LVMH: The French Behemoth

Louis Vuiton, Dom Pérignon, Givenchy, Sephora, Dior, what do all these brands have in common? Apart from making high-quality, expensive goods, all these brands have one parent company, LVMH. For those of y'all you don't know, LVMH is a juggernaut- $381 billion market cap, $64.7 billion revenues, and 47% of the company is owned by the elusive Bernard Arnault (one of the earliest investors in Netflix).

To understand the immensity of LVMH, one needs to take a look at it's brands. In the wines & spirits business, it owns- Glenmorangie, Hennessy, Dom Pérignon, Belvedere, Moët & Chandon. In the fashion industry, it owns- Dior, Bvlgari, Louis Vuitton, Fendi, Givenchy, Kenzo, Marc Jacobs, Stella McCartney. In the watches & jewellery business, it owns- Hublot, Tiffany & Co, TAG Heuer. LVMH also owns Duty Free Shoppers, Sephora, Belmond Hotels, and Guerlain.

LVMH is the world's most successful purveyor of luxury goods, however, it manufactures items that have little to no purpose in the lives of the consumers except fulfilling dreams. No one needs a $925 champagne bottle, or a $15000 handbag, yet millions desire them. In consumer marketing, aspirational brands are brands that a large segment wishes to own, but economic reasons prevent them. Purchase decisions are made at an emotional level to inflate self-identity. Aspirational brands command a premium price to drive conspicuous consumption, which is the acquisition of luxury goods to show economic superiority. Arnault's succesful integration of various aspirational brands into a single entity, is the reason for LVMH's growth.

Bernard Arnault started his career in 1971 in Paris, working for his father's real-estate company. In 1984, he acquired a dwindling textile company called Boussac Saint-Frères. He sold nearly all of Boussac's assets, but retained Christian Dior. Under Arnault, Dior expanded into perfumes, opened boutiques across the world, and repositioned the brand as exclusive. Dior also roped in celebrities as ambassadors. In 1988, Arnault acquired Louis Vuitton, and increased it's profits by 50%. After acquiring Sephora in 1997, Arnault bolstered it's international presence and included beauty and cosmetic products.

When Arnault acquired French perfume maker Guerlain in 1994, fans viewed it as cheapening and commercialisation of the firm's legacy, however, Arnault expanded Guerlain to offer makeup, skincare and started selling the brand in Sephora. Guerlain now has revenues of $500 million. Hublot, under LVMH established key partnerships with Manchester United, FIFA & Formula 1. Duty Free Shoppers expanded into Japan, Europe & Oceania, under LVMH's leadership. LVMH acquired Tiffany & Co for $16 billion in January 2021, and it'll be fun to see how they restructure the brand, especially after the losses it faced during the pandemic.

Another reason for LVMH's growth is Arnault's disbelief in managerial limit setting. In the fashion industry, radical innovation is crucial. Arnault does not oversee the work of creative 'engineers', be it writers or designers. "Artists need to be completely unfettered by commercial and financial concerns. You couldn't manage Leonardo da Vinci or Frank Lloyd Wright", says Arnault. LVMH, as a company is decentralised. Each brand operates on it's own, in it's home country, with it's own artistic director. For example, Tiffany is based out of NY, TAG out of Switzerland, DFS out of Hong Kong etc.

Bernard Arnault brand's are timeless, they have become an institution. The pandemic induced lockdown affected LVMH's business since a bulk of it's customers are wealthy Chinese in Europe. The company is now increasing their presence in China and also moving towards online retail. However, one of the reasons for LVMH's success is the experience of the boutique store itself, which can't be delivered online. The luxury group has created the blueprint for how to build and run a luxury brand in the 21st Century, transforming family-owned brands into well-oiled machines.