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Dubious deals, soaring prices and hubris: inside Moët Hennessy’s crisis

LVMH’s drinks business has been caught in a global downturn. Questionable management decisions are said to have made things worse

Moët Hennessy, the wine and spirits empire owned by France’s LVMH, went from generating €1bn in cash in 2019 to burning through €1.5bn last year, according to documents seen by the Financial Times, as aggressive price increases and an ill-fated acquisition spree hit the luxury group’s drinks business.

The group behind Dom Pérignon champagne and Hennessy cognac has been hard hit by a global downturn in sales of alcoholic drinks. But people familiar with Moët Hennessy’s operations say strategic decisions made under the leadership of former chief executive Philippe Schaus, who left the group at the start of 2025, exacerbated its problems.

These included a determination to maintain profitability by increasing prices, a hit-and-miss series of deals, and a lossmaking push into direct-to-consumer sales, according to several sources with knowledge of the business and documents reviewed by the Financial Times. 

Moët Hennessy has been a cash cow for LVMH for years. But in a presentation in February last year, reviewed by the Financial Times, senior managers at the wine and spirits group were issued with stark warnings — “Need to save cash!” — as budgets came under strain.

When a surge in sales during the pandemic-era luxury boom began to go into reverse, management did not respond quickly enough to the ensuing downturn, said one source close to the company.

“It got to a point where it looked like Moët Hennessy could do no wrong,” the person said. “That’s what got them.”

The consequences of Moët Hennessy’s struggles became clear this month, when the division’s newly appointed executives told staff that about 1,200 jobs would be cut as part of a cost-cutting drive, and warned that sales would not bounce back soon.

In April, LVMH reported that its wine and spirits sales fell by 9 per cent on an organic basis in the first quarter, compared with a 3 per cent decline across the business as a whole. Moët Hennessy’s profits from recurring operations dropped by 36 per cent to €1.35bn last year. 

But the spirits business had already been comfortably LVMH’s worst-performing division, in terms of sales growth, in the past two years.

Leadership changes have followed poor performance. In February, Jean-Jacques Guiony, LVMH’s former chief financial officer, was appointed chief executive of Moët Hennessy, replacing Schaus. Alexandre Arnault, son of controlling shareholder Bernard Arnault and a former senior executive at jeweller Tiffany, was installed as Guiony’s deputy.

Armed with a mandate to turn around performance, the new executives are reviewing the division’s portfolio, as well as underperforming ventures, such as its direct to consumer retail business. Its private sales business is also being brought directly under Alexandre Arnault’s purview.

LVMH and Moët Hennessy declined to comment.

Among the issues Guiony addressed in a presentation to staff this month was the extent of recent price rises. He acknowledged that prices had been pushed “quite high” and that was “difficult to swallow” for some.

Sources told the Financial Times that retailers had begun to balk at the increases Moët Hennessy pushed on to them, after double digit percentage price rises in both 2021 and 2022.

Prices across the portfolio had risen by well over a third on average since 2019, the people said, adding that maintaining profit margins had become a mantra internally — even as some managers raised concerns it was unsustainable.

In a presentation last year, seen by the Financial Times, Moët Hennessy’s then global head of distribution, Jean-Marc Lacave, said it was “critical” to maintain operating profit margins, telling staff he “would prefer to do less business and be above 30 per cent.”

However, Moët Hennessy reported profit margins of 23 per cent last year. Despite charging far higher prices, sales fell close to 2019 levels, implying substantial volume declines. Lacave left the group at the start of the year.

The spirits group’s struggles came as it was digesting a series of acquisitions made under former boss Schaus. They were designed to reduce Moët Hennessy’s dependence on cognac and champagne, which made up more than 80 per cent of sales at the time.

Schaus has held a variety of senior roles at LVMH and became one of Bernard Arnault’s close advisers in more than two decades with the group. In 2012, he joined the executive committee and was appointed Moët Hennessy’s chair and chief executive five years later.

