Louis Vuitton 2003 Annual Report Download - page 22

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20 LVMH ANNUAL
REPORT 2003
THE WINES AND SPIRITS GROUP
FOCUSES ON THE GROWTH OF ITS
LEADING BRANDS IN KEY MARKETS
AND RECORDS STRONG GROWTH IN
PROFITABILITY.
In 2003, the Wines and Spirits business group
posted organic growth of 5%. On a constant
consolidation basis, volume sales of champagne
and cognac continued to increase. The opera-
ting margin improved substantially, rising from
33% to 38%, thanks to excellent control of sup-
ply costs and increased operating efficiency,
especially in distribution. In a context of high
currency volatility, an effective currency hedging
policy also contributed to this performance.
The business group continued its strategy to
increase value. A steady pricing policy and an
increase in advertising and marketing expendi-
tures for the leading brands in priority markets
helped to gain market share for Moët Hennessy
in high-end segments.
The Moët Hennessy global distribution network,
the power and efficiency of which are a major
competitive advantage, was further strengthe-
ned with the addition of two new distribution
subsidiaries in Belgium and in Australia. In the
United States, in partnership with Diageo, the
development of sales teams exclusively dedica-
ted to Moët Hennessy with sole distributors in
the principal states continued smoothly.
In 2004, Moët Hennessy will continue to pursue
its value-creation strategy in order to solidify its
position as the world leader in prestige wines
and spirits.
CHAMPAGNE AND WINES
The unpredictable climate in 2003 contributed
to a highly unusual grape harvest in Champ-
agne, but one of unhoped-for quality. Most wine
growers, as well as the principal LVMH champ-
agne houses, had a small harvest, but one of
great quality, which in terms of volume is below
the official yield for the appellation.
The loss from the 2003 harvest can be offset
with inventories of the quality reserve from
prior harvests, thus preventing a production cri-
sis for Champagne, and also demonstrating the
merits of the control mechanisms implemented
some twenty years ago.
With this 2003 harvest, the four-year inter-
professional contract between wine growers and
champagne houses expires. Thus, the year 2004
will be especially important and the Moët
Hennessy champagne “houses” will work to
renew their grape supply contracts under the
best terms and conditions.
WS
INES
pirits
&