Moët Hennessy woes test Alexandre Arnault’s credentials

Bernard Arnault’s son, Alexandre, has been handed a daunting challenge: reviving Moët Hennessy, the drinks division of LVMH, which currently stands as the group’s worst-performing unit amid an escalating tariff war.

If he succeeds, the 33-year-old could gain a competitive edge in the high-stakes succession race among his four siblings, all contenders to eventually lead the $280 billion luxury conglomerate chaired by their father.

On Tuesday, Alexandre accompanied Bernard Arnault to Washington, where they attended the swearing-in ceremony of Middle East envoy Steve Witkoff, as broadcast on local channel Fox 5. During the event, U.S. President Donald Trump greeted them and referred to the younger Arnault as “the future,” while also mentioning a follow-up meeting with the pair.

LVMH declined to comment on the meeting. Each of the Arnault children holds a management role within the luxury empire, which spans over 70 brands—including fashion house Dior and jeweler Tiffany—although their 76-year-old father remains actively involved and has shown no sign of stepping down.

Delphine Arnault, 50, serves as CEO of Dior, while 47-year-old Antoine leads group communications. Frédéric, 30, recently became CEO of Loro Piana, and Jean, 26, oversees marketing for Louis Vuitton’s watch division.

Alexandre, the third sibling, previously held a senior position at U.S. jeweler Tiffany before joining Moët Hennessy in February as deputy to new CEO Jean-Jacques Guiony. Guiony, a longtime adviser to Bernard Arnault, served as LVMH’s chief financial officer for two decades.

Moët Hennessy, an asset-light division whose initials form half of LVMH’s name, sells its beverages through third-party distributors. Long regarded as a cash generator for the group, it posted nearly $6 billion in turnover in 2024. However, as demand waned in both the United States and China, the division saw sales decline for the second consecutive year and operating profit shrink by one-third.

Because champagne and cognac must be produced in their namesake French regions, they are subject to U.S. tariffs on EU imports, currently at 10% and set to rise to 20% in July. President Trump has threatened to hike tariffs to as much as 200% if the EU proceeds with plans to tax bourbon whiskey, escalating the transatlantic trade conflict.

Reviving the division will require both diplomatic finesse and sharp business acumen.

“The true test as a manager is how you handle events during difficult times,” said Markus Hansen, a portfolio manager at Swiss bank Vontobel. He added that replicating Bernard Arnault’s success would be no easy feat.

Wealthy clients in focus

In their first major internal announcement, Guiony and Alexandre informed staff on April 30 that Moët Hennessy would cut its workforce by 13% and concentrate marketing investments on its top global labels, according to a video address reviewed by Reuters.

Alexandre described the situation as “very difficult” in the video.

“Their message seems to be candid,” said Frédéric Merceron, a labor representative with the Force Ouvrière union. However, he noted that employees were still awaiting concrete steps to stimulate sales.

Alexandre also announced last week that he would personally take charge of one of the division’s key assets: the Moët Hennessy Private unit, which caters to high-net-worth clients. Staffed by about 80 employees, this unit offers personalized spirits blends and exclusive experiences for ultra-wealthy customers.

In 2022, the unit famously sold a cask of Ardbeg Scotch for £16 million to a private investor in Asia.

“We’ve decided to take this business unit… and make it its own entity, reporting to me directly,” Arnault said in the video.

This renewed focus on elite clients may soften the blow of tariff threats and reduced consumer demand, which are contributing to the slowest luxury market growth in a decade.

Still, Moët Hennessy’s broader middle-class customer base may resist buying a bottle of Moët if prices exceed the current $50–$60 range due to tariffs, noted HSBC analyst Anne-Laure Bismuth.

Hidden value?

Since its 1987 merger with Louis Vuitton, Moët Hennessy has delivered a steady stream of profits that funded Bernard Arnault’s acquisitions of brands such as watchmaker Hublot and jeweler Bulgari, while also supporting new store openings.

Leveraging centuries-old winemaking expertise, the division built its legacy on products like Hennessy XO cognac—recognized by its iconic curved bottle—and yellow-labeled Veuve Clicquot champagne. In the 1990s, it accounted for more than 40% of LVMH’s operating profit.

“This unit has been foundational for the family and has fueled the group’s growth,” said Mathieu Devers, a CGT union representative at Hennessy in the Cognac region.

Symbolically, the division holds significant weight within LVMH. It has featured the Moët & Chandon brand in prestigious partnerships, including with Formula 1 and the Paris 2024 Olympics. However, its financial contribution has dwindled.

According to Bernstein analysts, wines and spirits represented only 6% of the group’s operating profit in 2023, down from around 20% in 2015.

HSBC estimates that, if restructured and spun off, the division could be valued at €14 billion ($15.8 billion). Still, Bernard Arnault has firmly ruled out the idea. “Divestment is not on the agenda,” he said in January.

HSBC analysts suggest that narrowing the company’s focus to “pure luxury” sectors like fashion, leather goods, watches, and jewelry would create a tighter and more appealing brand portfolio.

For Alexandre and Guiony, the clock is ticking.

“Let’s give them two years to show what they can do,” Bernard Arnault said after their appointments.

($1 = €0.8886)

FashionNetwork.com with Reuters