While there has been much speculation as to what will happen to Seagram's spirit portfolio in the sell-off of its drinks business, there has been little discussion about Seagram's wine interests and in particular its worldwide distribution agreement for the Champagne marques Mumm and Perrier-Jouet.

Both these brands feature in the top ten exported Champagnes (sales outside France) with Mumm in fifth place and Perrier-Jouet ninth. Mumm, with total annual volumes in 1999 of 650,000 cases, is the third biggest selling Champagne brand worldwide. Only LVMH's super duo of Moet & Chandon and Veuve Cliquot, with 2.525m and 1.19m cases respectively, sell more than Mumm.

Mumm in particular could be an attractive option for Diageo because it remains one of the few marques not owned by the LVMH group that could challenge Moet's market leadership in the long term. (LVMH currently controls three of the five biggest Champagnes: Moet & Chandon, Veuve Cliquot and Pommery).

Despite the feeling that Paul Walsh, Diageo's CEO, has made it clear he wants Seagram's wines for himself, it has also been suggested that Perrier-Jouet and Mumm could fit very happily with Pernod Ricard, Diageo's partner in the fight for Seagram's drinks. This is particularly true in the important UK market where both are top ten players and where the wine arm of Pernod Ricard, Caxton Tower, is well placed to service the important off trade.

France, which alone accounts for around half Champagne's worldwide volumes, is Mumm's biggest single market at 275,000 cases. And, although LVMH's brands Mercier and Canard-Duchene are the French market leaders, sales of Mumm are only just behind Moet's (280,000 cases).

Furthermore, this year Mumm has become the 'official Champagne' poured over the triumphant drivers on the winner's podium in Formula One motor racing, a role Moet performed for many years.

Some of the impediments to Diageo's involvement in Champagne have been removed now the company's links with LVMH have been reduced a little (LVMH reduced its interests in Diageo from 6.8% to 2.93% in May) and since Laurent Perrier, in 1998, bought back the 22.5% shareholding IDV/UDV owned in this major international brand.

However, not all Diageo's potential hurdles with fizz have gone. It still owns a 34% holding in Moet Hennessy, and it will be interesting to see how Walsh and Co deal with the problem should Mumm end up in their stable. Perhaps of even more significance is Mumm's reaction to the idea of being distributed by the same company that owns over a third of its arch-rival Moet.

So while the prospect of gaining the distribution of two such potentially good Champagne performers is attractive, it is not altogether clear whether it is practical yet.

To an extent the same is true for Allied Domecq. The agreement it had to distribute Lanson Champagne (ranked as the sixth largest brand worldwide but number two in the important UK market and the fourth biggest brand in Germany, Champagne's fourth largest market) ended acrimoniously a couple of years ago, so it too lacks the image enhancement of a Champagne interest.

However, the main reason for the fall-out between Lanson and Allied was that the family-controlled Marne group, which owns Lanson, was unhappy with Allied's performance. It felt that Champagne was a low priority in the UK-based company's portfolio compared with some of the spirit brands the company owned and/or distributed.

Given that Seagram's Champagne distribution agreements appear to be renegotiable should there be a change of ownership at Seagram, there may be some question marks over whether Mumm and Perrier-Jouet will allow themselves to pass into the Allied portfolio. Given its history, the brand owners may be unconvinced of Allied's enthusiasm in the sparkling sector.

When Seagram put the two brands up for sale in the summer of 1998, it insisted on keeping the worldwide distribution rights for the pair. This was seen as a major stumbling block to the sale, as it was argued it would put off potential buyers.

But when a sale for US$310m to US investment bank Hicks Muse Tate & Furst was finally agreed in June 1999, Seagram did indeed hold onto worldwide distribution. (The deal also included a 14% investment by Reims-based Champagne producer Jean-Jacques Frey whose company, Groupe Frey, already owns and markets the Germain, Binet and Collery brands with respective annual sales of 1.4m, 250,000 and 80,000 bottles, plus other smaller marques).

This 'long-term' distribution agreement is, according to Mumm and Perrier Jouet's marketing director Edouard Beaslay, due to run for "more than three years". Speaking from Mumm's Reims base, Beaslay confirmed, however, that there are "a number of clauses within this agreement" that cover what might happen in the advent of a change of ownership. The implication being that Perrier-Jouet and Mumm, now under the same management team headed up by CEO Jean-Marie Barillère, would not have to accept any purchaser of Seagram as their new worldwide distributor.

Beaslay implied that the ability of any such new owner to distribute the two brands in their three key markets - the UK, France and the US which account for over half their Champagne business - would have a crucial influence on their decision to stay with that company. "We are watching what is happening with Seagram with great interest and want to keep our options open," Beaslay said.

Over the past decade Seagram has continually mucked around with the positioning of the two brands. In the UK, for example, Mumm was taken out of supermarket distribution to concentrate on the on-trade, particularly the restaurant market where it had strong links with gastronomy. UK supermarkets were encouraged to replace Mumm on their shelves with the then lower-priced Perrier-Jouet, but few did. In Europe, Perrier-Jouet has never had the brand profile and strength of Mumm.

Perrier-Jouet has long been the stronger of the two in the US however, and, Belle Epoque, its prestige cuvée has been a star performer even if it has not shaken Dom Perignon's dominance of this sector, which accounts for nearly a fifth by volume, and a lot more by value, of fizz sales in the US.

When however the American model was applied to the UK and Perrier-Jouet priced above Mumm, a position it still retains, the Mumm brand was further underminded. It has, however, made a significant recovery over the past few years in the UK with sales more than doubling in the second half of the 1990s to 90,000 cases, which has helped make it the fourth biggest seller. Its share of the UK off-trade in 1999 grew from 2.9 to 3.9% and MAT growth to the year end was 59.4%, according to AC Nielson figures.