LVMH Moët Hennessy Louis Vuitton is still struggling with Chinese Cognac sales, as well as global Champagne demand.

First-half revenues from LVMH’s Wines & Spirits unit dropped 9% organically on 2023 to €2.8bn ($3bn), while profit from recurring operations was down 26% at €777m.

LVMH's group first-half revenues declined 1% year on year to €41.6bn. Group net profits dipped 14% to €7.2bn.

Speaking to analysts following the release of its latest results yesterday (23 July), LVMH’s CFO Jean-Jacques Guiony said it was still “lowering inventories, which is the right thing to do”, as the group faces “a demand situation with Cognac in China that is quite negative and difficult to manage”.

Commenting further on its Cognac operations in China, Guiony said: “As far as China is concerned… We have lowered the inventories very much in Q2, so our sell-out numbers are better or not as bad as our sell-in numbers. But when I say not as bad, is that really the sellout numbers are not very, very good.”

He added: “As far as depletion is concerned, we are still about 10% down compared to last year, which is not as bad as it used to be, But nevertheless it's a big drag on Hennessy's… revenues and profits.”

LVMH’s financial chief also expressed concern about its Champagne segment. “I think we have a severe demand issue in Champagne”, he said.

“Champagne is quite linked with celebration, happiness…maybe the current global situation, be it geopolitical or macroeconomic, does not lead people to cheer up and to open bottles of Champagne, I don't really know. The fact of the matter is that our volumes are down double-digit.

“We understand that we are not the only one. Far from that, I mean the whole industry is under severe pressure, particularly in Europe where the bulk of the volumes takes place.”

Looking ahead to Champagne volumes in the second half of the year, Guiony said: “We have orders from our retailers, they don't seem to cheer up [much either] for the second half of the year, so I wouldn't bet on a big improvement in trends. Although we expect it to be less bad than the first half of the year, but probably still negative.”

When asked by analysts whether the Moët & Chandon maker would consider adjusting its pricing to drive up future Champagne volumes, Guiony stressed that there was no intention to reduce prices “whatsoever”.  

He added: “How do we manage a more price-conscious customer? I would say the way we always do. They are first of all top-end brands where price resistance is limited, particularly in… nightlife. So there, the price is not really a question. Secondly, by investing behind the brand on the point of sale and in terms of A&P, what we call above the line, so advertising, etcetera.

“And thirdly, through promotions, we don't intend to lower prices, but we can do some promotions, particularly promotions linked with volumes, and there is nothing wrong with that, to be frank. For the time being, the impact is not tremendous, but that's the way we will manage going forward.”

When it came to Cognac performance in the US, the Hennessey maker was more positive. Guiony said: “We think we have reached a point where sell-in and sellout are comparable. I announced that a little bit too early at the end of last year. Q1 was not so much balanced in this respect, but Q2 is much better, so we've seen virtually flat depletions and flat sell-out.

“Sell-out was a bit higher because there were areas in the US where we were really lacking stocks, but all in all, it's under careful monitoring, as you can imagine, given the issues we have had in the past. But we believe that the inventory situation has improved markedly in the US.”

Cognac performance in the US has previously been a sticky subject for LVMH. In its first-quarter results earlier this year, the group’s organic sales for its Cognac and spirits division fell 16% on the year prior.

At the time, the company said that “the cautious restocking of retailers” in the US was part of the reason behind the dip. Guiony had said that “for the first time in many, many quarters, I’m reasonably hopeful as far as Cognac is concerned in the US”.

The brandy had been struggling to sell in the US market, since a drop in demand from the boom during the pandemic. Data from the Bureau National Interprofessionel du Cognac (BNIC) indicates that global shipments in 2023 slumped 22.2% to 165.2m bottles.