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Champagne producer Herve Le Gallais examines bottles of champagne in his cellars at the Chateau de Boursault, in the village of Boursault near Epernay, in eastern France, on Friday, Sept. 7, 2007. The castle of Boursault was built in 1843. As drinkers celebrate the New Year with a glass of champagne, investors have something else to cheer. A looming shortage of the bubbly French wine will help push shares of producers including LVMH Moet Hennessy Louis Vuitton SA past records. Photographer: Alastair Miller/Bloomberg News

Champagne producer Herve Le Gallais examines bottles of champagne in his cellars at the Chateau de Boursault, in the village of Boursault near Epernay, in eastern France last September. The castle of Boursault was built in 1843.

When New Year's Eve revelers popped the cork on a limited-edition $1,150 bottle of 1996 Krug Clos du Mesnil champagne to celebrate the arrival of 2008, investors were partying alongside.

A looming shortage of the bubbly French wine, spurred by limits on grape production and rising demand in the United States, Japan and the United Kingdom, will push shares of champagne producers higher. LVMH Moet Hennessy Louis Vuitton SA, the world's largest champagne maker, will advance 21 percent within the next 10 months, according to the median estimate of nine analysts surveyed by Bloomberg.

Smaller producers may also gain, with Boizel Chanoine Champagne SA estimated by analysts to increase 14 percent and Vranken Pommery-Monopole SA 15 percent.

''If the champagne craze continues at the current pace, winemakers won't be able to satisfy demand and prices will skyrocket,'' said Laetitia Delaye, analyst at Landsbanki Kepler in Paris, who has been following French beverage companies for three years. ''That can only be good for the stocks.''

Champagne sales as a whole will rise as much as 5 percent this year, said Arnaud Guerin, an analyst at brokerage Portzamparc in Nantes, France, in a Dec. 19 interview. Guerin calls his estimate ''conservative'' and advises investors to buy Boizel, Laurent Perrier SA and Remy Cointreau SA. Prices may rise ''much higher'' after 2010, Guerin said, as the industry undergoes a ''radical transformation.''

The value of champagne sales has almost doubled since 1988, while the number of bottles produced has risen only 23 percent. Demand will outstrip supply by 2010 as the final available plots in Champagne's rigidly controlled vineyards are cultivated, said Delaye. At that point, there will be no more inventories of wine aged more than 3.3 years, the threshold for quality champagne.

The fizzy wine can be produced only in the 34,000-hectare (84,000 acres) Champagne region under strictly defined rules that include producing no more than 15,000 kilos (33,000 pounds) of grapes per hectare. The limits are designed to avoid lowering the quality or price of the wine, according to Epernay, France-based Comite Interprofessionnel du vin de Champagne, or CIVC, an industry group.

Champagne shortages will lead to consolidation in the $3.38 billion industry as bigger producers snap up cheaper brands to increase volume, according to Remy Cointreau Chief Executive Officer Jean-Marie Laborde. The bigger, publicly traded winemakers are likely to buy smaller, private producers to secure their supply, Guerin said.

Weakness of the U.S. dollar and Japanese yen against the euro hasn't deterred consumers, said Yves Dumont, chief executive officer of Laurent Perrier SA, the fourth-largest producer of champagne. The company's Japanese sales are up 40 percent this year as customers snapped up 70,000 yen ($620) bottles of 1998 Grand Siecle even as the Japanese currency dropped against the euro.

''The Japanese love luxury products,'' Dumont said. ''We sell huge amounts of our best brands - Rose and Grand Siecle.''

Rising demand means the gains by champagne producers this year are far from over and that LVMH is cheap versus its peers, said Laurent Belloni, a fund manager at Geneva-based Pictet & Cie, which has about $373 billion under management.