The must-have Champagne this New Year's Eve is a $300 bottle. Any $300 bottle. Money is now the definition of taste for high-end bubbly. And the big Champagne houses are racing to claim the bragging rights, sending prices on all Champagnes soaring to insane heights.
So far, status-conscious drinkers have been oblivious to sticker shock. U.S. demand for Champagne in 2006, the most recent figures available, increased by 10%, or 2.5 million bottles. And even as prices continue to soar, there are no signs of slowing sales.
Blame it on Krug. Three years ago, the Krug Champagne marketing team didn't even bother visiting Los Angeles. Though wine cognoscenti have long considered Krug one of the world's greatest, L.A. was besotted with the world's most expensive: Louis Roederer's then-$200 Cristal. At less than $100, the flagship nonvintage Krug was too cheap to be considered its match.
Then Krug's owner, luxury giant LVMH, set about fixing Krug's perception problem by cranking up the price. And bingo: Demand rose right along with it.
The other Champagne houses got the message and have been raising their prices 20% to 30% or more each year.
Champagne is one of the few products that is sold solely on brand image, says Gib Rockwood, in charge of marketing Salon Champagne for distributor Wilson Daniels Ltd. "Salon wasn't the most expensive Champagne but was considered by many to be the best. We're now raising the price to reflect the quality."
Salon's price has gone from $200 to $325 in the last 18 months -- and, incredibly, will soon rise to $400 a bottle, Rockwood says.
It's out of control, says Allen Meadows, a wine critic specializing in Champagne and Burgundy. "It's hard to beat Krug. And Salon is one of the very finest Champagnes available. But you have to justify paying hundreds of dollars for a bottle when a $35 nonvintage grower-producer Champagne delivers only 5% less quality."
At Spago Beverly Hills, Roederer's Cristal is still the prestige bottle. As the others raised their prices, Roederer simply bumped up the price of Cristal, which now hovers near the $300 benchmark.
"The Champagne houses have all realized they have to play the price game," says Kevin O'Connor, Spago's wine director. "Bargains don't sell. Champagne has to be expensive."
Christian Navarro, an owner of Wally's Wine & Spirits in Westwood, says it's no longer only the older, established customers buying. "We see people in their mid- to late 30s, and 40-somethings," he says.
And that's exactly the market Armand de Brignac was created to serve. It is the brainchild of American distributor Sovereign Brands and Cattier, a small Champagne house. Cattier's best Champagnes sell in Europe for $40 to $70 a bottle. With no history or acclaim, their new gold-bottled Champagne has nothing to recommend it except its $300 price tag.
"We've packaged it properly," says Barry Berish, chairman and chief executive of Sovereign. Twelve thousand bottles were released here last summer. "It's selling," says Tom Martinez, a salesman at K&L Wine Merchants in Hollywood. "A younger crowd is buying."
The Champagne houses downplay the price competition. The exchange rate is the real culprit, they say, noting that prices have been rising as the value of the dollar plummets against the euro. But L.A. retailers say currency fluctuations account for only 10% of this year's price increases.
"The producers are banking on everyone continuing to play 'follow the brand leaders,'" says Jim Knight, an owner of Wine House in West Los Angeles. "I don't know that consumers will at these prices."
Krug marketing director Remi Fritsch is confident. "There is much higher demand today for Krug than there was three years ago," he says. "I'm sure one day we will be in a hip-hop video. It will be a sign of our success."