Last month, France’s richest man Bernard Arnault surpassed Inditex owner Amancio Ortega as the fourth richest person on the planet. With a net worth estimated at more than $80 billion, Arnault heads up French luxury goods conglomerate LVMH Moët Hennessy Louis Vuitton, which owns 70 companies ranging from fashion labels Louis Vuitton, Christian Dior and Fendi to Veuve Clicquot and Dom Pérignon. The powerful conglomerate builder maintains what CNBC calls “a fine balance between creativity and commerce.” In conjunction with Credit Suisse, CNBC looks at how Arnault he keeps his company at the height of fashion. Here are some of the key takeaways.
On Arnault’s primary skills: It is in realizing the demand for high-end products around the world, says Goldman Sachs Chair and Chief Executive Lloyd Blankfein. “For his business of luxury goods, he has to think of whether or not there’s growth in the world, where that growth is occurring and very importantly, what the people in those countries to whom wealth is (accruing), what they will pay for, what they will want."
He also has to be an accurate predictor of trends, and having a portfolio helps to mitigate the risks of one brand going out of fashion. “All of your brands cannot be hot all the time, (a portfolio) allows you to deal with … the inevitability that sometimes you're going to have a brand that's going to hit the fashion sweet spot, and sometimes you're going to miss,” said Allen Adamson, a branding expert and founder of consultancy Metaforce, speaking to CNBC by phone.
On building a conglomerate: Arnault was criticized for trying to put so many luxury brands — including those competing with each other — under one roof. “In the 90s (I) had the idea of a luxury group and at the time I was very much criticized for it. I remember people telling me it doesn’t make sense to put together so many brands. And it was a success ... And for the last 10 years now, every competitor is trying to imitate, which is very rewarding for us. I think they are not successful but they try,” he told CNBC.
On deciding which brands to acquire: When buying a brand, Arnault works out how it can be improved and what niche it fills, such as in the case of Bulgari, which it bought for $5.2 billion in 2011.
“We are really relatively small in jewelry and Bulgari was number two in the world … What we have brought … is the capacity in hiring the right people and we can also provide them with the best talent. Because the big advantage of LVMH, since the beginning, is because we are number one, because we are so diversified, we can attract the best talent.” Since buying the company, sales have tripled and profits have multiplied five-fold, Arnault claims.
On the future of LVMH: Acquisitions may become trickier, suggests Allen Adamson, a branding expert and founder of consultancy Metaforce, because younger consumers prefer smaller, more niche brands. “Entrepreneurs want to stay independent. So (LVMH’s) ability to buy new brands has been more challenging and even consumers have an increasingly sophisticated knowledge of authenticity and (wanting to know) what's the story. For many of them, small is better than big.”
The business of luxury also has to adapt to the march of the digital means of communication. LVMH hired Ian Rogers from Apple Music as its chief digital officer in 2015 and launched a start-up incubator in Paris last month. It has had to find ways to be accessible, too, said Adamson.