Dive Brief:
- Moët Hennessy Louis Vuitton bought 50% of premium Champagne company Armand de Brignac, which is owned by entertainer and businessman Jay-Z. Terms of the deal were not disclosed.
- Armand de Brignac, known for its distinctive metallic bottles and "Ace of Spades" nickname, started in 2006. According to the company, it sold more than 500,000 bottles worldwide in 2019.Moët Hennessy plans to expand global distribution of the brand, but is remaining an equal partner with Jay-Z. The release says this power-sharing is an "essential element of this alliance and ensures that each of the two partners wants to bring its strengths and expertise."
- This is the latest tie-up between a legacy alcohol company and a celebrity-owned premium brand, even as alcohol sales overall have dipped during the pandemic. Last year, Diageo bought Aviation American Gin — partially owned by actor Ryan Reynolds— for $610 million, and in 2017 it purchased Casamigos, the super-premium alcohol brand part-owned by actor George Clooney, for up to $1 billion.
Dive Insight:
As the pandemic has driven alcohol sales down, it may seem like an odd time for Moët Hennessy to be investing in another Champagne brand.
According to industry group CIVC, 2020 saw an 18% drop in Champagne shipments. This is primarily because fears of COVID-19 shuttered many bars, restaurants and celebrations, the group said. According to Forbes, 2020 showed the largest decline in demand for Champagne since the Great Depression almost 100 years ago.
However,Moët Hennessy is banking on the celebrity trend, to help give the brand some fizz.Jay-Z has a history with Armand de Brignac that goes back 15 years. He first touted the brand in a 2006 music video,after an exec at Champagne brand Cristal made what Jay-Z considered a racist comment about its association with rap artists.Jay-Z, a former Cristal fan,began a vocal boycott of the brand and became an investor in Armand de Brignac soon after,according to The Wall Street Journal. He bought out other investors and became Armand de Brignac's sole owner in 2014.
Jay-Z, who Forbes named hip-hop's first billionaire in 2019, made his fortune mostly through business deals. Armand de Brignac, which Forbes estimated was worth $310 million in June of that year, is just one of his high-end alcohol holdings. He also is a part owner of Bacardi's premium cognac D'Ussé, which is a blend Jay-Z personally helped create in 2012, according to Billboard. His cachet also helped this brand become a success. In 2017, D'Ussébecame the fourth best selling cognac in the U.S., with a 98.1% increase in case sales in a single year, according to a report in alcohol industry publication Market Watch Magazine.
Philippe Schaus, head of Moët Hennessy's spirits division, told The Wall Street Journal the company was attracted to Armand de Brignac by its design, buzz, and the fact that this new label was attracting new Champagne drinkers to the higher end of the bubbly market. Jay-Z's ownership, Schaus told the business publication, gave a feeling "that something was happening behind the scenes, which was making the brand work in a different way from other brands."
After nearly a year of people staying at home and pinching their pennies, Moët Hennessy is in need of a jumpstart. The company was largely in the red for all of 2020, with its total revenues for the year down 17% compared to 2019, according to its most recent earnings report. Wine and Champagne revenues were down 15%, said Chris Hollis, Moët Hennessy's head of investor relations, according to a transcript of the investor call.
Moët Hennessy has made other recent acquisitions as it works to improve its bottom line — including iconic jeweler Tiffany & Co. in a deal that closedlast month. But the Armand de Brignac deal — and what Jay-Z brings to it — could have the potential to bring more of a change to Moët Hennessy's business. According to a 2016 report by WineBusiness.com, among several ethnic groups, Black Americans have the strongest preference for sparkling wine. The report also noted that Black consumers gravitate toward wineries that are Black-owned and that use Black entertainers in their marketing campaigns. Armand de Brignac brings all of those together, and with Jay-Z's continued 50% ownership, his influence will continue.
Filed Under: Corporate Operations, Beverages
