Behind the Money: Inside Moët Hennessy’s crisis

SPEAKER_1 (0:01)

Listeners, we're off today for Juneteenth. So instead of Unhedged, we thought you'd enjoy listening to another great FT podcast, Behind the Money. In this episode, you're going to learn about what's going on at Moët Hennessy, the luxury alcoholic beverage business, and what its recent struggles mean for the future of one of Europe's largest companies. I myself love champagne, but only to bathe in. Enjoy the show.

Michela Tindera (0:28)

The opening ceremony for the Olympics last year was truly a spectacle. Lady Gaga performed.

Adrienne Klasa (0:42)

Bonsoir, bienvenue à Paris.

Michela Tindera (0:48)

Athletes from around the world floated in on the Seine. A headless Marie Antoinette sang with a heavy metal band.

SPEAKER_1 (0:58)

Assoyera, assoyera, assoyera!

Adrienne Klasa (1:00)

Les aristocrates, on les pendres!

Michela Tindera (1:10)

But for the FT's Paris correspondent, Adrienne Klasa, who watched with some of our colleagues, there was one part of this pageantry that really stood out to her.

Adrienne Klasa (1:21)

They had this really long sequence that featured Louis Vuitton trunks, like big person-sized almost trunks, and they had this dancing sequence that went on for at least a couple of minutes.

Michela Tindera (1:35)

Taking in the ceremony, you see dancers sashay and twirl around brown leather luggage in the middle of the street. For Adrienne, seeing this scene felt indicative of something that became much more noticeable as the games went on.

Adrienne Klasa (1:51)

The Paris Olympics were very much supposed to be about Paris and the city, but in some ways it felt like the LVMH Olympics. LVMH is Louis Vuitton, Moët Hennessy, it is the world's biggest luxury group, and it was one of the biggest sponsors of the Paris Olympics, and they were everywhere.

Michela Tindera (2:09)

Walking around Paris, LVMH's brands were entwined with this massive celebration. To the average person, it probably looked like the good times were rolling for the company, including their wine and spirits division, Moët Hennessy.

Adrienne Klasa (2:25)

If you went to any of the bars, especially the VIP bars anywhere in the games, all of it was supplied by Moët Hennessy, Champagne, Cognac, you name it. It was all coming from this business and from this group.

Michela Tindera (2:40)

But Adrienne tells me that seeing this wasn't the full story.

Adrienne Klasa (2:44)

Behind the scenes, it was a much more somber moment for the luxury industry more generally, but also certain businesses within sort of the LVMH empire, notably Moët Hennessy, had actually been really struggling.

Michela Tindera (2:57)

At the time, Moët Hennessy was the worst performing arm of LVMH in terms of sales growth, a trend that continued after the Olympics ended.

Adrienne Klasa (3:07)

So now Moët Hennessy is in a situation where there's a lot of pressure to turn around this business. And the big question is, of course, you know, how did they get there? Partially it was the market, but what my reporting indicated was also there were some strategic mistakes that were made internally that essentially compounded the whole situation and made things worse.

Michela Tindera (3:31)

I'm Michela Tindera from the Financial Times. Today on Behind the Money, an inside look at the trouble at LVMH's Moët Hennessy and what it means for the future of one of Europe's largest companies.

In the 1980s, renowned wine and spirits business Moët Hennessy joined with the luggage and handbag brand Louis Vuitton. Together, they formed the conglomerate LVMH. Moët Hennessy today includes a whole slew of notable brands.

Adrienne Klasa (4:17)

So they own Moët, the Champagne, they own Khennessy, the Cognac, it's in the name, but they also own other Champagne brands like Dom Perignon, like Veuve Clicquot, like Krug, which is extremely high-end. And then other sort of hard alcohol brands like Belvedere Vodka.

Michela Tindera (4:35)

Depending on the item, a bottle of something from Moët Hennessy can range in price from $50 or $60 to several thousand.

Adrienne Klasa (4:43)

So it's very important to the identity of this luxury empire that is controlled by the family of billionaire Bernal Nau, who's a big character in France and is also often cited as one of the world's richest men.

Michela Tindera (4:59)

But Moët Hennessy's importance to LVMH and Bernard Arnault is about more than just identity.

Adrienne Klasa (5:06)

The important thing to know about LVMH is that it was built by Bernard Arnault through acquisitions. So he bought all of these companies and he brought them together and created one of the biggest companies in Europe now.

Michela Tindera (5:18)

What Adrienne's talking about here are all these major luxury fashion and leather goods brands like Dior, Bulgari, Fendi, Loro Piana. The list goes on and on.