A Lesson in Buisness

Whoever thinks that fashion is all about design, and not about business is gravely mistaken. The business side of fashion seldom works smoothly. And there are constant financial hurdles or threats (such as take over bids) to be avoided. Which brings us to LVMH SA. LVMH is a really intriguing study in the business of fashion. They have succeeded in creating the first (but not only) multinational luxury conglomerate, and streamlined the entire process of taking their products to market. They own the entire process enabling them to take their products through research and development, production, and distribution and sales seemlessly. They are the original luxury Wal-Mart, if you will. With average annual sales numbers between 9-12 Billion USD. And 30,000 full time employee's. LVMH is a fashion behemoth that set out and succeeded in becoming fashions first giant. And I guarantee most people have shopped at an LVMH store, or bought an LVMH product in the last year.

The famed LVMH Tower

     What led to LVMH massive success was the friendly and personal acquisition policy LVMH used to eliminate their competition. After all, like DeBeer's, LVMH realized early that if you control the supply, the demand will surely grow. Only what they controlled wasn't diamonds, but "luxury". All of the constant acquisitions not only limited the competition and prevented pricing wars, but they also allowed for the absorption of the best materials, workmanship, and knowledge of production, from each and every one of the aquired companies. It also established an interconnected and fully operational distribution network and manufacturing facilities. This allowed LVMH to ensure that all of the products be built with care and quality. It also allowed fashion and cosmetic products to be delivered anywhere in the world faster than ever previously thought possible.

      So who is LVMH?
      Why haven't you heard of them? and what do they make?


History

The LVMH corporation is essentially a holding company that manages the leading creators of luxury goods. Named after the two largest members of the conglomerate, Moet Hennessey and Louis Vuitton. LVMH owns the largest, most brand recognized and dominant fashion, cosmetic, and lifestyle brands all under one single umbrella corporation.

Louis Vuitton's Logo

History of Louis Vuitton

 In 1885 Louis Vuitton left home and decided to strike out on his own, and head to Paris. He was 14 years old. He was poor, his family had always been poor and he realized early in life, that he had to find a new way to try to change his fortune. He decided that Paris was where the money was, and that he had to go towards the money, instead of simply toiling away as a labourer in his small town. Unable to afford a trip to Paris, Louis decided that nothing would possibly stand in his way, and walked. It took him a year to walk from his village of Anchay to the capital. And once there he jumped at the first opportunity, becoming an apprentice packer and trunk maker. Within ten years Louis became a master trunk maker, and became the exclusive packer for Empress Eugenie, and her ladies in waiting.



Charles Lindburgh



     In 1854, Louis opened his first shop and set to work producing innovative and well crafted luggage. His first success was the creation of flat topped trunks. Before this, all travel trunks were domed. This simple innovation propelled Vuitton into high demand. His simple, elegant, well thought out designs allowed Vuitton to become the supplier of luggage to the most famous people in the world. "The quality of the materials, the arrangement of interiors, and the finishings made Vuitton's deluxe trunks far superior to anything that had previously been produced"*1. His luggage was used by everyone from royalty, explorers, and trailblazers. Everyone from Czar Nicolas II to Charles Lindbergh travelled with Vuitton's durable, stylish, utilitarian luggage sets.



     To keep the luggage current and to prevent counterfeiting the material and designs would change annually, and to the specifications of the clients. This constant evolution and adaptability was key to Louis Vuitton's success. The company became experts at adapting to changes in style and vogue materials, and used that expertise to remain relevant when the world underwent dramatic changes in transportation. Vuitton quickly adapted and perfected construction of luggage for sea, rail, automobile and sky travel, giving the company the edge over all of the competition.

     Innovation plays an essential role in Vuitton's growth. Without the constant innovation in design, the company wouldn't have succeded.

    In 1890, Louis' son Georges invented the first tumbler lock to be put on luggage- thus preventing theft. It was the only luggage that offered built-in security for the traveller.

    Since its inception there has been huge numbers of counterfeit Louis Vuitton products on the market. As the success of Louis Vuitton boomed in the 1960's and 70's the cheaply made counterfeits coming out of Asia gained popularity, and began to really effect the value and prestige of the Louis Vuitton brand. "With the company's success and reputation for luxury came a vast wave of counterfeit Louis Vuitton products. One year before his death in 1970, Gaston Vuitton (the grandson) decided to take action against the counterfeiters by opening a store in Tokyo; by offering the real Vuitton product in the Asian market, he hoped to better inform customers and discourage the purchase and manufacture of imitations. The company also undertook a successful advertising campaign to battle the increase in counterfeiting."*2. Attempting to fight counterfeiter's seemed to be an unending battle. So,"The company allocated two percent of annual sales revenue to the unending battle against counterfeiters"*3. And then Vuitton began in a new direction, "Under Racamier [chairman], Louis Vuitton began to acquire companies with a reputation for high quality, purchasing interests in the couturier Givenchy and the champagne house Veuve Cliquot. Louis Vuitton's takeover philosophy was personal, courteous, and discreet, rather than systematically aggressive."*4

  
History of Moet Hennessey

     The  Moet story begins in 1743 with the creation of Moet et Cie, by Claude Moet and his son. Moet started out as a simple vintner, a glorified grape farmer that could blend fine artisan wines. His winery was a medium sized plot of land in the center of the French Champagne district. The first years were a struggle for Moet, despite Claude's insistence that the district where he grew his grapes was the best in all of France. Claude realized that his reliance on 'courtiers en vin' or distributors that would take his wine to market and sell it along with the other wines they represented. Claude thought favoritism played a far larger role in the sales of the wine than the actual wine itself. He decided that instead of letting the 'courtiers' decide his fate he would buy his own 'courtier en vin' office and start representing himself. He could focus on selling his own wine and presenting it as 'the best' in the market, a claim that many critics and connoisseurs agree with to this day. Once in office, Claude's business exploded, and his clients included mostly landed gentry, nobles and even royalty. In 1750 Moet established an account with Madam Du Pompadour, who ordered regularly for special events held in the royal court.

