Enterprise de luxe
Established in 1987 after the merger of Louis Vuitton and Moët Hennessy, LVMH has grown like a giant black hole, absorbing brands and adding to its mass such that it now sits at the center of the luxury universe, its sheer gravity sucking smaller, often family-owned, luxury companies towards it.
The company's portfolio of 75 brands, or "houses", includes its original namesakes, as well as household names like Givenchy, Marc Jacobs, Fendi, Hublot, TAG Heuer, Tiffany & Co. and many more. That portfolio has largely been assembled under one roof by prolific dealmaker by Arnault, the “wolf in cashmere”, whose entry into the world of high fashion was a $15m investment in a bankrupt French textile merchant.
Wolf in cashmere
Arnault's genius was in solving the limiting constraint of luxury, desirable scarcity. His understanding that one brand can only maintain its premium placement through scarcity of distribution, but that a group of distinct brands — which could share the operational and financial benefits of scale — could grow tremendously.
In an industry with high upfront costs — retooling factories for limited runs, expensive marketing campaigns and eye-watering rents for shops — it’s obviously tempting to outsource things to cut spending. But after wrestling control of a brand, LVMH often doubles-down on doing things in-house. As Arnault put it "If you control your factories, you control your quality; if you control your distribution, you control your image". That focus, combined with an inherent trust in designers to be bold, and a ruthless knack for dealmaking, made for a potent combination.
How much further LVMH can grow in luxury goods is an interesting question. Luxury brands typically need a long history to establish themselves, and those that remain independent fiercely preserve their status. Chanel and Rolex, for example, are among the few remaining independent global luxury brands. Arnault's idea? To widen the company's scope — even entering the world of luxury travel and hotels in recent years.
Arnault's new focus is on succession. But we're not talking about the hit HBO show (which is an office favorite), but the real story at LVMH — all 5 of Arnault's children are involved in the family business.
