Behind the Money: Inside Moët Hennessy’s Crisis

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

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.

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)

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