Behind the Money: Inside Moët Hennessy’s crisis

Summary

Behind the Money: Inside Moët Hennessy’s Crisis

Released on June 19, 2025 | Financial Times & Pushkin Industries

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Introduction to the Crisis

In this episode of Unhedged, hosted by the Financial Times' markets experts, listeners are taken behind the scenes of one of Europe's largest conglomerates to explore the turmoil within Moët Hennessy, the luxury alcoholic beverage division of LVMH. The episode delves into the factors contributing to Moët Hennessy's recent struggles and examines what this means for the future of the luxury giant.

Moët Hennessy's Pivotal Role within LVMH

Moët Hennessy has long been the financial backbone of LVMH, providing the cash flow necessary for the group's expansive acquisitions. Founded in the 1980s through the merger of Moët et Chandon and Hennessy, the company owns prestigious brands such as Dom Pérignon, Veuve Clicquot, Krug, and Belvedere Vodka. Bernard Arnault, the billionaire behind LVMH, utilized Moët Hennessy's robust performance to fuel the empire's growth through continuous acquisitions of top-tier luxury brands like Dior, Bulgari, Fendi, and others.

Strategic Mistakes Leading to the Crisis

Adrian Klasse, FT's Paris correspondent, identifies three critical strategic missteps under former CEO Philippe Schauss that have led to Moët Hennessy's downturn:

1. Price Increases
   “The prices across the portfolio had risen by well over a third on average since 2019,” Klasse explains (12:30). This aggressive pricing strategy alienated both clients and retailers, making products seem overpriced and unsustainable.

2. Acquisition Push
   Schauss spearheaded a €2 billion acquisition spree aimed at diversifying the portfolio beyond Cognac and Champagne. While acquisitions like Minuti wine estates were successful, many other purchases failed to perform, draining resources and complicating the business structure.

3. Direct-to-Consumer Initiative
   The push to sell directly to consumers through online platforms and branded boutiques, particularly in China, resulted in significant losses. “Opening Hennessy branded cognac boutiques in China...was loss-making to the tune of several million plus per year,” Klasse notes (14:22).

These strategic errors coincided with broader industry challenges, including declining alcohol consumption and a slowdown in the luxury market post-pandemic.

Management Shakeup and New Leadership

Facing escalating losses—“burning through 1.5 billion last year” (09:39)—Moët Hennessy underwent a significant management overhaul. Philippe Schauss and other senior executives exited, making way for Bernard Arnault’s son, Alexandre Arnault, and the group's respected CFO, Jean-Jacques Guillaume, to take the helm. Their appointment signifies LVMH's commitment to addressing the crisis with fresh leadership.

Plans for Turnaround

The new leadership has outlined several strategies to stabilize and revitalize Moët Hennessy:

• Cost-Cutting Measures: Immediate reductions in headcount, marketing budgets, and travel expenses are underway to curtail losses.

• Review of Acquisitions: A comprehensive evaluation of recent acquisitions is being conducted to determine their viability and potential integration into the core business.

• Investment in Non-Alcoholic Beverages: In response to declining alcohol consumption, Moët Hennessy has invested in French Bloom, a non-alcoholic wine producer, signaling a strategic pivot to diversify offerings.

As Klasse remarks, “They are really turning the screws now in terms of trying to cut costs and turn the business around” (16:42).

Addressing Macro Issues

Beyond internal challenges, Moët Hennessy faces macroeconomic pressures:

• Declining Alcohol Consumption: A long-term trend of reduced alcohol intake is forcing the industry to adapt to changing consumer preferences.

• Luxury Market Slowdown: The post-pandemic slowdown has dampened sales of luxury goods, further straining Moët Hennessy's performance.

• Reduced Consumer Spending in China: As a major market for luxury goods, decreased spending in China exacerbates the company's woes.

Trade Tensions and Their Impact

The ongoing tariff dispute between the US and the EU poses additional threats. While luxury goods are somewhat insulated due to their high price points and affluent consumer base, “Trade disruptions and geopolitical tension are not good for most businesses, especially not for export industries” Klasse observes (19:23). Efforts to mitigate these impacts include potential expansion of LVMH’s workshops in the US, although the effectiveness of such measures remains uncertain.

Future Prospects

Looking ahead, the sustainability of Moët Hennessy’s turnaround efforts remains questionable. Arnault has set a two-year timeline for the new leadership to demonstrate substantial progress. However, Klasse cautions that “given the current state of the world, of the global economy, of pressures on China, of uncertainty emanating from the U.S., this is probably going to be a longer, tougher process than previously anticipated” (22:29).

