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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 Mo\u00ebt, says people don\u2019t have much to celebrate now\u2014so the group\u2019s champagne sales have suffered.\u00a0<\/p>\n
While LVMH\u2019s champagne and wine sales generated $1.52 billion in revenue in the first half of this year, that\u2019s a 12% decline from the division\u2019s take last year, according to the company\u2019s earnings report released Tuesday. In the U.S., revenue was down, but still above pre-pandemic levels, according to the report.<\/p>\n
Jean-Jacques Guiony, LVMH\u2019s chief financial officer, blames the drop on a \u201csevere demand issue in champagne,\u201d a beverage typically \u201clinked with celebration, happiness, et cetera.\u201d LVMH\u2019s champagne brands include Veuve Clicquot, Dom P\u00e9rignon, Mercier, Krug, and Mo\u00ebt & Chandon.\u00a0<\/p>\n
\u201cMaybe the current global situation, be it geopolitical or macroeconomic, doesn\u2019t lead people to cheer up and open bottles of champagne,\u201d Guiony said on the company\u2019s earnings call this week. \u201cI don\u2019t really know. The matter of fact is, is that our volumes are down double digit.\u201d Guiony noted that the whole industry is under \u201csevere pressure, particularly in Europe,\u201d as consumers grapple with rising costs of consumer goods.\u00a0<\/p>\n
Considering geopolitical and economic tensions, it\u2019s not totally a stretch to link consumer sentiment to falling sales\u2014particularly beverages linked with celebrations.\u00a0<\/p>\n
\u201cSeasonality and key events definitely play a role in the choices consumers make,\u201d Sean Goldsmith<\/a>, co-founder and CEO of non-alcoholic beverage retailer The Zero Proof<\/a>, tells Fortune.<\/em> \u201cWith the upcoming election and lots of uncertainty around that, folks might be waiting to pop their champagne.\u201d<\/p>\n Ren\u00e9e Zavislak, a California-based certified therapist who works with clients on their alcohol consumption, also says people are too sad to buy champagne\u2014but 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 \u201cpolitical instability and environmental disasters\u201d even worse.<\/p>\n \u201cPeople have finally realized that alcohol only exacerbates anxiety and depression,\u201d Zavislak tells Fortune<\/em>. \u201cSo, yes, in a very different sense, people are too sad to buy champagne\u2014but 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.\u201d<\/p>\n Whether a lifestyle, health, or mental-health choice, consumers are increasingly turning away from booze in favor of non-alcoholic beverages, including N\/A champagne, beer, and other spirits. It\u2019s become an especially popular choice among Gen Z consumers<\/a>. Indeed, more than 60% of people born between 1997 and 2002 said they plan to cut back on their alcohol consumption this year<\/a>, according to a January survey by advertising company NCSolutions.<\/p>\n \u201cWine 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,\u201d Goldsmith says. \u201cAs individuals are more focused on wellness, millennials and Gen Z specifically, people are moving away from wine.\u201d But in the N\/A space, sparkling wine sales are \u201cstill strong,\u201d meaning N\/A consumers still want that familiar fizzy taste\u2014minus the hangover.<\/p>\n Another factor behind the drop in champagne sales is the continuing effects of inflation on consumer spending.\u00a0<\/p>\n \u201cWith costs increasing everywhere, people have less disposable income to splurge on champagne,\u201d Emma Versaw, head of alcohol business of retail technology company Swiftly<\/a>, tells Fortune<\/em>. \u201cThis 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.\u00a0<\/p>\n \u201cSo maybe there aren\u2019t less celebrations, but less extravagant celebrations,\u201d she adds. For reference, a bottle of Mo\u00ebt typically costs around $60, but some exclusive bottles cost more than $6,000<\/a>. Bottles of Veuve Clicquot cost between $60 to $120, on average.\u00a0<\/p>\n So how much longer will consumers be penny-pinching? Guiony said he\u2019s not expecting a turnaround anytime soon, adding that retailers who stock LVMH\u2019s products seem similarly pessimistic.<\/p>\n \u201cFor the second half of the year\u2026.I wouldn\u2019t bet on a big improvement in trends,\u201d he said, \u201calthough we expect it to be less bad than the first half of the year, but probably still negative.\u201d<\/p>\n<\/div>\n