Wine and spirits maker Moët Hennessy is anticipating a “post-Covid renaissance” as consumers flock to newly reopened bars and restaurants and splash out on pricier brands on a quest for celebration.
“People are clearly trading up,” said Philippe Schaus, chief executive of the LVMH-owned company.
The outlook was similar in countries where some pandemic-related restrictions were already being lifted, such as Australia, the UK and the US, and in places where they were still in effect, like Italy and France.
“Some call it the revenge of pleasure or the new Roaring ’20s, but it’s clear that people are almost desperate to enjoy food and drink again,” said Schaus
Unlike a typical economic crisis, he said many people now had money to burn because spending opportunities had been limited since the pandemic began. In some countries, government support schemes had also been generous, boosting disposable income.
In the US, this has led to a cognac boom that has left Hennessy struggling to keep up with demand and pushed the valuation of smaller cognac maker Rémy Cointreau to historic levels.
“There is purchasing power out there and it seems to be translating, not necessarily to more alcohol consumption, but better consumption, and we are benefiting from that,” he said.
As one of the biggest makers of wine and spirits globally, Moët Hennessy competes with UK-based Diageo, Pernod Ricard and Campari in Europe, and Brown Forman in the US.
The sector proved surprisingly resilient last year despite the “on trade” market of bars and restaurants being shut during lockdowns. Consumers ended up buying more wine and spirits to drink at home. After an initial slump in early 2020 as global stock markets swooned, the price-to-earnings ratios of the big spirits companies have recovered and now exceed pre-pandemic levels.
Moët Hennessy sales contracted by 15 per cent to €4.8bn last year, while operating profit fell 20 per cent to €1.4bn. But the latter figure rebounded to €1. 5bn in the first quarter of this year, 12 per cent higher than in the same period of 2019 before the pandemic.
Asked whether the company could get back to pre-crisis levels this year, Schaus declined to give such a forecast, but said he was “cautiously optimistic” and added that it would “have a good year”.
Whether the pandemic will leave lasting marks on global drinking culture remained to be seen. Some changes such as the expansion of ecommerce were not likely to disappear, said Schaus, but it was too soon to tell if there would be a wave of bankruptcies among restaurants and bars.
“I think you probably have to wait until six months to be able to know,” he said. “It is a big question everywhere. I mean, there will certainly be some form of reshuffle. On the other hand, some countries have been very generous in supporting their restaurant industries, so it really depends.”
To stoke demand this summer, the company is counting on new product launches as well as a marketing push for its rosé wine brand Le Château d’Esclans acquired last year.
It recently introduced a new sparkling wine called Chandon Garden Spritz for sale in the UK, Europe, and the US that was inspired by the enduring popularity of the Aperol Spritz cocktail. That drink, known for its deep orange colour, includes sparkling wine and bitters, so Chandon wanted to develop something with a similar taste that was ready to pour from a bottle.
Chandon’s winemakers in Argentina came up with the recipe, and it is now being rolled out globally. “It’s a very elegant drink,” said Sybille Scherer, who heads Chandon. “We hope it will fit very well with the mood of the moment.”
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