Conclusion

Moët Hennessy's struggle underscores the delicate balance within large conglomerates between maintaining core strengths and pursuing growth through diversification. As LVMH navigates this crisis, the outcome will have significant implications for its future strategy and position in the global luxury market.

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Notable Quotes:

• “The prices across the portfolio had risen by well over a third on average since 2019.” — Adrian Klasse (12:30)
• “Opening Hennessy branded cognac boutiques in China...was loss-making to the tune of several million plus per year.” — Adrian Klasse (14:22)
• “They are really turning the screws now in terms of trying to cut costs and turn the business around.” — Adrian Klasse (16:42)
• “Trade disruptions and geopolitical tension are not good for most businesses, especially not for export industries.” — Adrian Klasse (19:23)
• “Given the current state of the world... this is probably going to be a longer, tougher process than previously anticipated.” — Adrian Klasse (22:29)

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This summary is based on the transcript provided and aims to encapsulate the key discussions and insights from the podcast episode.

Transcript

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[Podcast Host]

Listeners. We're off today for Juneteenth, so instead of unhedged, we thought you'd enjoy listening to another great FT podcast, Behind the Money. In this episode, you're going to learn about what's going on at Moet Hennessy, the luxury alcoholic beverage business, and what its recent struggles mean for the future of one of Europe's largest companies. I myself love champagne, but only to bathe in Enjoy the show.

[Mikela Tindera]

The opening ceremony for the Olympics last year was truly a spectacle. Lady Gaga performed. Athletes from around the world floated in on the scene. A headless Marie Antoinette sang with a heavy metal band. But for the FT's Paris correspondent Adrian Klasse, who watched with some of our colleagues, there was one part of this pageantry that really stood out to her.

[Adrian Klasse]

They had this really long sequence that featured Louis Vuitton trunks, like big person sized almost trunks. And they had this dancing sequence that went on for at least a couple of minutes.

[Mikela Tindera]

Taking in the ceremony. You see dancers sashay and twirl around brown leather luggage in the middle of the street. For Adrian, seeing this scene felt indicative of something that became much more noticeable as the Games went on.

[Adrian Klasse]

The Paris Olympics were, you know, very much supposed to be about Paris and the city, but in some ways it felt like the LVMH Olympics. LVMH is Louis Vuitton Moet Hennessy. It is the world's biggest luxury group and it was one of the biggest sponsors of the Paris Olympics. And they were everywhere.

[Mikela Tindera]

Walking around Paris, LVMH's brands were entwined with this massive celebration. To the average person, it probably looked like the good times were rolling for the company, including their wine and spirits division, Moet Hennessy.

[Adrian Klasse]

If you went to any of the bars, especially the VIP bars anywhere in the Games, all of it was supplied by Moet Hennessy. Champagne, cognac, the, you name it, it was all coming from this business and from this group.

[Mikela Tindera]

But Adrian tells me that seeing this wasn't the full story behind the scenes.

[Adrian Klasse]

It was a much more somber moment for the luxury industry more generally, but also certain businesses within sort of the LVMH empire, notably Moet Hennessy had actually been really struggling at the time.

[Mikela Tindera]

Moet Hennessy was the worst performing arm of LVMH in terms of sales growth, a trend that continued after the Olympics ended.

[Adrian Klasse]

So now Moet Hennessy is in a situation where there's a lot of pressure to turn around this business. And the big question is, of course, you know, how did they get there? Partially it was the market. But what my reporting indicated was also there were some strategic mistakes that were made internally that essentially compounded the whole situation and made things worse.

[Mikela Tindera]

I'm Mikela Tindera. From the financial on behind the Money, an inside look at the trouble at LVMH's Moet Hennessy and what it means for the future of one of Europe's largest companies. In the 1980s, renowned wine and spirits business Moet Hennessy joined with the luggage and handbag brand Louis Vuitton. Together they formed the conglomerate lvmh. Moet Hennessy today includes a whole slew of notable brands.

[Adrian Klasse]

So they own Moet the Champagne, they own Kennessy the Cognac, it's in the name. But they also own other champagne brands like Dom Perignon, like Veuve Clicquot, like Krug, which is extremely high end, and then other sort of hard alcohol brands like Belvedere Vodka.

[Mikela Tindera]

Depending on the item, a bottle of something from Moet Hennessy can range in price from $50 or $60 to several thousand.

[Adrian Klasse]

So it's very important to the identity of this luxury empire that is controlled by the family of billionaire Bernard Arnault, who's a big character in France and is also often cited as one of the world's richest men.

