It's no secret that post-COVID, the wine and spirits market has faced one of its steepest declines as consumers have returned to their regular routines after being isolated for months, with nothing else to do but drink and watch endless hours of TV show reruns.
Not only did people's reliance on alcohol decline, but the uncertain state of the economy and inflation became yet another factor that forced people to begin cutting back on their alcohol spending, especially brands with a pricier price tag.
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
According to a study by IWSR, the total beverage alcohol (TBA) volumes in the U.S. decreased by 3% in 2023 due to imbalanced inventories, economic pressures, and the increasing popularity of non-alcoholic beverages.
Related: Iconic whiskey brand makes harsh decision amid declining sales
This was the first time in the last 30 years that the industry saw declines in alcoholic beverage consumption, especially in spirits sales, which reported a 2% volume decline.
LVMH reports a concerning ongoing decline in wine and spirits sales
LVMH ( (LVMHF) ) owns some of the most luxurious and renowned wine, Champagne, and spirits brands worldwide, such as Moët & Chandon, Dom Pérignon, and Hennessy, to name a few.
Although the company once used to thrive on its wine and spirits exclusivity, this once lucrative Maison has become an economic burden for the luxury company, posting continuous declining sales since 2023.
Related: Popular luxury brand invests in 'sober market'
According to its full-year report for 2024, LVMH's Wine & Spirits sector reported declining organic revenues by 8% compared to last year, with profit from recurring operations down 36%, making it the least profitable sector.
The company attributed the steep decline to the exchange rate fluctuations and the post-Covid demand normalization that began in 2023, which it claims has led to a slowdown in consumption. The state of China's economic challenges have also greatly affected the market, as it used to be luxury's star regional client.
Despite a slight decrease, LVMH's Champagne brands maintained a market share of over 22% of all Champagne-appellation shipments. However, cognac and other spirits' sales continued to drop from previous years.
Although LVMH's Wine & Spirits Maison has not been profitable for the last few quarters, the company has continued investing in the sector, launching limited-time products, exclusive editions, and developing collaborations to hopefully get this sector back on a positive track.
The company expects this declining sector to recover in the next two years and has hired a new team to focus heavily on the turnaround of this business.
Related: Bernard Arnault's net worth: How LVMH's CEO got so rich
LVMH enters the sober market for the first time to salvage its declining business
As the saying goes, "If you can't beat them, join them." After multiple failed investments in its Wine & Spirits Maison to try to salvage it, LVMH decided to enter a brand new market.
In October of last year, LVMH announced a partnership with the premium alcohol-free sparkling wine French Bloom, making it the company's first investment in a non-alcoholic drink.
According to a study by the IWSR, the non-alcoholic wine market in the U.S. increased by 18% in 2023 and is projected to grow by double digits yearly. This growth is largely driven by higher-price brands, which account for 87% of that increase.
More Retail News:
- Popular fast-food chain launches new liquor brand menu item
- McDonald's unveils new partnership with nostalgic childhood franchise
- Oreo launches new flavor in collaboration with a fan-favorite singer
This could be the change the company desperately needs to reverse dwindling sales in the sector since the non-alcoholic beverage industry has grown to surprising amounts due to its increase in demand by the sober and sober-curious.
However, LVMH is not the only company entering the non-alcoholic beverage industry; alcoholic beverage companies, like Molson Coors and Diageo, have also launched new products to appeal to this lucrative market, creating more competition that is only projected to increase.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
