The French luxury giant – owned by Bernard Arnault and boasting brands across fashion, cosmetics and perfume such as Louis Vuitton, Dior, Givenchy – is commonly cited as a ‘bellweather’ for the luxury sector.
And consumers just aren’t finding causes for celebration to prompt the popping-open of a bottle of champagne, suggest the company's executives.
LVMH’s wine and spirits division covers luxury brands such as Moët & Chandon, Krug, Veuve Clicquot, Hennessy, Château d’Yquem, Glenmorangie and Colgin: which collectively brought in €6.6bn in revenue in 2023.
But the picture looks less rosy for 2024: H1 results, published this week, shows organic revenue for the division was down 12%, coming in at €2.8bn ($3bn) for the half.
Breaking down the division into wine and spirits shows similar declines between categories: Champagne and Wines generating €1.4bn / $1.5bn (down 8% on an organic basis) and Cognac and Spirits down 10% to €1.4bn / $1.5bn.
‘Champagne is linked with celebration. Maybe the current global situation does not lead people to open bottles...’
Much of the decline in wine and spirits is down to ‘ongoing normalization of demand’ since 2023, says LVMH.
But the performance of wine and champagne was particularly impacted by weak demand for champagne in key markets, notably in Europe.
That’s not, however, an issue limited to LVMH, said CFO Jean-Jacques Guiony in this week’s earnings call.
“I think we have a severe demand issue in champagne,” he said. “Champagne is quite linked with celebration, happiness, etc.
"Maybe the current global situation, be it geopolitical or macroeconomic, does not lead people to cheer up and to open bottles of champagne - I don't really know.
“The fact of the matter is that our volumes are down double-digit. We understand that we are not the only one. Far from that: the whole industry is under severe pressure, particularly in Europe, where the bulk of the volumes takes place.”
While orders from retailers are still coming in, Guiony hopes to see a marginal improvement in H2 but warns there will be no big improvement.
But he also points out that champagne remains ‘significantly above’ pre-COVID levels in both value and volume.
Data from the Comite Champagne (CIVC) shows shipments of champagne were down 15.2% in the first half of 2024, compared to the same period in 2023, but coming back in line with 2019.
Good news for cognac in the US
In spirits, cognac has suffered from weak demand from China. “The Chinese market for cognac remains challenging, demand is soft and retailers are cautious,” said Rodolphe Ozun, director of financial communications.
But good news comes from the US market: where cognac sales volumes returned to growth in Q2. Hennessy, for example, made market share gains – although the market remains a ‘wait-and-see’ environment.
Despite its prestigious brands, the wine and spirits division is a small part of LVMH’s overall business. The €2.8bn posted for the division in H1, 2024 compares to €41bn overall, for the company whose brands range from Louis Vuitton, Dior, Givenchy and Sephora.
Perfume and cosmetics, for example, managed 3% reported growth and 6% organic growth; while selective retailing (which includes beauty chain Sephora) grew 3% reported and 8% organic.
Overall, the company saw 1% decline in reported growth and up 2% organic growth.