[Mikela Tindera]

But Moet Hennessy's importance to LVMH and Bernard Arnault is about more than just identity.

[Adrian Klasse]

The important thing to know about LVMH is that it was built by Bernard Arnault through acquisitions. So he bought all of these companies and he brought them together and created one of the biggest companies in Europe.

[Mikela Tindera]

Now, what Adrian's talking about here are all these major luxury fashion and leather goods brands like Dior, Bulgari, Fendi, Loro, Piana, the list goes on and on.

[Adrian Klasse]

And he used a lot of the cash that was generated by the Moet Hennessy business to do acquisitions. So it was a very important part of the way that essentially this empire was built.

[Mikela Tindera]

So, in short, Moet Hennessy served as the cash cow that fueled buying other companies. And this was possible for a few reasons.

[Adrian Klasse]

In fashion and luxury, we talk about something that's called fashion Risk, which is, you know, if your brand is suddenly uncool, then all of a sudden your sales drop, which can happen in the alcohol industry, but it's a lot less volatile in some ways than it can be in fashion, which is very seasonal and very, very changeable.

[Mikela Tindera]

Adrian says that sales of wine and spirits don't really experience the cycles that the fashion world does. And when they do go through volatility, it tends to happen at different times. Plus, these kinds of businesses are also tend to have high margins. So for a long time, these two parts of lvmh, the alcohol and the fashion, complemented each other really well. And then about five years ago, both sides of the business experienced a significant boost.

[Adrian Klasse]

So during the pandemic, somewhat counterintuitively, after markets completely shut down in sort of early 2020, there was actually a huge boom in luxury goods, including in the alcohol industry. And that was because essentially people were sat at home with extra savings with furlough checks, and they were shopping and they were shopping online and they were shopping to buy premium booze, essentially to mix cocktails at home. And so that led to absolutely explosive growth for Moet Hennessy.

[Mikela Tindera]

Now, it was always clear that at some point, these double digit levels of growth from the COVID era weren't going to go on forever. And when that was becoming a reality was around the time that Adrienne started her job as the FT's Paris correspondent in 2023. And in this job, she became responsible for covering all kinds of luxury businesses that are based in Europe. Not only lvmh, but also Kering Richemont and Hermes.

[Adrian Klasse]

Yeah, so that was kind of the tail end of the luxury boom. And it was sort of a moment where I start the job and people are already asking the question, okay, how long can this keep going if this kind of explosive growth can sustainable? And then within a few quarters, it becomes quite clear that it will not continue at that level at all.

[Mikela Tindera]

The slowdown in luxury comes at a time when another problem is bubbling up to the surface. For the alcohol industry.

[Adrian Klasse]

There are a couple different things happening at the same time, as is often the case in life. I mean, there is one sort of long term demographic shift, and this is not new. This has been going on for decades, which is basically that people are increasingly drinking less. So this is gathering pace and the entire industry is having to adapt to that.

[Mikela Tindera]

These factors combined, people consuming less alcohol, people buying fewer luxury goods. There's also a drop in spending among consumers in China since COVID So for a company like Moet Hennessy. It seems rough times are on the horizon.

[Adrian Klasse]

And then at some point, I started to receive information from various sources that indicated to me that, yes, they were contending with the sort of same pressures and trends that the entire industry was contending with, but also there appeared to be some internal problems that were really compounding the impact on performance there.

[Mikela Tindera]

And what did you learn, basically, through.

[Adrian Klasse]

Sort of, you know, conversations with many different sources who know about this business, and also sort of internal documents that I was able to examine about Mo Hennessy's performance. Because LVMH does not disclose all of this stuff publicly, it became apparent that the business had deteriorated a lot and had gone from being sort of a cash generator, which it had been for decades in 2019, to essentially burning through 1.5 billion last year. And that was setting off alarm bells across the business.

[Mikela Tindera]

Just months before their big moment at the Paris Olympics, Moet Hennessy execs were scrambling behind the scenes.

[Adrian Klasse]

So basically, in some of the sort of internal documents I was able to look at, there were presentations that had been made to sort of a wide variety of senior staff as they were looking at these numbers going into 2024, 2025, and trying to put together a budget for the business. And there were big caps lock warnings saying things like, need to save cash. Cash is now a problem.

[Mikela Tindera]

Adrian tells me this marked a dramatic change in how LVMH had operated for years.

[Adrian Klasse]

I think that the things that really struck me, though, was the sort of switch from being a cash generator that had essentially been a motor used to build this business empire, switching to being a part of the business that was burning through cash and that would need to have contributions from other parts of the business essentially to keep the budgets balanced. It's a huge shift.

