LVMH Paper
For the exclusive use of M. IRTIS
CASE: SM-123
DATE: 03/17/04
LVMH IN 2004: THE CHALLENGES OF
STRATEGIC INTEGRATION
The correct strategy is to know where a particular brand is headed and the managers and teams of each brand must imagine that. Then, we watch what is done at the group level and we extract a number of learnings: what are the businesses to acquire, where do we have to invest to develop this or that brand to benefit the group as a whole.
—Bernard Arnault, Chairman and CEO, LVMH Moët Hennessy Louis Vuitton1
INTRODUCTION
LVMH was created in 1987 in Paris, France through the merger of Louis Vuitton, the upscale luggage company and Moët Hennessy, leading producer of champagne and cognac. Since its merger, LVMH stood out as a leader in the $60 billion luxury goods industry. By early 2004, it had grown to over 50 brands sold in more than 100 countries around the world and generated more than ¼ ELOOLRQ LQ VDOHV ,Q WKH SDVW GHFDGH LWV VWUDWHJ\ KDG \LHOGHG SHUFHQW \HDUO\ growth in revenue, of which 9 percent had been achieved through organic growth.2 The company had achieved a dominant position in champagne, cognac, fashion and leather goods, and selective retailing; and a top tier position in perfumes and cosmetics, as well as watches and jewelry.3 Despite facing the toughest environment for the luxury goods industry since its founding over 15 years ago, the company delivered strong results for 2003, reporting a 30 percent increase in net income in 2003 (Exhibit 1). Most of the increase was driven by efficiencies at the brand level, disposition of non-strategic brands and a successful hedging policy. Some groups performed well, including Moët Hennessy, the wines and spirits division, the perfume and cosmetics group and Louis Vuitton, the luggage group. (The performance of the latter was particularly impressive given that the rest of the industry—Hermes and Gucci in particular—were
1
Bernard Arnault, Interview with Yves
CASE: SM-123
DATE: 03/17/04
LVMH IN 2004: THE CHALLENGES OF
STRATEGIC INTEGRATION
The correct strategy is to know where a particular brand is headed and the managers and teams of each brand must imagine that. Then, we watch what is done at the group level and we extract a number of learnings: what are the businesses to acquire, where do we have to invest to develop this or that brand to benefit the group as a whole.
—Bernard Arnault, Chairman and CEO, LVMH Moët Hennessy Louis Vuitton1
INTRODUCTION
LVMH was created in 1987 in Paris, France through the merger of Louis Vuitton, the upscale luggage company and Moët Hennessy, leading producer of champagne and cognac. Since its merger, LVMH stood out as a leader in the $60 billion luxury goods industry. By early 2004, it had grown to over 50 brands sold in more than 100 countries around the world and generated more than ¼ ELOOLRQ LQ VDOHV ,Q WKH SDVW GHFDGH LWV VWUDWHJ\ KDG \LHOGHG SHUFHQW \HDUO\ growth in revenue, of which 9 percent had been achieved through organic growth.2 The company had achieved a dominant position in champagne, cognac, fashion and leather goods, and selective retailing; and a top tier position in perfumes and cosmetics, as well as watches and jewelry.3 Despite facing the toughest environment for the luxury goods industry since its founding over 15 years ago, the company delivered strong results for 2003, reporting a 30 percent increase in net income in 2003 (Exhibit 1). Most of the increase was driven by efficiencies at the brand level, disposition of non-strategic brands and a successful hedging policy. Some groups performed well, including Moët Hennessy, the wines and spirits division, the perfume and cosmetics group and Louis Vuitton, the luggage group. (The performance of the latter was particularly impressive given that the rest of the industry—Hermes and Gucci in particular—were
1
Bernard Arnault, Interview with Yves