Jay-Z Pops the Cork on New Deal
By Robyn Ma |
The Story
Luxury brand LVMH’s Moet Hennessy has purchased Jay-Z’s Armand de Brignac Champagne brand. The rapper is looking to expand the reach of the “gold bottles of that Ace of Spade”, touted in his 2006 music video (MSN). Since Jay-Z bought into the company in 2014, later acquiring a majority stake, the brand has grown “to sell 500,000 bottles in 2019, which are usually priced from $300 to $950” (Financial Times).
Jay-Z’s Champagne brand will benefit from the “luxury-marketing expertise and distribution network of LVMH”, especially at a time when the Champagne industry is struggling through the pandemic (Business Live; Aljazeera). Most of LVMH’s brands, including Moet & Chandon Champagne, have outperformed, despite a 14% drop in its wine and spirit sales (Business Live). Jay-Z stated that Moet Hennessy was the “natural partner” to take Armand de Brignac to “the next level of taste and distribution” (Financial Times). On the other hand, the deal will likely enable LVMH to successfully expand their business to consumers looking to purchase luxury goods. This comes at a time when luxury brands worldwide are entering partnership deals with celebrities to appeal to younger consumers.
What It Means For Businesses and Law Firms
A-list stars are keen to jump onto this bandwagon. Many are developing their own big drinks brands. Diageo bought actor Ryan Reynolds’ Aviation Gin brand, and three other spirits, for $610 million last year (Financial Times). It also acquired George Clooney’s Casamigos tequila for $1 billion in 2017 (Financial Times). Global sales by volume for Casamigos reached a growth rate of 78.4% between 2015 and 2019 (Financial Times). What differentiates these brands is “authenticity”, according to Ken Austin - co-founder of Irish mixed martial arts fighter Conor McGregor’s Proper No. Twelve Irish whiskey brand, and Dwyane ‘The Rock’ Johnson’s Teremana tequila (Financial Times).
Alliances between hip hop stars and luxury brands are on the rise. Annual sales of premium tequilas in the US jumped five-fold over the rate of lower-priced ones, increasing by 14% on average each year (Financial Times). Mr McGregor’s brand has become the fourth most popular Irish whiskey brand. Not all partnerships have performed well, though. Bruce Willis’ stake in the parent company of Sobieski is one example. The French parent group entered bankruptcy protection and could not pay Mr Willis (Financial Times).
Despite celebrity endorsements, the pandemic has added further challenges to the industry. With bars and nightclubs shut, champagne sales have contracted sharply - “volumes were down 18 per cent to 245m bottles in 2020, while revenue contracted almost to a quarter to €4bn” (Financial Times).
Lawyers will be involved in all aspects of the buying and selling of interests in the business. In acquisitions, M&A lawyers will most certainly be involved in providing guidance on the deal structure. This includes drafting legal documents, such as the acquisition agreement and employee letters. Due diligence and negotiations throughout the process are necessary as well. Solicitors may advise clients on compliance with the specific laws of each jurisdiction, and the financing for such acquisitions.
Image Credit: Debby Wong / Shutterstock.com
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