[Mikela Tindera]

So rather than supporting the rest of the business, the other parts of LVMH would have to step in and support Moet Hennessy. But the more Adrienne reported, the more she learned these problems weren't only tied to the broad luxury slowdown or trends in alcohol consumption. She found a much clearer picture, and she pinpointed three strategic mistakes that, when combined, turned into something that's been been tough for LVMH to swallow. Adrian says the three key missteps of Moet Hennessy can be traced back to decisions made under the company's former leader.

[Adrian Klasse]

The former CEO is a man named Philippe Schauss, who has been at LVMH for a very long time. I think he'd been there for over two decades so under him, there were sort of three things that were done that my sources believed were not beneficial to the business. The first was a real emphasis on increasing prices and continuing to increase prices even when some clients and retailers were starting to feel that it was too high and it was too much and it was not reflective of what was reasonable for the product.

[Mikela Tindera]

Adrienne told me that her sources said that the prices across the portfolio had risen by well over a third on average since 2019.

[Adrian Klasse]

So that was one thing. The second was he went on a big M and a acquisition push. Now, part of this made a lot of sense because when he took over the Moet Hennessy business, it was extremely dependent on Cognac and on Champagne. They knew Cognac was probably going to fall out of style, so they needed to sort of diversify to sort of balance out the impact of that product having a bit of a dip. So he went out and with his team bought about 2 billion euros worth of different businesses. And that had quite mixed results. Some of the stuff that they bought, such as wine estates like Minuti, those have been very successful. But then there was a whole bunch of other stuff that complexified things, ate up a lot of cash, hasn't performed the way those businesses were expected to when they were buying them, and just essentially were a drain on the business.

[Mikela Tindera]

So we've got unpopular price hikes plus a hit and miss acquisition spree. But the final blunder was schous launch of a so called direct to consumer initiative.

[Adrian Klasse]

So direct to consumer is a jargony way of basically saying selling directly to the shopper. Which if you think about how you normally buy alcohol, if you're someone who purchases alcohol, is you don't go to a branded store most of the time and buy a bottle of champagne or whiskey. You go to a liquor store that's run by a retailer who buys a selection of stuff from a whole bunch of different brands from a distributor.

[Mikela Tindera]

Right. There isn't a Moet store that I would go to to buy my bottle of champagne.

[Adrian Klasse]

Typically, most of the time not. But what was changing was that Moet Hennessy and Schauss thought it would be a good idea to do more direct sales because then you can control the product more, you can probably retain more margin, right, because you're not paying as many middlemen. And you can also sort of, you know, put your brands to the fore. So there was a push to do this and make their product directly available to shoppers, both online and in physical stores. So for instance, opening Hennessy branded cognac boutiques in China during that time. Now at that time, Cognac was super popular in China, but the problem was none of those stores, according to my sources, were ever really making money during the boom years. It doesn't really matter, right? It's marketing essentially. So that was loss making to the tune of several million plus per year, it seems, in recent years.

[Mikela Tindera]

So by early 2025, these decisions left Moet Hennessy struggling in an already tough environment. Adrian, so how do they handle all this? Does the company do anything?

[Adrian Klasse]

There is then a management shakeup that takes place where, you know, Philippe Schauss and some of the senior people that were around him leave their positions and leave lvmh. The group. And two people very close to Bernard Arnault are brought in with, with a mandate essentially to turn things around.

[Mikela Tindera]

Adrienne tells me that the choice of new leadership indicated to her that Moet and LVMH were taking problems seriously. Things needed to change.

[Adrian Klasse]

And those people are his son, Alexandre Arnault, who's, you know, in his 30s and is coming back from a stint as a senior executive at Tiffany the jeweler in New York, which is also owned by lvmh, and the trusted CFO of the entire group, a guy named Jean Jacques Guillaume, who has been at the group for two plus decades and is highly, highly respected as an executive and as a financial guide for the group. So they're sort of put in place as chief executive and deputy.

[Mikela Tindera]

Okay, so new leadership is in place now, but what are their plans?

[Adrian Klasse]

Well, first, I mean, their plans are they're gonna have to cut a whole bunch of headcount. So that was one of the first things that became apparent quite quickly. They're conducting a review of all of the acquisitions that were made, especially recently within the group. The internal leaked materials that I've been able to look at indicate that they think that they're going to be able to keep most of these different companies and brands and stuff like that. But you know, their marketing budgets are being cut, travel budgets are being cut. I mean, it's very clear that this, it's not been the boom years for a few years now, but I think they're really turning the screws now in terms of trying to cut costs and turn the business around.

