cocktails & wines

Next time you need to celebrate, pop open the Champagne--or perhaps, don't. The bubbly might provide a much more valuable experience if you keep the cork in the bottle and sell it at auction.

Why? While global equity markets have been tanking in the wake of the subprime crisis, the price of a case of high-end bubbly is surging.

The London-based Liv-ex Champagne 25 Index, which tracks the price of 25 of the world's most sought-after Champagnes, rose by 27% in the 12 months ending in June. That's against the 8% rise in the Liv-ex 100 Index of top wines (mainly Bordeaux), and the 14.8% drop in the FTSE 100 during that period.

In Depth: The World's Most Coveted Champagnes

Twelve months ago, a case of Krug 1996 would have set you back just under $3,000 on the auction market, but now it's worth $4,713.40. Louis Roederer Cristal 1989 is now worth 39.1% more than a year ago, bringing in $6,417.90 a case.

Behind The Numbers
It's a simple case of demand outstripping supply. People are quick to glug Champagne as soon as they buy it, according to Justin Gibbs, the director of the London International Vintners Exchange, an electronic marketplace for trading in fine wine. While top Bordeaux reds are typically laid down for 20 years, Champagne is ready to drink as soon as it lines store shelves--and often is.

People tend to drink Champagne quickly," says Gibbs. As a result, a vintage can become scarce within a couple of years of being released by the producer. As the supply of the highest-quality Champagnes declines, the price quickly rises.

So a small surge in demand, such as someone looking for merely a case or two for a wedding, can drive the price up dramatically on what few cases remain after the initial release.

There's the "bling" factor, too, which is adding to the appeal and driving up the price of the finest Champagnes.

"Champagne is what is drunk in the casinos of the world, on the yachts of Russian oligarchs and by footballers' wives, so there is an element of flash money about it," says Gibbs.

Bordeaux Stays Strong
Driven by this demand, the price of Champagnes such as Krug, Dom Perignon and Louis Roederer Cristal have soared over the past year, overtaking the big names of Bordeaux as an investment, at least for the time being.

While Bordeaux prices skyrocketed from the strong vintage in 2005 and then held steady on the 2006 wines, the 2007 vintage is considered a weak one, so some interest has waned--and turned to Champagne instead.

Still, it's not enough to lure leading wine funds away from their traditional staple investment of Bordeaux red.

"Historically, claret [the British term for Bordeaux red wine] has performed much better than Champagne, and we would expect that to continue," says Will Beck of London-based Wine Asset Managers, which does not currently invest in Champagne.

"It just so happens that claret is taking a breather after an incredible performance in the two previous years, while Champagne has enjoyed a relatively good year in terms of performance." Wine Asset Managers' Fine Wine Fund, available to individual investors, has returned 46% since it was established in 2006.

Scarce Supplies
While Champagne valuations may be driven up by consumption, the price of fine Bordeaux red is driven only in part by the scarcity of supply. Château Lafite Rothschild, for example, produces around 17,000 cases a year; while it is expensive, it costs significantly less than the wine of Château Petrus, which produces no more than 2,500 cases each year.

The figures on Champagne production are harder to come by because the houses are less forthcoming with information. This is one reason asset managers such as Beck are more comfortable investing in Bordeaux red, since the châteaus that produce them are open about their production figures.

"There is a lot more transparency about claret," Beck says, "and we can work with a finite production figure for each year."

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Peter Lunzer, a wine adviser at the London-based Wine Investment Fund, agrees that--for the moment, at least--Champagne, which is only just beginning to emerge as an investment vehicle, is a more risky alternative to claret.

"One of the reasons we invest in Bordeaux," he says, "is that unlike with Champagne, there is a lot of international data on how prices have fluctuated over the years."

However, some say the tide may be changing.

"There are a group of investors who feel that there is only one way that Champagne prices are headed, and that is up," says Geoffrey Troy of New York Wine Warehouse, the North American auction partner for wines at Christie's. "We are beginning to see a number of serious wine collectors who are buying serious amounts of Champagne as an investment."