Champagne officially in class of its own

It is a ruling sure to warm the hearts of winemakers from that famous French region which has fought hard to maintain the exclusivity of its fizz.

After sampling the state of competition in New Zealand's liquor industry, the Commerce Commission has confirmed what wine snobs have long suspected: champagne is in a class of its own.

The commission has decreed that, for the purposes of competition law, New Zealand has two distinct sparkling wine "markets": the market for authentic champagne and the market for all other types of bubbles.

At the same time the competition watchdog has ruled that all still wine is competing in the same market no matter how much it costs or whether it comes in a bottle or a cask.

The pronouncements came in the commission's decision allowing French-based multinational drinks giant Pernod Ricard to acquire the local assets of another global player, Britain's Allied Domecq, owner of what used to be Montana Wines.

The commission gave its approval for the takeover deal last month but has only just released a 25-page report detailing the reasoning behind its decision.

In its deliberations over whether the takeover was likely to have the undesired effect of "substantially lessening competition in a market", the commission concluded it was dealing with five distinct wine product markets: still white, still red, sparkling, fortified and champagne.

It considered, then rejected, suggestions that cask wine, regular bottled wine and top-end "premium" wines should be treated as different markets, saying a wine's place in the pricing hierarchy "depends very much on public perception and marketing".

Sparkling wine was different, however, because it was bought for special occasions, the commission concluded.

"Views [of those in the liquor industry] were divided in considering whether champagne formed part of a broad sparkling wine market or was a distinct market on its own," the decision said.

"Those parties which held the latter view based it on the substantial price point difference between a standard sparkling wine (roughly $12) and a typical bottle of champagne (starting at $50). Accordingly, the commission is of the view that sparkling wine is a distinct product market from champagne."

Allied Domecq dominates the New Zealand sparkling wine market through several popular brands including Lindauer, Aquila, Italiano and Chardon. A condition of Pernod Ricard's takeover is that the company sell off all four brands, a move aimed at stimulating competition.