LVMH’s Strategic Revival: Focusing on Iconic Brands for Moët Hennessy
PARIS (Reuters) — In a bold move to reinvigorate its Moët Hennessy division, LVMH is shifting its sights toward bolstering its most renowned alcohol brands. This transformative strategy, outlined by CEO Jean-Jacques Guiony in a recent video message to employees, signals a definitive commitment to reviving the division’s fortunes by prioritizing legacy brands while streamlining some operational components.
A Shift in Focus: The Return to Core Brands
The emphasis is clear: LVMH’s future efforts will center on its prestigious names, particularly the high-end champagne label Moët and the distinguished cognac brand, Hennessy. Guiony expressed that this approach aims to correct years of dilution from the division’s expansion into smaller, less recognized labels, which has contributed to a decline in revenue and an alarming drop in operating profits—over one-third last year alone.
“Today, we have too heavy a construction,” Guiony remarked, alluding to a structure developed for a once-burgeoning business, but now hindering growth opportunities.
This strategic pivot comes at a critical juncture when the global market for luxury beverages faces headwinds from various directions, including weak demand in key markets like the United States and China and ongoing U.S.-led tariff conflicts.
Staffing Changes: The Path to Efficiency
As part of this revival strategy, the division will undergo a restructuring process aiming to reduce its workforce by nearly 13%. Currently at 9,400, the target is to bring staff levels down to 8,200, echoing 2019 figures. This reduction will largely occur through natural attrition and the non-renewal of vacant roles, a move seen as prudent by analysts like Luca Solca from Bernstein.
“I find it very appropriate that the new leadership is looking at cutting costs to support profits — this is the right thing to do,” Solca noted, stressing that the entire sector currently grapples with softer consumer demand.
Revitalizing The Brand Portfolio
Guiony’s approach also outlines a necessary realignment of the division’s broad array of nearly 30 brands. While Moët & Chandon and Hennessy will remain the focal points, brands like Veuve Clicquot may see a renewed emphasis, with a commitment to ensure they are positioned for success in their respective markets. Lesser-known offerings like Volcan de mi Terra tequila and Eminente rum may need to be evaluated for potential divestment or rebranding.
“We need to focus them much more on where they have a chance to succeed,” emphasized Guiony.
Navigating a Challenging Market Landscape
LVMH’s challenges are compounded by economic uncertainties and the unpredictable landscape shaped by tariffs under the Trump administration. Potential tariffs of up to 20% on EU wines and spirits could further curtail growth, though a temporary pause on most tariffs offers a glimmer of hope for trade stabilization.
Alexandre Arnault, the division’s deputy CEO and son of LVMH’s owner Bernard Arnault, addressed concerns regarding the division’s future by dismissing notions of a complete divestiture.
“It’s never been a plan of our family, of our group, it’s not a plan today,” he stated, reinforcing a commitment to the legacy of Moët Hennessy.
Conclusion: A Calculated Move Toward Resilience
In a world where luxury brands must continually evolve to retain their allure, LVMH’s strategy emphasizes a return to its roots, harnessing the power of its most iconic offerings. By realigning focus and optimizing operational structures, the French luxury giant is not just aiming for survival; it seeks to thrive once more in the competitive spirits market. Only time will reveal if this gamble pays off, but the initial roadmap is nothing short of strategic for a company steeped in the art of branding.
For further insights on the effects of global market dynamics on luxury brands, explore Reuters and Bernstein Research.