A near €2bn acquisition spree included the 2021 purchase of a 50 per cent stake in Jay-Z’s champagne brand Armand de Brignac — a deal that was, coincidentally, sourced by Alexandre Arnault, who is close with the American rapper — as well as the purchase of Provencal rosé brand Minuty in 2023 and Napa Valley winemaker Joseph Phelps in 2022.

Schaus — who declined to comment for this story — also signed off on launches of new products, including Volcan tequila and Eminente, a Cuban rum brand.

LVMH typically manages most of its dealmaking through a central team that reports to the chief financial officer.

But Schaus and his team was given wide discretion to make decisions on deals, particularly smaller transactions, according to two people with knowledge of the set-up. However, that was disputed by another person familiar with the matter, who said any significant acquisition went through LVMH’s normal channels.

Several deals have so far failed to deliver returns. One source with knowledge of their performance said that, with the exception of the Minuty acquisition and a handful of other deals for other rosé wine estates, the initiatives had “added complexity, lowered margin and drained cash”.

Guiony told staff this month that he was reviewing Moët Hennessy’s portfolio, particularly brands “added over the past few years”. Last week, after visiting the White House with his father, Alexandre Arnault was in Napa Valley visiting the Californian wineries.

Most of the acquired brands could be kept, Guiony said to staff this month, though their growth plans will be scaled back and costs cut substantially.  

“These businesses have been driven by an ambition that is very difficult to accommodate today . . . and we have been planning to develop in many geographies at the same time, which is in my view a mistake,” he said. 

Under Schaus, Moët Hennessy also accelerated a push into direct to consumer retailing, opening Hennessy stores in China and a Veuve Clicquot outlet at Parisian department store Printemps, as well as selling cases of Dom Pérignon and Veuve Clicquot online.

The initiative, which is now losing millions of euros per year, according to the people and documents seen by the Financial Times, has also been placed under review. Tannico, an e-commerce joint venture with Campari, launched in 2021, has also been a flop, the people said. Campari did not respond to a request for comment.

“We don’t know why these decisions were made [and] we’re not going to question them now, but we are going to look at what we should do in the future regarding these activities,” Alexandre Arnault said in this month’s staff presentation.

Even as Moët Hennessy’s sales tumbled last year, LVMH executives pressured the division’s managers to find ways to make up a projected €90mn shortfall in operating profit, relative to its 2024 targets. 

“We aren’t in a position to revise down our target,” Schaus wrote in emails seen by the Financial Times, as he urged teams to cut costs. “I know each and every one will have many good reasons to argue for lower numbers, but today we need to all rise to the challenge”.

One source said it was “very rare” that a business within LVMH submitted a forecast lower than the year before, adding that it was “growth, growth at all costs.”

“It was clear [Moët Hennessy] was going to deteriorate further,” the person said. “But Bernard Arnault didn’t want to hear that.”

Super-prime and the rise of ‘try before you buy’

In a buyer’s market for properties, some sellers are allowing potential buyers to move in temporarily before they sign on the dotted line. Cosy sleepover — or bed of thorns?

Imagine the scenario: you’re selling your house and it’s taking some time. Eventually, a purchaser comes into view, but first they want to thoroughly check your property’s suitability. And to do so they want to move in, temporarily. Maybe for a night or two, maybe for a longer-term rental. What would you say?

It seems that more people might say yes. The concept of “try before you buy” is growing in popularity among buyers and sellers, especially at the very highest price points, says Becky Fatemi, executive partner at Sotheby’s International Realty in London. It makes sense, she says. “We have the opportunity to try on clothes before we buy them so why shouldn’t we be able to try out homes?”

“In the past 13 months, four of my super-prime tenants — two in Mayfair, one in Kensington and one in Knightsbridge — have gone on to purchase the properties they were renting, two priced over £20mn and one over £50mn,” says Tom Smith, head of super-prime lettings at Knight Frank. “That was not something I had seen at all in the previous 12 months.”

