Savoring a rustic lunch of tuna salad, veal stew, and red wine, Benoit Gouez, chief vintner at Champagne house Moet & Chandon, took a long view of the financial crisis rocking the global economy.
“We are more than two centuries old and crisis and wars and problems, we have known them all in the past, and we are still here,” he said as pickers outside harvested the latest crop of Champagne grapes.
Moet & Chandon survived even tougher times during the French Revolution, when the aristocracy stopped buying Champagne, and the house learned to turn adversity into success by discovering how to prosper through exports.
As fortunes evaporate overnight in the maelstrom hitting world markets, it is the high end of the retail market – sports cars, haute couture, fine wines, Swiss watches, yachts – that might be expected to take the hardest and most immediate hit. But many people in luxury goods are confident that the highest echelons of wealth will always have disposable cash.
“In our opinion it’s probably when the times are hard that people really like or need to dream more and luxury products are never more necessary as in the tough periods,” Gouez said.
In fact, the Champagne house’s unofficial motto – trotted out by staff on many occasions during a recent visit – is: “When times get tough, you need Champagne.”
Recent numbers may belie the optimism.
Champagne sales fell 2.6 percent in the first eight months of the year to 165 million bottles, according to figures from Champagne winegrowers committee CIVC. Domestic sales were down 4.2 percent to 89 million bottles, while exports fell 0.67 percent to 76 million bottles.
Exports to the U.S. have been hit particularly hard, plunging 22 percent to 6.5 million bottles in the first six months of the year, the most recent period for which detailed export statistics are available.
There are abundant signs, however, that the luxury goods market is holding up, at least for now.
Ferrari expects 2008 to be another record year, with “more or less constant” sales in U.S. and Europe topped up by growth in countries such as Russia, China and the United Arab Emirates, CEO Amedeo Felisa told The Associated Press.
Despite the financial crisis, some 6,000 people have expressed interest in buying Ferrari’s new California, a coupe-cabriolet with a retractable hard top, which retails for around €179,000 (US$247,000) in Europe – even before Ferrari opened its book for orders.
No Lamborghini orders have been canceled. Giorgio Armani is going ahead with a fashion hotel in Milan. And even as Wall Street imploded, LVMH – maker of fancy luggage and fine liqueurs – bought Dutch mega-yacht builder Royal van Lent.
“It is true that for sure we have some signals of crisis in some specific markets and in some specific niches,” said Bain & Co. luxury analyst Claudia D’Arpizio. “But overall if we take the world … as a complete marketplace, the situation is still good.”
She added that the crisis has left unscathed the “absolute consumer” whose super wealth will remain remarkably stable in good times and bad. And emerging economic powers like China and India, while vulnerable to the financial turmoil, remain growth markets for the luxury sector.
“Even if some people are hit by the crisis, there are still more people drinking Champagne than 10 years ago,” said Moet & Chandon’s Gouez. “The world has never before seen so many people being able to afford so many luxury products.”
While sales have slipped at Italy’s high-end Damiani jeweler, CEO Guido Damiani is confident the dip won’t be too deep.
“It’s just enough for the winds to change a little, and the well to do will start buying again,” said Damiani CEO Guido Damiani.
Still, it appears the financial chaos has taken some of the froth out of fashion – even if it doesn’t show in the price tag.
Stressed times call for relaxed looks, and that’s what the top fashion houses presented during recent womens wear shows in Milan and Paris for their spring/summer 2009.
Designers went for bolder color palettes to portray a sense of optimism, and stuck to more practical styles that could better weather uncertain buying habits.
Mario Boselli, head of Milan’s Fashion Chamber, said that while there were fears buyers might skip the shows, more than 2,000 globe-trotting buyers showed up alongside more than 1,200 journalists from 40 countries.
One of those buyers, Saks Fifth Avenue chief merchandising officer Ron Frasch, acknowledged in Paris that it was an unpredictable moment.
“This is a tough one, this is maybe the worst I’ve ever seen,” Frasch said.
“Clearly, the ones who are in the best position are the ones who have the strongest brand names. The ones who have the most difficulty are the ones who are either beginning to develop or trying to get their goods onto the market. It’s really tough to add new brands right now.”
The bottom line is that no one knows how long the crisis will last.
While the world’s luxury makers say they have the stuff to weather this crisis, they also acknowledge it is like none they have witnessed it the past.
The consumer crash after the Sept. 11, 2001, terror attacks was a one-time event that wasn’t repeated, and consumers slowly returned to their old ways.
The current financial meltdown, on the other hand, has been advancing in stages since last year’s subprime crisis.
Large-scale buyers of high-end fashion won’t admit they are buying less. But a sign of the times: more promotions of designer wear in department stores, creating a conflict with designers who sell their creations at full price sometimes just a few doors down.
Lamborghini’s one-year waiting period makes it unlikely that its customers are buying on a whim of momentary well-being. CEO Stephan Winkelmann said during a recent interview at the carmaker’s Sant’Agata headquarters that no orders have been canceled – and they weren’t expecting any to be.
“So far we are managing quite well. We always produce below demand, so you have a buffer, an alert system,”