Christina Passariello has an interesting WSJ article today on LVMH’s Champagne business, explaining at some length how the French luxury-goods giant sources all the grapes it needs to be the world’s biggest Champagne merchant.
I do worry, though, that in order to justify the story’s front-page placement, the WSJ overstated LVMH’s dominance of the Champagne industry. Here’s how the story starts:
For Americans who toasted the New Year with champagne, the odds are about three in five that the bubbly was bottled by industry behemoth LVMH Moet Hennessy Louis Vuitton…
LVMH, which owns six brands including Veuve Clicquot, Moet & Chandon and Dom Perignon, dominates the $5.4 billion global champagne market… LVMH had 18.6% of the global market for champagne by volume in 2006, according to Impact Databank, a market-research firm. The company had more than two-thirds of U.S. champagne sales by value and about 62% by volume…
Independent farmers own 90% of the vineyards in France’s Champagne region — the only source of grapes for bona fide bubbly — and LVMH is the biggest buyer of their grapes. LVMH is also the single largest owner of vineyards in Champagne, possessing 4,077 acres, or 5%, of the fields available. The French fashion-to-spirits company has achieved a rare agricultural feat: sewing up much of the world’s supply of champagne grapes.
It’s indubitable that LVMH has had massive success in the US Champagne market – I, for one, am constantly astonished by the seeming ubiquity of Veuve Clicquot here in New York. But if LVMH has two-thirds of the US market and only 18.6% of the global market, where does that put it in the rest of the world? Passariello never gives figures for the size of the US Champagne market, so it’s hard to tell. But the handy champagne.us website tells us that the USA consumed about 22 million bottles of Champagne in 2006, out of a global total of about 300 million. Crunching the numbers, I’d say that LVMH has a market share of less than 15% outside the US.
Given that the USA is not a big growth market in Champagne (that would be Russia and China), and that increasingly-sophisticated US consumers are likely to become a bit more catholic in their Champagne taste going forward, the prospects for LVMH’s continued "domination" of the market might seem less than solid, even if you concede that an 18.6% market share really consititutes domination in the first place.
The fact is that LVMH hardly has a stranglehold on big Champagne brands, even as smaller producers are becoming increasingly popular, especially among the fast-growing population of conoisseurs and wine snobs. LVMH might be the biggest player in a rather fragmented field, but I don’t think it has quite the dominance in the region that the WSJ might have you believe.