Potential acquirers for Champagne Piper & Charles Heidsieck may include LVMH with Thienot Group or Lanson BCC with Investors; Two “Best Fits” for two Different Reasons…

Editorial by Guillaume Jourdan

At the time when COFCO Wines & Spirits, a subsidiary of COFCO (chinese largest food processor, manufacturer and trader), is announcing a new acquisition in Bordeaux and global luxury group LVMH’s company Moet Hennessy, in a first-time move, has crushed about 150 tonnes of grapes in India, Champagne makes its slow revolution with the soon-to-come announcement of the Piper & Charles Heidsieck acquisition deal. After a first analysis – on December on www.vitabella.fr – of potential non-French acquirers, let’s now focus on two French collaborations (LVMH with Champagne Thienot and Lanson BCC with investors) which could finally make the deal. Should we consider it as a “French Affair” or as a perfect strategic and financial match? In fact, both associations would make sense but sometimes for different reasons…

LVMH / Thienot Group

1) Makes sense as LVMH is looking for new grapes sourcing contracts. In fact, listed company LVMH has recently prepared the financial market and said that there could be a “Champagne shortage”. So it’s high time to buy new parcels and get more grapes to secure the next sales made by a powerful distribution network.

2) This association makes sense as LVMH is mostly interested in securing grapes sourcing contracts and less in acquiring new brands. LVMH”s Strategy is about strengthening an already large brand portfolio and not broadening it. Prices and margins are key focuses in the future.

3) The historical roots of Thienot Group are in Champagne. Thienot Family has already developped a brand portfolio with Canard Duchene, Marie Stuart and of course Champagne Thienot. Financially, the group recently invested heavily in CVBG to get access to grands cru wines from Bordeaux. Strategically, in terms of image, it is crystal clear Thienot group wants to go more up-market either in Bordeaux or in Champagne. Consequently, after the clever acquisition of CVBG, it would make sense that “A grand house of today ” – as they name themselves – invests in a widely recognized Champagne brand. And in this particular situation they would get two, with the “up-market boutique” Charles Heidsieck champagne brand and the globally renowned Piper Heidsieck brand which is currently quite successful in terms of image with the top Rare Cuvee.

Lanson BCC / Investors

1)Association would make sense as an “investors only deal” would rapidly may be confronted to a lack of a strong “Champagne related support” that would secure and strengthen existing grapes sourcing contracts, make the day-to-day operations work properly and also sell bottles through an existing distribution network.

2) Also makes sense as listed company Lanson BCC has a great experience in integrating big companies (The management team worked on the Lanson integration into the entire group and this can certainly be considered a major achievement when we look at the excellent future prospects for Lanson BCC).

3) Makes sense as Lanson BCC continues its expansion and is always interested in considering new opportunities for strengthening sales and developping new markets.

Any non-French company could acquire Piper and Charles Heidsieck, but it appears that both French associations look very attractive and “well fitted”. Now let’s think about “what’s Next?”. After the acquisition, those who buy parcels and get grapes sourcing contracts will get prepared for a future “champagne shortage”. And those who buy assets and liabilities will have to focus on value maximization which is first of all a matter of achieving great results on a day-to-day operational level. Just considering brand assets, the new marketing team will have to play without the “third Heidsieck key”, the Heidsieck Monopole brand owned by Vranken. It will certainly make future brand marketing plans for Piper and charles Heidsieck more complicated. Confusion among consumers may continue to exist. And, for this reason, the future repositioning of both brands may be at risk.