearly 80% of all champagne destined for the Eurozone, it is telling that December of 2012 marked the lowest sales total since 2004, according to Michelle Letter. Considering the forecasts of growth in 2013, this should indicate softening in the European economy early in 2013. This will be a development to watch.

France represents 56% of all global champagne consumption. Consumption here was poor in 2012, partially due to the decaying economic conditions during the middle of the year; however more significantly due to an excise duty (tax) hike that took place in January 2012 according to LVMH and Pernod Ricard filings. This duty caused a transition to comparable products.

Thus, when one hears of a “slumping champagne market” that has been reported as of late, this is due to the economies most responsible for the consumption of champagne being in hardship. “You need a 10% increase in China to compensate for the 1% decrease in France alone” explained Charters (Decanter, 2012). Thus, the broader champagne growth story is promising, yet indicated that greater distribution diversification is sorely needed

The Correlation is Strong

Although the sample size is small, thus being based largely on the “eye test” of the past year, champagne does pass muster as a leading indicator. In the examples above, orders and sales of champagne have consistently preempted positive developments in the U.S. and China, while at the same time confirmed the end of the year projections by the IMF and ECB for European growth.

2013 is being projected as a soft year for Europe, with a projection of zero growth according to a consensus of analysts and the IMF/ECB. What we should be looking at is whether there is an improvement in the European champagne consumption rate and whether this preempts an economic recovery. That would largely reaffirm champagne’s position as an accurate leading economic indicator.


InvestorGuide. Leading Economic Indicators Explained. Retrieved from

LVMH (2012, Aug). LVMH: Letter to shareholders [Press Release]. Retrieved from

Pernod Ricard. (2012, Oct 25). Good overall performance in Q1 2012/13 [Press Release]. Retrieved from

Prescott, R. (2012, Dec 8). Champagne market outlook still looks bleak for 2013, says research. FoodBev Magazine. Retrieved from

Categories: Wine & Spirits

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  1. Terroirist: A Daily Wine Blog » Daily Wine News: Drink Five Bottles

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