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LVMH Champagne - WSJ - Document View...

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Document View http://proquest.umi.com/pqdweb?index=103&sid=3&srchmode=3&vins... 1 of 5 1/16/2008 11:48 AM Databases selected: Multiple databases... To Rule Champagne Market, LVMH Courts Grape Growers; Giant Offers Farm Help To Win Long Contracts; A Struggle for Growth Christina Passariello . Wall Street Journal . (Eastern edition). New York, N.Y.: Jan 2, 2008. pg. A.1 Abstract (Summary) The conglomerate, controlled by French billionaire Bernard Arnault, has managed in recent years to lay claim to the largest share by far of the Champagne region's limited grape output. Full Text (2159 words) (c) 2008 Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission. REIMS, France -- 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. The conglomerate, controlled by French billionaire Bernard Arnault, has managed in recent years to lay claim to the largest share by far of the Champagne region's limited grape output. LVMH has done that by assiduously cultivating the independent growers who raise most of the grapes -- including by offering them free farming help. The result is that LVMH, which owns six brands including Veuve Clicquot, Moet & Chandon and Dom Perignon, dominates the $5.4 billion global champagne market. LVMH doesn't break out its champagne sales, but its wines and champagne revenue in 2006 totaled $2.2 billion. 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. LVMH's strategy in champagne provides a window into Mr. Arnault's overall dominance of the global luxury-goods market. In fashion, France's richest man targeted small, family-owned businesses to build his empire, snapping up brands such as Fendi and Guerlain in the 1990s, from founding clans who wanted their names to live on. In champagne, LVMH focused on the needs of independent grape growers, allowing it to secure a long-term supply. As global demand for bubbly increases -- partly from booming sales in China and Russia -- LVMH's strategy leaves it in a unique position. 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. Yet each year, squeezing growth out of LVMH's champagne business becomes more difficult. Recently, sales growth has come as much from charging more for champagne as from selling more bottles. As they hike their sticker prices every year, LVMH executives are questioning how much consumers are willing to pay. Veuve Clicquot now tops $40 a bottle, while Moet & Chandon costs around $35.
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