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Home  arrow Chapter 13  arrow Marketing Spotlight-Louis Vuitton Moet Hennessey (LVMH)

Marketing Spotlight-Louis Vuitton Moet Hennessey (LVMH)

Luxury leather goods maker Louis Vuitton was established in Paris in 1855. For more than a century and a half, the company made quality, handcrafted luggage and other leather goods. It remained a small, family-controlled company until the 1970s, when French businessman Henry Racamier married a Vuitton heiress, and rapidly expanded and diversified the business. When Racamier took over in 1977, the company had only two shops in France and had combined sales of less than $50 million. By the mid-1980s, the company had 95 stores across the globe and revenues topping $500 million.

In 1987, the merger of Louis Vuitton with famed French spirits, champagne, and perfume group Moet-Hennessey marked a new era of consolidation in the luxury-goods industry. The newly formed Louis Vuitton Moet Hennessey (LVMH) instantly became the world’s largest luxury goods company, raking in $4 billion in revenues in 1991. The company continued to grow in the 1990s by acquiring a number of other luxury-goods companies, including fashion label Christian Lacroix and shoe designer Berluti in 1993, TAG Heuer watchmaker in 1999, and the Donna Karan brand in 2000. Today, LVMH has a portfolio of 50 luxury brands and is the number one worldwide seller of champagne, cognac, fashion and leather goods, and the number three worldwide seller of perfumes and cosmetics. The company’s revenues topped $10 billion in 2000.

Here are some of the famous luxury brands LVMH controls:

Champagne, Wine, Cognac, And Brandy
  • Moet & Chandon
  • Dom Perignon
  • Hennessey
Fashion
  • Berluti
  • Christian Lacroix
  • Givenchy
  • Louis Vuitton
  • Donna Karan
Fragrances
  • Christian Dior
  • Givenchy
Cosmetics
  • Hard Candy
  • Fresh
  • Urban Decay
Watches
  • Ebel
  • Tag Heuer
LVMH also owns several business and financial media publications, including La Tribune newspaper, and two art magazines. The company owns all or part of a number of retail franchises, including the Sephora chain of cosmetic stores, DFS Group duty free shops, Miami Cruiseline Services duty free shops, and French department stores Le Bon Marche. Other businesses the company owns include auction houses Phillips, de Pury & Luxembourg and Etude Tajan, Omas luxury pens, and a development capital business called LV Capital. LVMH maintains an Internet presence (www.lvmh.com), but its website is mostly informational. It does, however, feature an e-commerce site called eLuxury, which debuted in June 2000 and in which LVMH is a principal investor. The site strives to maintain an "exclusive" image by prohibiting advertising, providing editorial content on trends, travel, and entertainment, and partnering with more than 60 luxury brands.

Luxury Pricing, LVMH Style

LVMH has consistently pursued a luxury pricing strategy, which means high markups, limited availability, and few if any markdowns. When asked by a reporter whether the Louis Vuitton store in Paris would have a post-Christmas sale, the company’s president Yves Carcelle answered "No," saying, "That would devalue the brand." Louis Vuitton sells its products only through a global network of company-owned stores. This keeps margins high and allows the company to maintain control of its products through every step in the channel. Bernard Arnault explained, "If you control your factory, you control your quality; if you control your distribution, you control your image." Today, LVMH maintains a global network of 1,286 stores, a 28 percent increase over 1999. Its 284 Louis Vuitton stores and 461 Sephora locations comprise over half of the stores in this network.

Recently, Louis Vuitton built several flagship concept stores located on high-fashion avenues around the world like Rodeo Drive and Fifth Avenue. These stores sell an estimated average of $1,800 per square foot. Some of the best-selling stores sell as much as $8,000 per square foot. Additionally, since maintaining an upscale image is vital to a luxury brand, LVMH devotes over ten percent of annual sales to promotion and advertising. The company advertises its brands primarily in fashion and lifestyle publications. Some of the leading brands sponsor major international events with luxury cachet, as Louis Vuitton does by sponsoring the America’s Cup. Since image is an essential part of marketing luxury goods, LVMH is careful to evaluate every advertising and promotional opportunity for consistency with the image of its brands. As a result, the company manages a portfolio of luxury brands unparalleled in both size and sales.


(Sources: William Echikson. "Luxury Steals Back." Fortune, January 16, 1995; www.lvmh.com; www.eluxury.com;; Thomas Kamm. "Latest Fashion." Wall Street Journal, December 28, 1987; Lisa Marsh. "LVMH Thinks of Vuitton Globally, Acts on 5th Ave." New York Post, December 5, 2000; Joshua Levine. "Liberté, Fraternité – But to Hell with Égalité!" Forbes, June 2, 1997.)

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