Since Liberty Media acquired Formula 1 in 2017, the iconic auto racing competition has become one of the world's most popular annual sporting series.
Not only is Formula 1 a well-known event that is recognized worldwide, but it is also a highly profitable business.
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According to Liberty Media's Q2 earnings report for 2024, Formula 1 generated nearly $988 million in total revenue, a 36.5% growth from the year prior.
LVMH is a French luxury group that owns multiple renowned luxury brands in various sectors, including wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and select retailing.
Some of its brands include popular names like Louis Vuitton, Tag Heuer, Tiffany & Co., Moët & Chandon, to name a few.
With Formula 1 holding the number one spot in annual sporting events and LVMH being one of the biggest luxury fashion groups worldwide, it is no surprise that the two would eventually cross paths along their way to success.
Formula 1 and LVMH have a historic, long-lived friendship
Formula 1 and LVMH have a long history of partnerships that encompass multiple decades.
When thinking of Formula 1, one can't help but associate the sporting event with race card drivers' traditional celebratory move of spraying Champagne while standing on the Formula 1 podium after scoring a big win on the track.
From 1966 to 1999, and then again in 2020, LVMH's Champagne brand Moët & Chandon was the official sponsor for Formula 1 until it eventually got replaced by other sparkling drink brands like G.H. Mumm (PDRDF) , Chandon, Champagne Carbon, and the most recent Ferrari Trento.
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The Swiss brand Rolex has been Formula 1's official sponsor since 2013, but after over a decade-long partnership, LVMH's CFO Jean-Jacques Guiony said during the company's Q2 earnings call that Tag Heuer had been in talks with Formula 1 to become the new official sponsor.
LVMH's jewelry brand Tiffany & Co. (TIF) has been involved with the auto racing business since 1904, when it produced the Vanderbilt Cup. Tiffany & Co. currently makes the trophy for Formula 1's Miami Grand Prix.
In 2021, LVMH's fashion brand Louis Vuitton and the Automobile Club of Monaco signed a multi-year partnership in which the luxury fashion brand would develop a travel case for the Formula 1 Grand Prix de Monaco trophy; since then, Louis Vuitton has created some of the most iconic trophy cases in the events' history.
Formula 1 and LVMH announce a huge partnership agreement
On Wednesday, Formula 1's parent company Liberty Media (LMACA) and LVMH (LVMHF) announced a 10-year global partnership that will integrate LVMH's luxury brands into multiple aspects of the Formula 1 auto racing competition, including hospitality, activations, and limited-edition releases.
As stated in the press release, "The partnership will bring together the best of these two worlds and provide unparalleled experiences combining thrilling sport and elegant art-de-vivre, wheel-to-wheel racing and time-tested craftsmanship, for enthusiasts, fans, and clients."
This partnership is set to launch in 2025, at the same time as the start of the Formula 1 season. However, details of the collaboration have yet to be disclosed and will be revealed next year.
A strategic business move for LVMH to get back on track after reporting declining earnings
The newly announced partnership came after LVMH published its first-half earnings report, which included multiple declines and revenue losses, reflecting a struggling luxury market.
According to LVMH's first-half financial report for 2024, total revenue was down by 1% compared to last year, and profit decreased by 15%.
However, this latest partnership may be a strategic business move for the luxury group to get its numbers back on track.
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In the earnings report breakdown of its luxury Maisons, wine and spirits revenue declined by 12%, fashion and leather goods were down by 2%, and watches and jewelry decreased by 5%.
These three underperforming maisons hold brands that have previously performed key roles in Formula 1's history, and this partnership could be their opportunity to exit the luxury slump successfully.
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