The Financial Value of Champagne Houses in a Cobweb Economy
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The objective of the paper is to simulate the corporate value of Champagne makers by taking
into account the Champagne market evolution. These measurements are conducted by linking
financial debt, performance and valuation to a vertical coordination model of production-consumption
within a cobweb economy. The overall model uses the dynamic structure that underlies
the strategic interactions amongst grape producers and wine makers. These segments
coordinate grape production and trade by forming expectations about final consumption, price
and stock risks. The paper examines the dynamics of the financial cash flows and net worth of
Champagne houses for the 1977 – 2003 period using system dynamics (SD) modeling principles.
The results presented in this paper report on key financial indicators for that period for financial
debt, performance and valuation of Champagne makers. It provides a sound basis to
pursue this work, because the model can further enhanced to anticipate the possible value
Champagne makers for the coming crucial years since the Champagne appellation has reached
its geographical limit determined by the protected designation of origin (PDO), while worldwide
demand continues to grow.