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From lots of little things one big thing grows - LVMH

"Luxury goods are the only area in which it is possible to make luxury margins." Bernard Arnault

A week or so ago I wrote about Cloudy Bay and in the process found that it is now owned by LVMH, which I was dimly aware was a luxury goods company - Louis Vuitton and all that. So I decided today to learn a little bit about it's history.

I was only dimly aware, because, well, I don't buy many luxury goods. Perfume perhaps is my only 'regular' luxury purchase. Most ordinary people don't buy luxury goods. They might dream about them. If they don't care, they may even browse in luxury goods shops. I remember visiting Hawaii with our teenage sons once, and my son happily going into some luxury store - I mean real luxury - to have a look, whilst I waited outside. I just was too embarrassed to go in. I suppose very occasionally, like the birthday Cloudy Bay wine, we buy a bottle of expensive wine. Well expensive for us, but never the truly expensive, hundreds, even thousands of dollars a bottle wine. Because true luxury is out of the reach of most of the world is it not?

"Affordable luxury - these are two words that don't go together." Bernard Arnault

I don't know why now, I thought this would be a neat story of something that started small and grew big, but of course it's not that simple. Or is it? Because, in fact, LVMH is really the creation of just one man - the above quoted Bernard Arnault, who for the last few years has been swapping the title of world's richest man with Jeff Bezos of Amazon - which company you could say is at the other end of the spectrum in terms of luxury. So you can make a fortune out of both ends of the market. According to Arnault, in his case it's through large margins (if he is to be believed that is) and in the case of Amazon it's small margins on vast quantities - well that's what I'm guessing anyway.

The point is though that there is no one foundation story really. LVMH now owns something like 75 brand names and has investments in lots of others. The LVMH stands for Louis Vuitton, Moët Hennessy, representing the merger of two companies - Louis Vuitton and Moët/Hennessy in 1987 - Moët and Hennessy having combined in 1971. But it, and the CEO's family did not create the many businesses that make the company. They acquired them and they manage them.

Arnault's father was a manufacturer, and after studying engineering joined his father's companies, taking over the management of one of them. But then in 1984 he had the idea of going into luxury goods, (his mother had been obsessed with Dior) bought one, and then another that owned Dior. From there it's been an ongoing and continuing story of acquisition after acquisition, buying out partners along the way. He now owns the controlling interest in the company. So obviously a very canny man, who has, on occasion been accused of tax evasion I believe.

But the group has been very careful to keep each of its brands distinct, with most of them being relatively independent but still under the umbrella of LVMH. Like Cloudy Bay. The blurb on their website puts it this way:

"The LVMH group brings together truly exceptional Houses. Each of them creates products that embody unique savoir-faire, a carefully preserved heritage and a dynamic engagement with modernity. These creations make our Houses ambassadors of a distinctively refined art de vivre."

"LVMH is home to 75 distinguished Houses rooted in six different sectors. True to tradition, each of our brands builds on a specialty legacy while keeping an unwavering focus on the exquisite caliber of its products."

There are some truly big names in the luxury world in the portfolio - Dior, Fendi, Givenchy, Donna Karan, Bulgari, Guerlain, Tag Heuer, Tiffany, Hennessy and I think Guinness too. Moët et Chandon, Dom Perignon, Krug, Veuve Clicquot, not to mention newspapers, yachts, hotels ... The list goes on and on and yet they have the nerve to call themselves a family-run group. Which I suppose is true, but isn't it interesting that when you say 'family run' it implies something small and cosy. Instead what you have here is the world's largest luxury goods company, but in the hands of one family.

And it's French - not American, or Chinese, Korean, Japanese, or even British. As Arnault says:

"What we do in our group is the opposite of the bad effects of globalization. We produce in Italy and in France and we sell to China, when usually it's the opposite." Bernard Arnault

Arnault is also a great collector of art, and benefactor of the arts in general. I guess the most noticeable expression of this is the building of the Louis Vuitton Foundation - a new art gallery, which was designed by Frank Gehry, and is therefore spectacular. Mind you I believe this too was mired in stories of tax fraud, etc. Do we mind when we get something like this as a showcase for a remarkable art collection?

And then Arnault has donated €200million to the rebuilding of Notre Dame. Oh to have enough money to be able to toss the odd few million euros around like that. His current personal worth is put around US$116.00 billion!!

He must be a remarkable man. Driven anyway. But the story, which started in my mind with the relatively humble Cloudy Bay is not the story of a man who created a company and a product - like Kellogs for example, but a man who is basically a collector - in this case of luxury companies. He buys them and then it looks as if he more or less lets them do their own thing. I'm guessing if they don't make enough money, then they get closed down. Some companies have definitely been dropped now and then.

“What I have fun with is trying to transform creativity into business reality all over the world. To do this, you have to be connected to innovators and designers, but also make their ideas liveable and concrete.

The goal of a start-up is not to stay a start-up. The goal of a start-up is to grow and to become, if possible, a large company.” Bernard Arnault

I suppose it's one of the models of large company structures. One of my ancestors, back in the mid 19th century was a director of one of England's many insurance companies of the time. Over the next hundred years it merged with others, which merged with others, until today you have Aviva - the largest general insurer in Britain. So in a sense my ancestor is a founder, but not really. LVMH however, acquires, merges, divests itself of some of its acquisitions, but generally retains and develops the individuality of each of its acquisitions. They do not become nameless parts of the whole.

This is not really about food - or drink is it? But it's interesting, and the champagne companies in particular. First was Moët et Chandon and then he bought the main competitor - I'm not sure which of those other famous champagnes it now owns it is and then other competitors too, and launched them into the world. Moët et Chandon now has branches - also more or less independent - in Australia, Argentina, California, Brazil, China and now India. Now how cosmopolitan is that?

It's a very plain logo for a very complicated company.

And yet another demonstration of the increasing gap between the rich and the poor of the world, luxury champagne, and bread made from acorns.


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