LVMH will be the official Global Partner of Formula 1 from 2025, in a landmark 10-year deal announced this week. The world’s largest luxury group has a number of relevant brands here, the group’s press release making special mention of Louis Vuitton, Moët Hennessy and TAG Heuer. This news is almost not newsworthy at all anymore because it has been gristle-clogging up the rumor meat processor for some months now. However, this remains one of the biggest news items in the world of luxury, if for nothing other than its sheer scale. The consensus on the value of the deal (undisclosed by LVMH or F1) is estimated at between USD 100 to USD 150 million a year, which only counts as small potatoes if you are BlackRock.
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For some context, the LVMH group clocked revenues of EU86.15 billion in FY23, with a net income of EUR 15.17 billion. If the F1 deal had been in place then, net income would have been lower to the tune of 0.15 billion. To put it another way, any cost that is visible from this kind of cursory top-down look will make shareholders groan and reach for their Moët; we recommend the Dom Perignon 2003 vintage, in the David Lynch limited edition, if possible. So, what does LVMH gain from this? Details are about as scant as what is known of the activities of the Arnault family office but here is what the big guns said in the presser:
“The people, the quest for excellence and the passion for innovation are at the heart of the activity of our Maisons and Formula 1,” said Bernard Arnault, Chairman and CEO, of LVMH Group. “In motorsport as in fashion, watchmaking or wines and spirits, every detail counts on the path to success. Both in our workshops and on circuits around the world, it is this incessant search to break boundaries that inspires our vision, and this is the meaning that we want to bring to this great and unique partnership between Formula 1 and our Group.”
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“In recent years, Formula 1 has truly become one of the most desirable sports in the world,” said Frédéric Arnault, CEO, of LVMH Watches. “It’s a vibrant discipline that echoes a number of values that are very important to us, such as innovation, team spirit and performance. For many years, several of our Maisons have also chosen to invest in Formula 1, whether to create unique experiences or for moments of celebration. With our Maisons and the expertise of our Group, we want to further grow this experiential dimension that Formula 1 provides all over the world. We are only at the very beginning of this partnership, but the seasons that await us promise to be extraordinary.”
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The prominence of the younger Arnault in the reporting on this story across the board seems to indicate the degree of his involvement. In fact, he has been vocal in the past of the importance of Formula 1 to TAG Heuer in particular (when he was CEO of that brand) and was very public in his ambition to return the brand to pole position in the sport; TAG Heuer is currently partnering with the Red Bull Formula 1 team, which has been pretty good for the brand. Our retail friends in Singapore tell us that TAG Heuer typically sees a sales boost from racing season, and we have no reason to doubt this.
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On the other hand, a deal as massive as a global partnership is probably too big for TAG Heuer to swallow, without a bit of Moët to wash it down and Louis Vuitton to sew it all up; Morgan Stanley estimates TAG Heuer’s revenue at under USD 800 million in the last FY. Again, it is worth bearing in mind that this is not LVMH’s first rodeo. Most famously, Moët & Chandon was the champagne of record for the podium celebrations for years, and it was once synonymous with Formula 1. We have heard from industry insiders that champagne’s biggest name withdrew from the races because, well, they just used too much inventory.
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And then there is the matter of what role Louis Vuitton will play, as it surely must do. While it is fun to imagine all the drivers kitted out in Louis Vuitton flame-retardant suits, this is extremely unlikely. The story is still developing so we will return with more updates once they are confirmed.
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