     In 1792, Claude Moet's death. And the company was willed to his grandson, Jean Remy. Remy was proven to be a skilled and cunning businessman, with a special talent for looking forward and anticipating the coming needs for the company. He expanded the vineyard and production facilities by buying up huge tracts of land within what would later become the Champagne district. Including the Abbey of Hautilliers- the land and buildings that housed the Benedictine monk Dom Perignon while he was undergoing experimentation to perfect his double fermentation process that would create Champagne.

    But what would really launch Jean Remy and Moet to international acclaim was the patronage and friendship of Napoleon. The friendship of the emperor was of mutual benefit. Moet treated Napoleon as the Emperor he was. Plying him with wine, building a special guest house complex for him and his entourage. This gave Remy a portal to reach the highest class of people, and the ability to sell them on his concept of luxury wines. The friendship of the Emperor led to Remy becoming one of the worlds most famous vintners- and sales of the Moet wines skyrocketed. Between 1820 and 1880 Moet's sales went from 20,000 to 2,500,000 bottles a year.

     To help the recovery from World War I, Moet et Cie created a new product. Dom Perignon vintage champagne. The new champagne was fussed over, only the best grapes and the highest quality of craftsmen were allowed anywhere near it. Remy's goal was to create the world's most perfectly balanced wine the world has ever tasted. And the continued success or the premier vintage champagne proves his success.

    Throughout the 1950's, 60's and 70's Moet continued to succeed. Using the profits from the growth in sales, the company financed a string of aggressive take overs. Including: Ruinart Pere + Fils (champagne), Mercier (winery), JA. Hennessey (cognac), Rozes (winery), Parfums Christian Dior (perfumes), Roc (cosmetics), Delbard (roses), and Armstrong Nurseries (roses). Moet dominated the Champagne districts land, diversified itself into other beverages and alcohol based products, and had even unintentionally became the worlds leading producer of roses, in a search for a way to use cutting edge botany to hybridize their grapes.

    The string of takeover's however had an unintended negative effect. It exposed Moet Hennessey  to the threat of a takeover. With the huge amounts of cash and credit tied up in the various takeover bids Moet was approached by the Louis Vuitton group, which offered a merger partnership instead of a hostile takeover. The Vuitton group offered Moet Hennessey the financial protection and stability that it drastically needed. The merger offered Moet Hennessey total autonomy, and ensured the firm had capital for further takeovers- a common and established holding company tactic to ensure continued prosperity.

     The offer of the merger seemed to benefit Moet Hennessey the most. Moet was three times the size of Luis Vuitton, and while the agreement was that the two corporate entities were to be equal partners, both the leadership and the stock percentages favored Moet Hennessey greatly. With the majority shareholders of Louis Vuitton only receiving a 16.5% ownership in the new partnership. The fear of Louis Vuitton was that they were being absorbed into the larger company and that they would no longer be in a decision making position. This sentiment led to internal strife and bickering between the two sides. Eventually the LV group tried legal battles and finally attempted a share buying war. After losing the bidding war, former Vuitton chairman Henry Racamier was forced out of the company. Racamier found that his shares had been bought out from under him by the person that he originally went to in order to get the bankrolling for his takeover attempt. After being stabbed in the back by the former ally, Racamier was rightfully angry- and left to create another luxury goods conglomerate, Orcofi SA., that would compete directly against his former employer.  

So as you can clearly see fashion has some pretty big business muscle behind it. It operates strictly as a business, and the atmosphere is constantly highly competitive. It can be assessed as cut throat in it's competition. If you are unsuccessful in fashion, you close your doors. But if you succeed don't expect to remain autonomous either. Creativity and fantasy in fashion is solely intended for the runway. Not the boardroom.

     

Here is a list of the daunting holdings of the LVMH SA

• Moet & Chandon (champagne)
• Champagne Mercier (champagne)
• Krug (champagne)
• Vins fins de Champagne SA (wineries)
• JA Hennessey (cognac)
• Thomas Hine & Cie (wine distribution)
• Edward Dillon & Co. (wineries)
• Belle Jardiniere (retail)
• Loewe SA (retail)
• Berluti (clothing)
• Celine (clothing and cosmetics)
• Parfums Celine
• Kenzo (clothing, cosmetics, perfumes)
• Givenchy (clothing, perfume, cosmetics) 
• Christian Lacroix (clothes, perfume)
• Parfums Christian Dior
• Guerlain (perfume)
• DFA Group (duty free retail)
• Sephora Holding (cosmetics)
• Le Bon Marche Rive Gauche (cosmetics)
• Franck & Fils (retail)
• Schieffelin & Co. (wine distribution)
• Domaine Chandon (US wine)
• Delbard (roses)
• Armstrong Nurseries (roses)
• Roc (cosmetics)
• Douglas Inernational (US wine distribution)
• Thomas Pink (shirts)
• Tag Heure (watches)
• Zenith (watches)
• Ebel (watches)
• Chaumet (watches)
• Hard Candy (cosmetics)
• Bliss Spa (cosmetics)
• BENEfit (cosmetics)
• Make up for ever
• co-own Fendi (with Prada)
• and there are more...