Shortly after attending his long-standing friend Donald Trump’s presidential inauguration in January, Bernard Arnault, Europe’s richest man, warmly praised what he called the “wind of optimism” blowing through the United States.
In recent days, Arnault has instead found himself shivering in an ice bath of Trumpian realpolitik. The French owner of the LVMH luxury goods conglomerate has seen some $11bn (£8.6bn) wiped off the value of his company in the wake of the US President’s decision to impose swingeing tariffs on products including Arnault’s stable of luxury marques from Dior to Dom Pérignon champagne.
The result is that Arnault, who owns the Moët & Chandon, Krug, Ruinart and Veuve Clicquot champagne houses, and his fellow producers from Pol Roger to Bollinger are turning towards other markets, in particular the UK, to try to win back some of the trade lost in America.
According to the industry body for French wines and spirits, some €800m (£686m) of annual exports to the US are estimated to have evaporated the moment Trump announced his 20 per cent levy on all goods entering America from the European Union.
It is understood that champagne producers and buyers have sought to insulate themselves against some of the impact by shipping about six months of stock – some 13.5m bottles – across the Atlantic ahead of last week’s announcement.
But eventually that stockpile will dwindle and the likes of Arnault’s Moët label will need to find alternative markets for champagne that was otherwise set for America.
Bernard Arnault has grown his LVMH group into one of the world’s biggest luxury conglomerates (Photo: Thibault Camus/AP Photo)Industry insiders told The i Paper that champagne houses will try and bolster sales in key markets like Britain, which is already the second largest export market behind the US for the elite French fizz, by resisting any urge to increase prices despite continuing inflationary pressures – and will almost certainly look to tempt UK tipplers with price promotions.
Britons last year bought some 22.3m bottles of champagne worth €519m (£445m) – second only to the US which, which consumes some 27m bottles a year.
The champagne houses of Epernay and Reims are under pressure to maintain their profit margins after UK sales slid by almost three million bottles in a year – their lowest level since 1997 – and global sales dropped by almost 55 million bottles since 2022.
With bottles from well-known brands now routinely costing £40 or more, insiders say the trade turbulence caused by Washington will mean producers look to established markets like Britain to maintain or boost sales.
James Simpson, chairman of the UK Champagne Shippers Association, said: “Prices have already stabilised in the UK and in the current uncertainty the UK is a very good option for producers. It is an established market with, frankly, less hassle and less tariffs compared to the US.
“I think we will see producers coming in with promotional activity just as they do at Christmas, Easter or over the summer to generate interest from consumers and kick-start sales. Champagne is there to serve as that ‘affordable luxury’ – a bottle at home is going to cost you about the same as the one above entry level on a restaurant wine list. It is something to celebrate or to just make things a bit better amid all the uncertainty.”
Champagne producers typically offer discounts of around 25 per cent to 33 per cent for purchases of six or more bottles at a time. But one UK buyer said larger producers will be tempted to offer sizeable discounts on individual bottles as merchants seek to turn the tide back against an increasing preference for cocktails and a general trend towards lower drinking rates.
The buyer said: “The champagne houses have been doing this for a very long time and they understand their market. There is already an expectation that the UK could return to being the number one export market ahead of the United States and they will be pricing keenly to ensure it’s the drink people think of when they want to celebrate.”
Just how much celebrating Arnault will be doing remains to be seen.
On one level, French and European wine makers can breathe a small sigh of relief after a rattled Trump did not, as yet, make good on a threat to respond to proposed retaliatory levies from Brussels on iconic US products such as bourbon and jeans with a ruinous 200 per cent tariff on EU wines and spirits.
But Arnault, 76, whose estimated fortune of $152bn (£119bn) makes him the fifth-richest person on the planet, may have had grounds for some optimism that his close relationship with Trump might have prompted a re-think in the Oval Office about including the luxury goods sector in the seismic shake up of America’s trading relationships.
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The friendship between the two men goes back to the 80s when Arnault left France under the presidency of Socialist leader François Mitterrand and began to invest in the New York property market, where Trump made his own name and fortune.
The extent to which the bonhomie of those days has endured between the two men was on prominent display in January when the Frenchman, his wife and two of his children – Delphine, who heads the Dior label, and Alexandre, deputy managing director of Moet-Hennessy, were sitting just behind the President during the inauguration ceremony. The relationship has also spread into the subsequent generations with Alexandre known to be close friends with Jared Kushner, Trump’s son-in-law and the husband of Ivanka Trump.
In the wake of his visit to Washington, Arnault, whose luxury goods empire makes about a quarter of its sales in the United States, was quick to express his admiration for American entrepreneurship, comparing what he considered to be France’s high tax environment to being a “bit of a cold shower”.
The billionaire has maintained a radio silence since the imposition of the tariffs amid forecasts from several analysts that most luxury houses will pass on the extra cost to their well-heeled customers.
As one champagne executive put it: “If you are in the luxury segment, the point is not to be panicked by short-term disturbances. The tariffs will eventually pass but the point is to show that the Bollingers or Laurent Perriers of this world will still be there when the storm has passed.”
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