The concept is one Fatemi has been testing the water with since 2017. Mansion House in Westminster, the remodelled former Liberal Democrats headquarters, had been listed for sale at £36mn, she recalls. When the property was still unsold in 2018, she arranged a one-year £1mn rental. The contract included the option to buy at an agreed price when the lease expired.

“Since that rental, I have negotiated into contracts, where possible, the option for tenants to purchase,” says Fatemi. “Today, high purchasing costs make it cheaper to rent [at the top end of the market] and with buyers in the driving seat, asking prices are not being achieved.” For those properties that have been on the market for more than a year and have not reduced their asking price, “offers are sometimes coming in up to 25 to 30 per cent below,” says Fatemi. When prices have been reduced, following Fatemi and her team’s advice, offers can still be around 5 per cent under asking, she says. 

For sellers in this situation, renting is being considered as an option. “As long as the sellers trust that the agent has truly checked that the client has a serious intention to purchase, it can make sense,” says Fatemi. “In some situations the buyer will get comfortable, they’ll understand the benefits of living in the property and not want the hassle and associated costs of moving elsewhere.” 

In 2018, Mansion House in Westminster was rented with the option to buy at an agreed price when the lease expired

Not everyone is in agreement. Mark Lawson, partner at The Buying Solution, says that “try before you buy” is “an excellent idea for a prospective buyer but requires a leap of faith for vendors.” He adds: “The buyer gets to live in the house, see how it works, listen to any noises and learn about the area and the neighbours. It gives them excellent insight — while they check out all the negatives. The only upside for the seller, however, is that if the buyer likes it, they tend to commit fully to the purchase.” 

Most buyers wisely check out an area before committing to a purchase, consulting easily accessible information — from crime figures to internet speed. Far fewer consider checking out — by checking into — a specific property. Knight Frank data shows that 23 per cent of UK buyers in 2024 bought a property after only one visit, a figure that rose to 52 per cent in Edinburgh. 

“Try before you buy is not a new concept but it has become more structured and visible in recent years, particularly in the super-prime market,” says Knight Frank’s Smith. There are multiple reasons for the sleepover preview to be gaining ground. “In light of market volatilities, tax changes and associated costs with purchasing, more international buyers are opting to rent first before committing to a purchase,” says Smith. Knight Frank’s data for London shows that the number of tenancies agreed from £1,000 per week was 16 per cent higher in the first quarter of this year compared to the same period last year. “However, I’d still say [renting with a view to purchase] remains a niche strategy rather than a widespread market trend.”

“Around 10-15 per cent of our London tenants engage in discussions, request an option to purchase, or seek first refusal,” he continues. He cites a client who paid for a three-year Hampstead rental upfront, negotiating fixed sale options for each year of the tenancy. But most renters are not looking to buy. “Based on our data, no more than 5 per cent of [total] rental deals in the super-prime market in London lead to a purchase,” he says.

There’s certainly plenty of red tape to consider, even for just a short one- or two-night stay: drawing up contracts, covering insurance and setting house rules to start with. “For some sellers, the risks outweigh the potential benefit,” says Laura Conduit, a partner at law firm Farrer & Co. “I had a former client who went into occupation under a contractual agreement between exchange and completion and then failed to complete and refused to move out, causing a major headache for the seller. It’s perfectly possible to draft for such an eventuality but enforcing legal agreements doesn’t come cheap and takes time.” 

It’s a risk increasing numbers of those with a home to sell are willing to take, though. “In a market where buyers are scarce, we find sellers are much more willing to consider such arrangements,” she says. 

There’s also a high chance it comes to nothing. “One client of mine stayed for the weekend in a house that was for sale at around £6mn on the south coast with a view to purchasing,” Lawson says. “He asked if his family and friends could stay. For his part, the owner stipulated that the property should be professionally cleaned afterwards.” 

