‘Weak’ Hennessy demand hampers LVMH sales

The wine and spirits arm of LVMH was the only part of the company to decline during the first half of 2023 due to ‘weak demand’ for Hennessy Cognac in the US.

LVMH’s spirits division reported sales of €1.6 billion (US$1.77bn) for the six months to 30 June 2023, representing an 11% decline. The group’s spirits sales also fell by 5% during the first quarter of this year.

In contrast, Champagne and wines rose by 8% to €1.58bn (US$1.75bn) during the first half of 2023.

Hennessy Cognac’s revenue was down after being ‘hampered’ in the US due to high retailer inventory levels and ‘weak customer demand’.

Furthermore, the group noted that Cognac purchases in China were ‘heavily affected’ by the pandemic during the first quarter.

LVMH highlighted that its travel retail revenue had increased and Hennessy had extended its geographic reach.

The group said the performances of its Scotch whiskies, Glenmorangie and Ardbeg, were mainly driven by the launch of new products, including the limited edition A Tale of the Forest and Ardbeg’s BizarreBQ.

Belvedere vodka also continued to grow, driven by ‘strong momentum’ in the ‘high-energy’ club scene.

American whiskey Woodinville increased in the US after expanding into new states. Volcán de mi Tierra Tequila was lifted by the expansion of its XA ultra-premium line.

Meanwhile, Cuban rum Eminente ‘further consolidated its position in Europe’s ultra-premium market’, LVMH noted.

Outlook remains ‘uncertain’

In total, LVMH’s wine and spirits, which sit under its Moët Hennessy subsidiary, reported an organic sales drop of 3% to €3.18bn (US$3.52bn) for the six-month period. Profit from recurring operations dropped by 9%.

Sales for the same period last year were ‘particularly strong’ due to recovery from the pandemic in the US, the Paris-headquartered group noted.

Second-quarter sales of wine and spirits dropped by 8%. It followed a 3% revenue increase for the subsidiary in the first three months of 2023.

In its outlook for wine and spirits, LVMH said the economic environment remained uncertain, particularly in the US.

The group plans to focus on several areas: balanced geographical coverage, a diversified portfolio, and ‘excellence, reputation and capacity for innovation’ across its houses.

Moët Hennessy highlighted the recent opening of its first cocktail bar, Cravan, in Paris, which is in line with the group’s goal of ‘crafting experiences’.

The rest of LVMH’s divisions, which includes fashion and leather goods, and perfume and cosmetics, reported double-digit revenue increases for the six-month period.

In total, LVMH’s organic sales rose by 17% to €42.2bn (US$46.7bn) for the first half of this year.

The firm’s wine and spirits business saw revenue soar by double digits in 2022.