LVMH and Kering: the race for the best vineyards
The rush of luxury brands to acquire prestigious vineyards in search of profitability and diversification continues. Climate change is affecting production capacity and the quality of terroirs. A phenomenon that pushes groups to diversify their supply.
By Eva Morletto02 février 2023
34,3 bn €
The value of world wine exports in 2021
Growth in LVMH Wines and Spirits Division revenues in 2022
Liters of wine sold each year in India
Since the end of the pandemic and a growing demand for premium wines, major luxury groups are searching for the most prestigious vineyards in the world. This craze is explained by the recovery of global wine consumption, slightly increasing in 2021 (+0.7%), reaching 236 million hectoliters thanks to the reopening of bars and cafes, the recovery of tourism and events. The annual report of the OIV (International Organization of Vine and Wine) published in April 2022 for the previous year, is eloquent: "Counterbalancing the fall observed in the value of world wine exports in 2020, due to Covid-19, the value of world exports in 2021 reached the record level of 34.3 billion EUR.”
Be notified of the latest publications and analyses
New segments, such as organic wines, are also boosting the market: at the Act for Change Symposium held last June in Bordeaux, Cyril Grira, Director of Retail & Omnichannel at Google France, spoke of the acceleration of searches for wines and spirits on the Google search engine, such as "organic wines" which have tripled in number. The lack of consumer knowledge in this area (80% of searches are generic) and the lack of visibility of small producers are however a brake on the performance of this sector.
In this context, the guarantee of quality provided by large groups such as Kering or LVMH can be a growth lever for the reputation of small producers, highly sought after by luxury groups. Today, faced with the hazards of climate change that modify the organoleptic qualities of grape varieties, it is necessary to be able to renew the palette of terroirs.
At the same time, it is essential to renew the wine market outlets. If climatic conditions influence production, geopolitical uncertainties influence sales: this was seen in 2022 with the major crises that affected important importing countries such as China and Russia. According to the Federation of Wine and Spirits Exporters of France, in 2021, Russia imported almost 198 million euros of French wines, a figure that represented 15% of the turnover of wine exporters in France, now penalized by sanctions against Putin. As for China, the Chinese association for imports has communicated imports of wines and spirits on the first five months of 2022 down 14% due to lockdown.
One of the new promising markets is undoubtedly the African market. The Ivory Coast, with 4 million bottles of Bordeaux sold in 2021, for 9 million euros, is the first country on the continent to be placed in the top 10 of major export destinations rankings for Bordeaux wines. Cameroon follows closely in twelfth place.
Kering and LVMH: luxury empires conquering vineyards
The Pinault family is determined to invest more in the sector of great wines: the billionaire founders of the Kering group have finalized, in December 2022, the acquisition of Jacquesson champagne, which has been in the hands of the Chiquet family since 1974, and which exploits more than 40 hectares of vineyards. The production of this champagne, considered as a niche, delivers 250,000 to 300,000 bottles annually, whose brand image remains very exclusive. Founded in 1798, it is said that the winery was the favorite of Napoleon I, who awarded it a gold medal in 1810 for its rich cellars in the Marne. A bottle of Jacquesson champagne costs between 60 euros and up to 400 euros for the most prestigious vintages. The last known turnover of the house dates from 2019 and reached 6.4 million euros.
The financial transaction took place barely two months after the announcement of the merger of the investment group Artemis - founded by François Pinault in 1992 and whose active funds reach 43 billion euros - with the prestigious historic wine house Henriot. The latter has become a minority shareholder in the group. François Pinault obtained three quarters of the total capital and the Henriot family 25%. This merger allowed the total capital of the two companies to be valued at 800 million euros.
The objective of the Pinaults would be today to give life to a benchmark group in the very competitive world of spirits. Artemis Domaines, a sub-group of the Artemis investment fund, currently owns several emblematic wine brands, such as Chateau-Grillet (Rhone Valley) or Chateau Latour (Burgundy), as well as several estates in the United States (Eisele Vineyard in California and Beaux Frères in Oregon).