The final decision? No sale. “The client felt it was too small when they were there,” says Lawson. “They were genuine potential purchasers. If the vendor allows a stay it is hard to avoid but vetting is key.” Among his “try before you buy” clients in the UK, “based on my experience, there’s a 40 per cent chance of a sale completing after a brief stay”. One recent success story was the sale of a farmhouse in Oxfordshire; in this case, the buyer “had put in an offer, which had been accepted, and they asked to stay for a weekend when the vendor was away”, he says. “It spurred them on to exchange as quickly as they could.” 

There are two main routes to set a rental-to-buy option in motion, says Smith, both with pros and cons. The “fixed price option” involves a pre-agreed purchase price being written into the rental agreement. The “price fixed at trigger point option” gives the tenant exclusive rights to buy but with a price based on a market guide at the time they decide to proceed.

Costa Navarino in Greece, where rental villas can be bought, with any rent paid deducted from the price

“The second option is more common, giving both parties flexibility while securing the tenant first refusal,” says Smith. “Fixing the price upfront offers certainty for both parties but may leave one side disadvantaged should market conditions change. The second option gives flexibility but adds uncertainty. Buyers risk the price increasing, sellers risk the tenant walking away.”

Scott Sachs from Washington DC-based The Synergy Group has organised longer-term rentals specifically aimed at an eventual purchase, generally with no agreed sales price written into the rental contract. The “lease to own” concept is, he says, becoming more of a reality as sellers realise their prices are trailing market conditions. 

“Traditionally, renting-to-buy involves paying a higher rent with a small proportion going towards the down payment or closing costs,” he says. “The complication arises at the end of the lease agreement, getting both parties to agree to a fair market price. We’ve made it happen, but it takes creative thinking.”

He is currently working with a client to secure a rental in a high-end building in Washington; the property is for sale and the owner has agreed to a six-month lease. “Sixty days prior to expiration, the client can exercise the option to purchase and we are securing a price in the initial contract that insulates the seller and encourages this type of arrangement,” says Sachs. 

The resort and branded residences markets, with several similar properties available for rental and often an established rental programme in place, lend themselves particularly well to the try before buying model. At Costa Navarino, a sport and leisure resort on the Greek Peloponnese, rent paid on a stay in the Villa Rental Collection — nightly prices average €2,508 — will be deducted from an eventual property purchase. 

At the Koh Samui resort of Samujana a pre-purchase stay is encouraged © Nicolas Voisin

To date, every villa owner there previously stayed at the resort, either at one of the four hotels or in a rental property, says senior commercial director Lefteris Tassoulas. One such is Michael Wilkinson, general manager of engineering firm Bechtel, who is based in the Chilterns. “I was actively looking to buy a family villa in Greece, somewhere we had visited for holidays for several years,” he says. “From our previous stays at Costa Navarino we knew we wanted a house close to both the beach and the golf course and waited for the right opportunity to come up. It was relatively easy to make the decision because we knew the resort so well.” 

At Samujana, a villa resort on the Thai island of Koh Samui, a pre-purchase stay is positively encouraged, with all rental costs deducted from the sales price. “I would say approximately half of all villa sales have been secured on the back of eventual buyers having rented beforehand,” says John Kinder, chair of the villa owners’ committee. 

Back at Westminster’s Mansion House, Fatemi’s original try before you buy property, the tenants chose not to go ahead and purchase. The property did, however, change hands and now is once again back on the market, with the original £36mn price tag reduced to £21mn. Time for a sleepover? 

Elliott wins support in Phillips 66 fight

It had been more than a decade since influential proxy adviser Institutional Shareholder Services backed a full slate of board directors nominated by an activist investor in a fight against a large-cap US company. 

Twelve years ago, Elliott Management notched such a victory in its campaign against oil and gas company Hess.

