A signature sign of a party or celebration is popping champagne. The fizzy alcoholic beverage kicks off weddings, graduations, new jobs, and new homes. But luxury goods holding company LVMH, famous for brands including Louis Vuitton, Hennessy and Moët, says people don’t have much to celebrate now—so the group’s champagne sales have suffered.
While LVMH’s champagne and wine sales generated $1.52 billion in revenue in the first half of this year, that’s a 12% decline from the division’s take last year, according to the company’s earnings report released Tuesday. In the U.S., revenue was down, but still above pre-pandemic levels, according to the report.
Jean-Jacques Guiony, LVMH’s chief financial officer, blames the drop on a “severe demand issue in champagne,” a beverage typically “linked with celebration, happiness, et cetera.” LVMH’s champagne brands include Veuve Clicquot, Dom Pérignon, Mercier, Krug, and Moët & Chandon.
“Maybe the current global situation, be it geopolitical or macroeconomic, doesn’t lead people to cheer up and open bottles of champagne,” Guiony said on the company’s earnings call this week. “I don’t really know. The matter of fact is, is that our volumes are down double digit.” Guiony noted that the whole industry is under “severe pressure, particularly in Europe,” as consumers grapple with rising costs of consumer goods.
Are people really too sad to drink champagne?
Considering geopolitical and economic tensions, it’s not totally a stretch to link consumer sentiment to falling sales—particularly beverages linked with celebrations.
“Seasonality and key events definitely play a role in the choices consumers make,” Sean Goldsmith, cofounder and CEO of nonalcoholic beverage retailer The Zero Proof, tells Fortune. “With the upcoming election and lots of uncertainty around that, folks might be waiting to pop their champagne.”
Renée Zavislak, a California-based certified therapist who works with clients on their alcohol consumption, also says people are too sad to buy champagne—but for a slightly different reason. The root cause of the drop, she says, could be people realizing alcohol consumption only makes negative feelings linked to “political instability and environmental disasters” even worse.
“People have finally realized that alcohol only exacerbates anxiety and depression,” Zavislak tells Fortune. “So, yes, in a very different sense, people are too sad to buy champagne—but only because they have accepted that the champagne will only make them sadder. I have lost count of the number of clients who have either stopped drinking or who have cut back considerably.”
Whether a lifestyle, health, or mental-health choice, consumers are increasingly turning away from booze in favor of nonalcoholic beverages, including champagne, beer, and other spirits. It’s become an especially popular choice among Gen Z consumers. Indeed, more than 60% of people born between 1997 and 2002 said they plan to cut back on their alcohol consumption this year, according to a January survey by advertising company NCSolutions.
“Wine sales, and all alcohol sales, really, have been trending down across the board. In the last year wine sales were down 3%, which is the third consecutive year of decline in the industry,” Goldsmith says. “As individuals are more focused on wellness, millennials and Gen Z specifically, people are moving away from wine.” But in the nonalcoholic space, sparkling wine sales are “still strong,” meaning those consumers still want that familiar fizzy taste—minus the hangover.
Another factor behind the drop in champagne sales is the continuing effects of inflation on consumer spending.
“With costs increasing everywhere, people have less disposable income to splurge on champagne,” Emma Versaw, head of alcohol business of retail technology company Swiftly, tells Fortune. “This is a time when consumers opt for the cheaper, or more affordable option, so they are looking for value brands or brands that are offering promotions.
“So maybe there aren’t less celebrations, but less extravagant celebrations,” she adds. For reference, a bottle of Moët typically costs around $60, but some exclusive bottles cost more than $6,000. Bottles of Veuve Clicquot cost between $60 to $120, on average.
So how much longer will consumers be penny-pinching? Guiony said he’s not expecting a turnaround anytime soon, adding that retailers who stock LVMH’s products seem similarly pessimistic.
“For the second half of the year… I wouldn’t bet on a big improvement in trends,” he said, “although we expect it to be less bad than the first half of the year, but probably still negative.”
Source : Fortune