On Champagne: Keynes or Adam Smith?

John Maynard Keynes loved Champagne. When asked if he had any regrets in life he admitted to only one. I regret that I did not drink more Champagne, he said.

He even applied economic analysis to Champagne. Looking for ways to increase revenue from the bar at the Cambridge theatre where his ballerina wife Lydia Lopokova often danced (Keynes subsidized the theatre, so he had an interest in its “liquidty”), he studied the cross elasticity of demand between ordinary and premium Champagnes and proposes a novel plan to increase total expenditures by altering prices.

Raising the relative price of the cheaper stuff would make the more expensive tipple seem a better deal, he said, and increase total revenues. I don’t know if the author of Essays in Persuasion was able to persuade the bar manager to go along with the experiment.

Adam Smith, Terroirist

There is no indication that Adam Smith was fond of Champagne or even gave it much thought. Perhaps this was because of the difference in time and place relative to Keynes, but I think it might be because Smith was a terroirist. He believed in the idea of terroir and wrote in the Wealth of Nations that the wine grape was particularly sensitive to local growing conditions. He noted that certain famous Bordeaux wines earned a terroir premium in the marketplace.

If Smith was in fact a terroirist he might shy away from Champagne because most of the Champagne wines in the market place are relatively terroir-free.  Yes, of course, they represent that terroir of the Champagne appelation. But the wines that come from the big houses are blends that come from hundreds of growers and several different vintages. The wines are made in the cellar (through the highly manipulative methode champegnoise) at least as much as they are made in the vineyard. They can be excellent luxury products to be sure, but consistency is generally valued more than terroirst local or vintage variation.

Grower Champagnes are different; Smith and Keynes would both love them. They combine all the luxury and sensuality that Keynes appreciated with Smith’s intellectual focus on local conditions. Grower Champagnes are made in teeny tiny quantities by individual Champagne winegrowers from estate fruit. They are cult wines sold by specialists like Terry Theise, who also champions high terroir Rieslings from Germany and Austria.

Popping a Fat Cork

Is there a market for luxury terroir wines like grower Champagne? This question led us to a Seattle door marked “Fat Cork” where owner Bryan Maletis imports an exclusive list of grower Champagnes and sells them directly to small but growing local and national network of Keynesian-Smith and Smithian-Keynes buyers.

Bryan is well placed to take on the grower Champagne business. He has deep experience in the wine business, most recently as brand manager for Champagne Laurent-Perrier at Winebow, the big distributor. His connection to the grower networks and understanding of the market and distributional issues are valuable assets.

Bryan led us through a terroir tasting of three grower Champagnes (see the list at the end of this post) and the differences in wine were readily apparent to me and my Champagne research unit, which includes Sue, Joyce, Bonnie, Barry and Richard. Joyce revealed herself to have both a fine palate and an exceptional ability to express herself when it comes to Champagne and it was interesting to watch Bryan and his wife Abigail analyze the particular qualities of the wines in their portfolio in order to select the perfect wine for Joyce.

I asked Bryan about the challenges that his business faces, expecting him to start with shipping problems. But he told me that shipping isn’t an important barrier for him at this point. He has created innovative shipping containers that allow him to safely ship wine even in the hottest weather.  So check that important box. And he simply complies with all the interstate laws as best he can, accepting the constraints and pushing on.

University of Champagne

The real problem is that sparkling wine is a small part of the wine market and grower Champagne is a small part of that. People don’t drink Champagne every day, but save it for special occasions. Bryan would like to change that. And even people who have a Keynesian view of Champagne don’t necessarily know about grower Champagne, but may stick for the most part with the heavily-promoted brand names of the major houses.

It’s a marketing problem, he said, although I think it is also an educational problem (which probably makes it even worse). People won’t seek out grower Champagnes until they understand them. Once they taste them, however, I think many will be intrigued and want to probe the Champagne terroir as terroirists do for other wines.

Am I saying that, with a little education, Keynesians can embrace Adam Smith? I guess so! At least when it comes to Champagne.


Here are the three grower Champagnes we tasted with Bryan and Abigail. Special thanks to Sue, Bonnie & Richard and Joyce & Barry for their assistance in analyzing the market for grower Champagnes. And thanks to Richard, of course, for sharing his business model with us and popping a few fat corks.

  • Perrot-Batteaux et Filles Cuvée Helix Blanc de Blancs (Bergeres-les-Vertus, Cote des Blancs)
  • Pascal Redon Brut Tradition (Trepail, Montagne de Riems)
  • Didier-Ducos Fils Brut (St. Martin d’Ablois, Valee de la Marne)

5 responses

  1. Interesting article Mike,

    I would like to hear your opinion on the seemingly upside-down pricing structure of of Grower Champagnes, vs. the Grand Marque houses. I was astonished that the limited production grower wines were far less expensive in Champagne than the relatively large production wines from Moet, Mumm etc.

    • Thanks for this, Paul. I agree that, while grower Champagnes are not inexpensive, they are often a relative bargain compared with wines of similar quality from the big houses. The fact that grower Champagnes are not widely appreciated is part of the answer, of course. (Sherry is another under-appreciated bargain wine.) But I think the real answer is the fact that the big houses have invested in their luxury brands and need to earn a corresponding premium. Buy grower Champagne and you get distinctive wine. Buy Champagne from a big house and you associate yourself with a symbol of a luxury lifestyle. I guess what I am saying is that grower Champagne is the “no logo” segment of the Champagne market.

  2. Dear Mike,

    Thank you for writing such a great post and highlighting the company that my wife and I started, Fat Cork. It was a pleasure to taste with your group and I loved your economic insight. Your book, Wine Wars, is excellent, but getting to talk with you in person is even better. Your students are lucky to have you as a professor!

    With regard to Paul’s comments above, we believe that when you buy grower Champagne, you truly are paying for what it costs to produce, ship, and sell. While we also like many of the big name brands, and they generally cost about the same in the U.S. market when compared with grower bubbles, they obviously cost much less to produce per bottle as they have greater economies of scale. (millions of bottles produced vs. a few thousand) So, this means that their mark-up is much higher. But, this is because their cost of marketing is much higher. You know how you see Moet all over every Hollywood and NYC premier? Nobody pays for those bottles that they consume, and in fact, the big producers pay huge dollars for the right to be showcased in those events.

    So, that is why grower Champagne represents a great value when compared to the big houses, you truly pay for what it costs to produce. Again, we have nothing against the big houses, they have done a lot to promote the name “Champagne”, and we have all benefited. If one of your students ever wants to do a project on this, we would be happy to provide our time, knowledge, and business statistics.

    Cheers! Bryan

  3. Dear Mike,

    Perhaps the appropriate word is, ‘cult’. Cult following in the wine world
    clearly translates into cash. Champagne has cult status but it goes
    beyond cash because it represents the ultimate form of celebration.

    The sense of anticipation and the sudden silence before the bottled is
    opened adds to this cult value.

    With best wishes to Fat Cork who know doubt intend not to just sell
    champagne but to spread its legacy.

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