[Mikela Tindera]

Now what about how they address some of the macro issues like people consuming less alcohol? Do you know much about those sorts of plans?

[Adrian Klasse]

Yeah, so actually Moet Hennessy last year invested in any non alcoholic beverage producer for the first time. It's a non alcoholic wine producer called French Bloom. It's a minority stake, so they're obviously testing the water. But it shows that they are aware that this is A, a growing trend, but B, also that there is this demographic shift and they need to look at sort of solutions to address that. And just to say, you know, others in the industry are doing this a lot. If you look at Pernod Ricard and other sort of, you know, drinks makers, they're also investing in building out a non alcoholic options portfolio. The problem with it is I don't know how many of these sort of non alcoholic wines listeners will have tried before. I'm sure there are a few very good ones out there, but a lot of them are not great yet in terms of taste and in terms of the sophistication of palate that they offer and also in terms of price point, they tend to be cheaper than most wines and champagnes and other sort of premium drinks, which is the category Mohannessy is in, would be the other thing to mention is that the premium category is a little less vulnerable to the kind of demographic shift that we've been talking about because the stuff that's really getting hit the hardest is the really low end sort of table wine. So they are somewhat insulated from these trends by that. But yes, generally we're all over time drinking less.

[Mikela Tindera]

Yeah. Now, changing gears a bit, you know, the US and the EU have been locked into a tariff dispute of late. How might that impact LVMH and Moet Hennessy?

[Adrian Klasse]

I mean, look, trade disruptions and geopolitical tension are not good for most businesses and expect, especially not for export industries, which is what a lot of luxury and wine and spirits business is built on. It's a bit of a complicated one because luxury goods in general are a little more insulated from the impacts of tariffs than a lot of other basic consumer goods. A big part of this is because these are products that are being bought by people who have more disposable income and therefore don't feel the pressure from, you know, bad economic circumstances quite as quickly as, you know, people who are struggling to get by. So that's one factor. You also do have an element of being able to pass off some of the impact of potential tariffs because we still haven't landed on the final tariff regime through price increases. The issue with that is, first of all, it's harder to raise prices more when you've already been raising prices a lot. The other sort of vulnerability that all of these industries have is that the way that the luxury industry and also sort of, you know, high end European drinks makers are able to sort of command the kind of cachet that they have is to be able to say that, you know, these products are made in Europe, have a very specific origin, have a very specific supply chain, they are special. So that means that you can't all of a sudden just shift all your production and say, we're going to be made in the usa, we're going to be made in Kansas. That being said, Bernard Arnault has sort of intimated that the group would look at expanding its sort of very limited but already existing network of workshops in the US this might have been sort of more a gesture towards Donald Trump than an actual industrial program. So that could be offset a bit of impact and also be a good negotiating point for the company. But fundamentally, trade disruptions, anxiety about the state of the economy does not make people want to go out and buy champagne and handbags. It makes them want to put money in a savings account and worry about the future. And that overall is not going to be good for the luxury industry.

[Mikela Tindera]

Right, exactly. So what happens? Just thinking now back more to the internal changes happening at Moet Hennessy. What happens to LVMH if Moet Hennessy can't turn things around, if they can't become again this cash generating part of the business?

[Adrian Klasse]

I mean, I don't think anybody knows. I think that it's unlikely that that will be the outcome. I think it's more of a question of how long it will take and how painful that transition will be in terms of having to cut back and whittle down.

[Mikela Tindera]

Yeah. What will you be watching for then in that case of this question of how long it takes?

[Adrian Klasse]

I mean, Bernard Arnault, in sort of comments that he made sort of earlier this year, basically set Guillaume and his son Alexandre timeline as sort of saying something to the effect of, you know, let's see where they can get to in the next two years. I'm confident in them, you know, they'll be able to get things in hand. It's very hard to make a call at this point because things are so uncertain globally. But I would imagine given the current state of the world, of the global economy, of pressures on China, of uncertainty emanating from the U.S. you know, this is probably going to be a longer, tougher process than previously anticipated.

[Mikela Tindera]

Behind the Money is hosted by me, Mikhaila Tindera. It's produced by me, Safia Ahmed and Katya Kamkova. Our intern is Mikayla Sia. Sound design and mixing by Simon Panay. Special thanks to Sam Chambers. Original music is by Hannis Brown. Topher forges is the FT's acting co head of audio. Thanks for listening. See you next.