LVMH’S WINE & SPIRITS DIVISION SEES DECLINE OF 4%
The world’s leading luxury group, LVMH Moët Hennessy Louis Vuitton, posted recorded revenue of €42.2 billion in the first half of 2023, up 15%, but the wines and spirits division was down by 4%.
Wines and spirits generated €3.2 billion during the first half (ending 30 June) but the contraction – which contrasts with strong double-digit growth at all of LVMH’s other divisions – means that wine and spirits is now a distinct laggard with plenty of work to do to catch up.
While LVMH said that wines and spirits “faced a particularly high basis of comparison”, the key issue is weakness in the cognac market which has ben seen by other players, for example Remy Cointreau, in the final quarter of last year. This meant a weak demand for Hennessy, the LVMH’s leading spirits brand.
Profits down 9%
In a statement, the Paris-based conglomerate noted: “The wines and spirits business group recorded a slight revenue decline in the first half of 2023, when compared to a particularly strong first half of 2022.” But profit was down too, by 9% – again in sharp contrast to its other divisions of fashion, beauty, watches and jewellery, and selective retailing. In the latter case profits surged by 100%, after several poor years due to Covid and a lack of international travellers shopping at DFS duty-free stores.
The Champagne business compensated for Hennessy cognac to some degree by maintaining flat sales over the period, driven by what LVMH called a “value-based strategy”. Revenue from champagnes and wines together increased 5% (based on published figures) but by 8% taking out currency fluctuations.
According to LVMH, Hennessy was impacted by the economic environment in the United States and China, as well as by the high stock levels that retailers still had which had negatively affected new orders in the half year. Revenue from cognacs and spirits was down 12% (based on published figures) to €1.6 billion from €1.8 billion in the same period a year earlier.
Betting on Provence rosés
As well as champagnes, the company is pinning its hopes on Provence rosé wines. Earlier this year, LVMH acquired the prestigious domain Minuty, after buying Château d’Esclans the maker of Whispering Angel before the pandemic. Now LVMH is stepping up the international expansion of the brands.
The Joseph Phelps Vineyard, said to be one of the most renowned wine properties in Napa Valley, California, was bought last year by LVMH and was included in the first half accounts for the first time, although revenue for this business group was down 3% during the period.
In other categories, The French luxury house said that Glenmorangie whisky and Belvedere vodka “continued to show strong momentum in innovation”. The performances of Glenmorangie, and also Ardbeg whisky, were mainly driven by the launch of new products, including Glenmorangie’s limited edition A Tale of the Forest and Ardbeg’s BizarreBQ.
Meanwhile Belvedere continued to grow, boosted by strong momentum in the high-energy club scene and the arrival of the house’s first ultra-premium vodka, Belvedere 10, unveiled in an exclusive debut at the Cannes Film Festival.
LVMH’s chairman and CEO, Bernard Arnault, did not comment on the performance in the drinks sector. Instead he focused on the “the strong creative momentum” of the company’s fashion and jewellery maisons like Louis Vuitton, Bulgari, and Tiffany & Co. He said: “Thanks to the desirability of our brands, we approach the second half of the year with confidence and optimism but will remain vigilant within the current environment.”
Mixed performance in China
That vigilance will extend to China, a crucial market for Hennessy. Consumer purchases of LVMH spirits brands in China were still heavily affected by Covid in the first quarter. Better news has come from travel retail where revenue increased as more Chinese travelled, and as Hennessy expanded its geographic coverage.
The cognac house is pursuing brand-boosting strategies through a series of initiatives including its global partnership with the National Baskeball Association; a new V.S.O.P marketing campaign; the Hennessy X.O x Kim Jones limited edition which is a crossover opportunity into the world of fashion; and the new ‘Paradis is on Earth’ marketing platform, featuring performers Alicia Keys and Lang Lang.