Late on Monday, Elliott repeated the feat with ISS encouraging Phillips 66 shareholders to vote in favour of the hedge fund’s four board nominees ahead of a showdown at the oil refiner’s annual meeting later this month. 

And the similarities between the two campaigns don’t end there.

Both were overseen by veteran Elliott portfolio manager John Pike, and the campaigns called for major asset divestments. In Hess’s case, the company settled in the twilight hours before a shareholder vote. Perhaps that’s the fate that now awaits Phillips 66. 

In its report, ISS took aim at Phillips 66’s poor performance compared with industry rivals, and subpar corporate governance, including a decision to hand chief executive Mark Lashier the role of chair and the company’s failure to overhaul its staggered board election model. 

ISS said Elliott presented a “compelling case for change” as it endorsed the hedge fund’s nominees.

Emboldened by the endorsement of ISS as well as Glass Lewis, another key proxy adviser, Elliott said “it is clearer than ever that urgent and meaningful change is needed in the Phillips 66 boardroom”.

On Tuesday, Phillips 66 barked back.

It said: “Elliott is seeking rapid, irreversible change in pursuit of a short-term thesis that would introduce significant risks to Phillips 66 shareholders.”

The next twist in the tale might be a last-minute settlement between Elliott and Phillips 66, to draw a close to one of the most volatile campaigns in years.

If a settlement does not materialise, Phillips 66 and Elliott will be heading into the unknown.

The activist investor would then face the first full-blown proxy vote against a major US corporation in its history.

The big test within the Arnault empire 

The wedding of Alexandre Arnault and Geraldine Guyot in 2021 was a star-studded affair.

Rapper Kanye West, dressed in a black Balenciaga suit and mask, serenaded the lovers with hits including “Runaway” and “Flashing Lights”, as stars such as tennis icon Roger Federer looked on.

Among the celebrities in attendance at the two-day ceremony in Venice was American rapper Jay-Z, who had cause to celebrate beyond the Arnault scion’s nuptials.

Earlier that year, the rapper had sold a 50 per cent stake in his champagne brand, Armand de Brignac, to Moët Hennessy — LVMH’s wine and spirits division, part of the luxury empire controlled by billionaire Bernard Arnault and his family.

Forbes estimated that year that the deal, together with the sale of his stake in streaming business Tidal, had lifted Jay-Z’s net worth by 40 per cent to $1.4bn.

For Moët Hennessy, though, the acquisition was part of a hit-and-miss deal spree totalling nearly €2bn. It included several transactions that have not delivered as promised. 

The acquisition drive and other decisions at LVMH’s wine and spirits division have compounded the impact of a sharp global downturn in the drinks market, according to multiple sources and documents seen by the FT’s Adrienne Klasa. 

Moët Hennessy went from generating €1bn in cash in 2019 to burning through €1.5bn in last year’s budget.

That downturn is part of a wider global slump in sales of alcoholic drinks, but some of the company’s choices have exacerbated the issue, according to sources with knowledge of the business.

Under former chief executive Philippe Schaus, Moët Hennessy pursued hit-and-miss deals, a lossmaking drive into direct-to-consumer sales and sharp price increases. Yet he ascended to be one of controlling shareholder Bernard Arnault’s close advisers in his two decades at LVMH. 

Prices across the portfolio have risen by well over a third on average since 2019. Meanwhile sales last year fell close to 2019 levels and operating profit margins fell to 23 per cent, below Moët Hennessy’s 30 per cent target.

The company’s direct-to-consumer retailing push is now losing millions of euros per year. 

Moët Hennessy had been a cash cow for LVMH for years. But some complacency following the pandemic boom years has taken its toll, according to one source close to the company: “It got to a point where it looked like Moët Hennessy could do no wrong . . . That’s what got them.”

New leaders were installed at the helm of Moët in February, but they face a major test. 

Tasked with the turnaround: Jean-Jacques Guiony, LVMH’s former chief financial officer, and Alexandre Arnault.

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