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.