By Mimosa Spencer and Dominique Patton
PARIS (Reuters) -LVMH will focus on its biggest, best known alcohol brands and rein in international ambitions for smaller labels to revive Moet Hennessy, the division’s CEO Jean-Jacques Guiony told employees this week in a video reviewed by Reuters.
Plans are afoot to shrink the workforce by nearly 13% at the wine and spirits division epitomised by high-end champagne brand Moet and Hennessy cognac. It has for years been a drag on the French luxury behemoth’s performance. Revenue has been falling and operating profit plunged by over a third last year.
Revamping the drinks business poses a tough challenge while the U.S.-led tariff war rages and consumer appetite in key markets such as the United States and China remains weak. For Alexandre Arnault, the division’s deputy CEO and son of LVMH owner Bernard, it may be an opportunity to shine among five siblings lining up for a bigger role in the sprawling conglomerate.
“Today, we have too heavy a construction,” said Guiony, who served as financial officer for LVMH Group for two decades before moving to Moet Hennessy in February.
“We have been planning on purchases for decades … And most of the time, we’ve been aiming at developing in many geographies at the same time, which is, in my view, a mistake,” added Guiony, flanked by Arnault.
Guiony said he would “make some changes” after reviewing the division’s brands. The commitment to the larger and best-known labels like Hennessy and Moet & Chandon remains in place — however, the division houses around 30 brands ranging from top names like Veuve Clicquot champagne to lesser known labels like Volcan de mi Terra tequila and Eminente rum.
“We need to focus them much more on where they have a chance to succeed,” he said.
STAFF REDUCTION
Guiony also said that the division’s structure had been built for “a much larger size of business”, outlining plans to reduce staff numbers to the 2019 level of 8,200 from 9,400 currently.
LVMH’s job cuts, first reported by French publication La Lettre, would mostly take place through normal staff turnover and retirements, according to Guiony, and by not renewing vacated positions.
“I find it very appropriate that the new leadership is looking at cutting costs to support profits – this is the right thing to do,” said Luca Solca, analyst with Bernstein, adding the whole sector was currently facing softer consumer demand.
Drinks players Remy Cointreau and Brown-Forman cut jobs in the United States at the start of this year, while France’s Pernod Ricard, owner of Mumm champagne and Jameson Irish whiskey has reported a slowdown in sales. In current market conditions, growing the business to much higher levels “is not going to happen anytime soon,” added Guiony, citing the division’s nearly 10% first quarter sales decline and uncertainty surrounding tariffs unleashed by U.S. President Donald Trump in April.
“It’s particularly bad when (the move on tariff) is being announced and not decided, because when it is announced, you know how to react,” he said. “Today we don’t know.”
U.S. tariffs could include a 20% charge on European Union wines and spirits if fully implemented, but Trump earlier last month paused most tariffs for 90 days to give time for trade deals, setting a general 10% duty rate instead.
Alexandre Arnault, in the video to staff dismissed talk among some analysts that the division could be hived off altogether.
“It’s never been a plan of our family, of our group, it’s not a plan today,” said Arnault.
(Reporting by Mimosa Spencer and Dominique Patton, additional reporting from Emma Rumney in London; editing by Lisa Jucca and Elaine Hardcastle)
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