Weak demand for cognac and spirits pulls down LVMH, Diageo and Pernod
Weak demand for cognac and spirits has sparked a sell-off of LVMH shares and a dip for other listed luxury brands.
Shares in LVMH fell 7.25 per cent in early trade, causing the fashion behemoth to lose its crown to Hermes as the world’s most valuable luxury company.
Shares in London spirits maker Diageo and French business Pernod Ricard fell by 2.3 per cent and 2.9 per cent, respectively.
In its first-quarter results, LVMH said that cognac and spirits sales, which account for half of its Moet Hennessy business, fell by 17 per cent quarter on quarter.
Champagne and wine sales were relatively resilient, with a one per cent decline in quarterly sales, while overall sales at LVMH fell nine per cent.
“Aspirational clients are under pressure… [they’re] more vulnerable in the current macro environment, which is having some impact on wine and spirits… The US political context might not have helped on demand in most recent weeks,” Jeffries analysts said.
Weak demand for spirits has affected peer Diageo, too. In its latest half-year results, the FTSE 100 firm noted that while it had grown its overall market share in the 2024, US customers remained “under pressure” and US spirits sales were flat.
Pernod Ricard experienced a sales decline of 4 per cent in the first half of the 2025 financial year, or €6.17bn (£5.29bn), driven by a decline in US sales and overall Cognac sales.
Tariffs to hurt Cognac sales
Cognac sales are clearly already in decline – export revenues slid more than 10 per cent in 2024 – but tariffs are set to make the market even more difficult.
The drink, which is exclusively produced in the Cognac region of southwestern France, is one of the products that is set to face “particular hardship”, according to RBC, “as shifting manufacturing is nearly impossible”.
Head of equity research at Quilter Cheviot, Chris Beckett, said that the decline in US demand for Cognac may cause dumping in other markets.
“America… cannot make Cognac, but for now it appears Trump does not care about this and is simply concerned with consumers buying American,” Beckett said.
“As such, we expect the likes of Pernod Ricard and LVMH to also suffer and potentially be left with a glut of products that could end up having a deflationary effect in other markets.”
This is partly because there is less scope to raise the price of Cognac than there is to raise the price of high-end fashion products.
“[LVMH] sees more pricing power in core luxury than wine and spirits,” Jeffries analysts added.
RBC analysts similarly noted that tariffs were set to impact the premium categories of wines, spirits and beauty more than fashion.