On the side of LVMH the situation is no less sparkling. In July 2022, Moët Hennessy, the group's luxury wines and spirits division, announced the acquisition of Joseph Phelps Winery, a benchmark Californian property for American oenologists, thanks to its rich collection of Napa Valley wines. In their catalog, the "Insignia", one of the most appreciated Californian wines by consumers, has a price per bottle of 300 euros. The wine has received numerous awards from the international press and has achieved a top score of 100 points from the influential Robert Parker Wine Advocate, the famous American wine publication designed by the renowned oenologist Robert Parker.
As for Kering, this acquisition is part of Moët Hennessy's development strategy, which is to enrich its portfolio of prestigious wines and spirits by adding houses with strong values of excellence.
Today, LVMH's Wines and Spirits division is doing well, despite the slight downturn in sales in 2020 due to the pandemic. It has reached 5.9 billion euros in 2021 and will continue its momentum in 2022, with 7.099 billion and a growth of + 19% compared to the previous year.
Symptomatic event of the group's concentration on the premium section of the sector, LVMH announced in 2019 the creation of LVMH Vins d'Exceptions, an entity that brings together the most prestigious wine properties of the luxury group: Château d'Yquem, Colgin Cellars, Château Cheval Blanc, Clos des Lambrays or Château Cheval Blanc.
According to the annual report of Brand Finance, the champagne house Moët & Chandon, belonging to the group, was the most valued wine and champagne brand in 2022, increasing its value by 15% over the previous year. In the wake of this, and still according to Brand Finance, the LVMH Wines and Spirits division saw three of its houses ranked at the top of the brands in 2022. While Moët & Chandon is in first place, Veuve Clicquot is on the second step of the podium. The famous champagne house, with its 250 years of existence, has a value of $962 million. Chandon is third with a valuation of $939 million, and Dom Perignon, yet another flagship of the LVMH galaxy, is fifth in the ranking.
The champagne market in search of new export territories
The year 2022 has been an excellent year for every wine region in France. But for champagne, a new golden age seems to have begun. If the 2021 vintage was catastrophic, due to a late spring frost, and qualified as "the greatest agronomic catastrophe of the beginning of this century" by the French Minister of Agriculture, the 2022 harvest was excellent in almost all French regions, exceeding by 4% the average of the last five years. The French wine industry ended the year 2022 with a turnover of approximately 6 billion euros, an increase of 0.3 billion compared to the previous year, according to data from the Comité Interprofessionnel du Vin de Champagne.
The export of champagne now represents about 60% of total sales and demand is growing.
If Russian imports are down, new international markets are gradually opening up. If the interest of Africa is growing, so is that of Asian countries excluding China. With an average increase of 10% per year since 2010, the alcoholic beverage market in Vietnam is currently one of the most dynamic in Asia.
In 2018, Times of India estimated that the Indian wine market would double in size every five years. Now estimated to be worth $150 million, imported wine accounts for 30% of total consumption, with the rest being sourced domestically. The adult Indian population seems to be undergoing a profound change that is normalizing alcohol consumption, especially in the metropolises. The social and cultural taboo around alcoholic beverages is slowly dissipating.
Chandon - a Moët Hennessy-LVMH brand that produces sparkling wine in Argentina, Brazil, China, India, Australia and the U.S. - has teamed up with winemakers in the Nashik region, India's wine heartland located about 200 km northeast of Mumbai in the state of Maharashtra, to develop its local sparkling wine production.
Some 18 million liters of wine are sold each year in India and the sparkling wine market, whether locally produced or imported, represents about 10% of the volume, a figure destined to rise to 20% to 25% per year according to local wine market statistics.
Share the post
LVMH and Kering: opposite strategies face recovery and its challenges
After a year-long break in their growth, LVMH and Kering have to answer challenges linked to recovery, while facing changes in the luxury fashion sector. To do so, their fashion brands seem to have opted for opposite strategies.
By Sandra Krim
Be notified of the latest publications and analyses