In the world of luxury and heritage, while brands, themselves, have largely transformed from small family-owned entities to conglomerate-owned companies, a number of luxury’s biggest groups are owned and managed by the original founding family. The issue of succession planning, therefore, can be particularly important. This has recently come to the fore for the founder of the world’s largest luxury conglomerate, LVMH, French billionaire Bernard Arnault, as there has been much speculation over Arnault’s succession plan. The 75-year-old founder, chairman, and CEO of LVMH raised his retirement age from 75 to 80 in 2022, which should keep him at the helm of the €440 billion empire for another few years at least.
Succession speculation ramped up again this month when two more of Arnault’s five children were appointed to the LVMH board at the group’s annual shareholders meeting in Paris, with LVMH shareholders giving the greenlight to the nominations of Alexandre and Frederic Arnault, who will join their older siblings, Delphine and Antoine Arnault. The move leaves just one offspring, youngest son Jean, without a seat (although he is employed at the firm). It also gives the family 48.6 percent of LVMH’s share capital and 64.3 percent of the voting rights.
In light of the changing nature of luxury consumption, prompted by globalization in the sector and an influx of younger luxury shoppers across the globe, LVMH’s latest succession planning move allows the infusion of fresh perspectives and ideas, and helps the company to be agile and adapt to evolving tastes and trends. After all, the two latest Arnault appointments are young – aged just 29 and 31. Beyond merely an aim to bring younger members into the fold, a well-executed succession plan also provides stakeholders with a sense of stability and confidence in the business’s trajectory, mitigating uncertainties and fostering trust in the brand’s resilience.
The Workings of a Conglomerate
LVMH is not the only luxury group with familial management. Others, including Hermès, Chanel, Richemont, and Prada, among others, also adhere to this tradition. But LVMH – which boasts a glittering portfolio of brands ranging from Louis Vuitton, Fendi, Celine, Bulgari, Hublot, and TAG Heuer to Moët & Chandon – stands out as the largest multi-brand luxury conglomerate predominantly controlled by a single family. This wide array of strong brands provides LVMH with distinct advantages, including economies of scale, diversified revenue streams and increased bargaining power with suppliers and retailers.
At the same time, multi-brand luxury conglomerates like LVMH also face unique challenges compared to mono-brand enterprises. First, harmonizing brand identities and ensuring consistency across product lines and market segments poses a formidable task. Each brand boasts its own lineage, ethos, and customer base, which need to be carefully navigated to preserve individual identities. Resource allocation across brands with diverse needs demands a delicate equilibrium. Investment decisions must align with each brand’s growth potential, market positioning and strategic objectives, while also safeguarding the conglomerate’s overall financial health and longevity.
Still yet, internal competition between the brands for market share, resources and talent means there needs to be clear delineation of roles and mechanisms. Collaboration without encroaching on brand autonomy is the name of the game.
Family Strategy v. Looking Outside
Bernard Arnault’s career at LVMH spans several decades, marked by bold acquisitions and strategic expansions, and real estate prowess. Under his stewardship, LVMH has emerged as a global powerhouse. In his succession plan for LVMH, Arnault has strategically positioned his children – Antoine, Delphine, and Alexandre – in key leadership roles within the company. Antoine Arnault, the eldest son, has emerged as a prominent figure within the firm, responsible for guiding the strategic direction of LVMH’s retail businesses. Delphine Arnault, the eldest daughter, holds an important position within LVMH’s fashion division, which encompasses some of the world’s most iconic luxury brands. As the executive vice president of Louis Vuitton, Delphine oversees the strategic development and expansion of the brand. Alexandre Arnault has been entrusted with spearheading LVMH’s technology and digital initiatives, reflecting the conglomerate’s approach to innovation and growth.
It can sometimes pay dividends to keep things in the family. However, considering the challenges associated with heritage conglomerates, such as LVMH, appointing an external leader can offer certain advantages. External leaders, for instance, can bring fresh perspectives and impartiality, unhampered by tricky familial biases or dynamics. This impartiality can be invaluable in navigating intra-group conflicts, fostering collaboration between brands, and propelling innovation.
Bringing in an outsider can also mitigate risks tied to family dynamics, such as conflicts of interest or succession-related tensions, fostering a meritocratic culture where qualifications and performance are given priority. But when a brand is so closely tied to one family name, introducing an external leader may lead to resistance from family members worried about a departure from tradition.
Plus, the process of assimilating an external leader into the organization’s ethos and aligning their vision with long-term strategic objectives can be a fine line to tread, and stakeholders must also be on board.
Succession planning in the luxury sector is a complex process that requires a careful balance of tradition, innovation, and leadership. It serves as a custodian of the brand’s essence and a safeguard of its legacy in a complex marketplace. Getting the succession plan right, whether that means keeping things in the family or looking outside for new leadership, is crucial to maintain continuity and prosperity.
Qing Wang is a Professor of Marketing and Innovation and the Director, Marketing Innovation at Warwick Business School. (This article was initially published by The Conversation.)
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