LVMH buys California wine giant Joseph Phelps as the high-end beverage market soars

LVMH’s Moet Hennessy division announced Wednesday that it has acquired California winemaker Joseph Phelps Vineyards as the French luxury goods giant continues to expand its drinks portfolio.

The deal brings Moet to one of California’s best-known winemakers, famed for its red table wines and premium Insignia label, and deepens its presence in the United States, its largest market. The terms of the deal were not disclosed.

Moet Hennessy chairman and CEO Philippe Schaus told CNBC the company has been looking globally for larger winemakers that share the same commitment to quality, craftsmanship and entrepreneurial spirit as LVMH. Phelps, which was founded in 1973 by pioneering winemaker Joseph Phelps, produces about 750,000 bottles a year and had the right mix of size, brand, product offering and quality to expand Moet Hennessy’s portfolio, Schaus said.

“It’s an iconic name and an iconic winery,” he said. “It is important to us that we acquire a family business with a legacy and legacy. It is extremely important that we preserve this legacy.”

Phelps has become a staple at private wineries and steakhouses. A Bordeaux-style blend, Insignia typically costs at least $250 a bottle, depending on the vintage.

The deal comes as Moet Hennessy – whose dozens of brands include Dom Perignon, Moet & Chandon, Hennessy, Cloudy Bay and Belvedere – continues to ride the wave of high-quality champagne, wines and spirits despite recession and inflation fears.

Schaus said Moet Hennessy aims to serve “all the different moments of consumption” – from aperitifs, champagne and fine wines to bars, clubs and cocktails. The company’s Cloudy Bay brand covers white wines, and the Whispering Angel line offers rosé, but Schaus said “we were missing a strong red wine.”

Moet Hennessy reported sales of 1.64 billion euros for the first quarter, up 8% from 2021. Schaus said demand in Europe is “on fire” thanks in part to the return of European tourism.

“We’re seeing tremendous demand in Europe,” he said, “particularly in the resorts and nightlife.”

According to Schaus, the company has recorded a slight decline in demand in the low-price segments in the USA. But high-end consumers looking for products at premium prices will keep buying for now. “Summer is going to be strong, people are traveling and consuming,” he said. “After the summer we could see a different situation. It’s hard to predict inflation and prices.”

While Moet Hennessy was constrained by supply chain issues in the first quarter, Schaus said the company was able to “catch up” on many of those issues.

“We believe this quarter will be very strong,” he said.

The lack of high-quality champagne is unlikely to end anytime soon, Schaus said.

Dom Perignon, Krug and other high-priced brands are becoming increasingly difficult to find at some retailers and restaurants as supply remains limited. Dom Perignon, for example, ages 10 years before it’s sold to the public, making it difficult to match supply with exploding demand, Schaus said.

“Every bottle I’m going to sell in the next 10 years is already in the cellar,” he said. “And Dom Perignon only uses the highest quality grapes, so we simply have more demand than nature can provide.”

Schaus also highlighted Armand de Brignac, the champagne brand co-owned by Jay-Z, whose gold bottles have become a staple at flashy parties and clubs. The mark. quickly caught on in nightclubs in Japan and the Côte d’Azur, “far exceeding our expectations”.

“Also at Armand de Brignac there is only a limited supply,” he said.