World's most famous champagne company in crisis after hiking prices and slashing jobs
The world's most famous champagne brand is in crisis after a devastating slump in sales.
Moët Hennessy, the makers of legendary Dom Pérignon champagne and Hennessy cognac, made a loss of €1.5 billion ($1.68 billion) last year, the Financial Times reported.
The company's sales fell 9 percent in the first quarter compared to the same time last year.
It is quite the downfall for the wine and spirits maker, which made over €1 billion in cash in 2019.
It comes after Moët Hennessy, which is owned by luxury goods giant LVMH, aggressively raised its prices.
Moët Hennessy has hiked it prices by well over a third, on average, since 2019, according to FT analysis.
The company's financial position is so dire that it announced earlier this month that it would cut 10 percent of its workforce, around 1,200 jobs.
It has been hit hard by a global slowdown in alcohol consumption since the pandemic.
However, sources told the FT that the company's problems were largely down to missteps made by former CEO Philippe Schaus.
Those familiar with the matter told the publication that Schaus became too obsessed with turning a profit by raising prices and failed at his push to sell more directly to the consumer.
At a presentation in February last yea,r Moët Hennessy bosses were given a stark warning: 'Need to save cash!', according to materials viewed by the FT.
Last month the brand's new CEO, Jean-Jacques Guiony, who took over from Schaus in February, told executives that sales would not bounce back anytime soon.
Insiders told the outlet that a series of expensive acquisitions had also contributed to Moët Hennessy's woes.
Since 2021 the company has spent €2 billion on an acquisition spree. This includes buying a 50 percent stake in Jay-Z's champagne brand Armand de Brignac, Provencal rosé brand Minuty and Napa Valley winemaker Joseph Phelps.
One source said that by and large the deals had 'added complexity, lowered margin and drained cash.'
Although Moët Hennessy does not have plans to sell the brands it has bought, it is looking to scale back growth.
Moët Hennessy makes legendary Dom Pérignon champagne and Hennessy cognac
'These businesses have been driven by an ambition that is very difficult to accommodate today,' Guiony said earlier this month.
'We have been planning to develop in many geographies at the same time, which is in my view a mistake,' he added.
Moët Hennessy's plans to grow its direct to consumer business has also fallen short.
Under Schaus, Hennessy stores were opened in China and a Veuve Clicquot outlet opened at Parisian department store.
Dom Pérignon and Veuve Clicquot cases were also sold online.
However, the initiatives are now losing the business millions of euros per year, the FT reported.
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