Louis Vuitton Moet Hennessy : Expanding Brand Dominance In Asia

Presented by Group 7 : Akankha Arora Joseph Robert Shamil E Sathar Nidhin VC Shyam Sunder

Company Profile  LVMH is the world’s leading luxury products

group.  A $13 Bn group of companies with operations

across the world- 1,500 retail stores in about 60 countries.  A parent of around 50 sub-companies  In 2004 40% of the sales is from Asian

market.

Industry Profile : Luxury Goods  The sales of luxury products were expected to

rise by 3% to 5%.  Shares in luxury companies tend to go up  Growing middle class is also buying designer

goods.  26% of the worlds millionaires are in Asia

Competition in the industry : Gucci :  Well entrenched player in Europe and North

America.  Guccio Gucci originally started as a reseller

of luggage imported from Germany.  As of 2003, Gucci Group had 348 directly

operated stores.

Competition in the industry : Richemont  It was the second-largest luxury goods company in the

world.  Major player in Jewellery and Watches.  Sales of watches and Jewellery accounted for 70% of

total luxury products sales in 2000.

Hermes  Relied on single-branded strategy.  Products mainly clothing , fragrance and leather

accessories.

Competition in the industry : Bulgari : It operated in seven luxury segments

including watches, perfumes, jewellery etc. Substantial part of its revenue was from watches and jewellery Customers were mostly first time buyers. Asia pacific accounted for 36% of its sales.

Creating the LVMH empire • This company was founded in 1854 • Founder – Louis Vuitton • In 1971 Hennessy, a leading manufacturer of

cognac, merged with Moet et Chandon, a leading champagne producer. • In 1987 the drinks group then merged with

fashion house Louis Vuitton to create what is now the world’s largest luxury goods business –

Louis Vuitton Moet Hennessy.

Wines & Spirits  LVMH held 40% of the cognac market and

20% to 25% the overall champagne market.  50% share in premium champagne segment.  It is absent in the popular segments of drinks

such as beer, whisky, vodka.  Had a steady pricing policy and strict cost

control.

Fashion & Leather goods :  60% of sales in this division are concentrated

in the Asia-pacific region.  It had several product in this category, including leather goods, ready-to-wear, shoes, watches, jewellery, textiles etc.  Demand often exceeds supply.  Sales in this segment is mainly

attributed to Louis Vuitton brand.

Perfumes & Cosmetics :  This division account for 18% of company’s sales.  This division has been able to integrate R&D,

production, distribution, sourcing across brandsresulting in huge profits.

Watches & Jewellery :  The division contributed only 5% of company’s sales

in 2000.  It has an operating margin of only 10%.  26% of the division’s sales come from Asia.  Tag Heuer, Zenith, Christian Dior,DBS etc.

Selective Retailing  To create a sales environment that enhance

the image and status of luxury good.  They operate in two segments:

Travel retail: To market luxury products to an international travel clientele Specialised selective retailing  These selective retail shops are located in Europe, the US and Asia.

Expansion of LVMH in Asia Declining trade barriers and trade tariffs in the

luxury goods market Change in communication technology Capture growing Asian markets  Perception of luxury brand as status symbol Growing number of tourists from Asian countries

Expansion of LVMH in Asia 26% of people having financial assets more

than $1 million lives in Asia in 2003 Asian buyers accounted for 30-40% of sales of

all luxury clothing, handbags and watches Less competition in luxury market Young rich population & mass of nouveau rich

customers

Japan : There were 47 Louis Vuitton stores in Japan.  By 2003, Japan accounted for about 20% of

Christian Dior’s sales. Had plans to increase it to 30% in the future. Tough competition from competitors like Prada.

China : China a huge market and was expected to play a

pivotal role in the future of brands.

Annual growth rate of premium cosmetic market

was a significant 30%.

In 2003 there were 16 LVMH shops. LVMH was trying hard to establish an efficient

operating model in China. Mainly concentrating on eastern and southern China.

Area of focus are selling wines, perfumes, watches

and jewellery.

South Korea :  Even though small in size was a huge market

for luxury brands.  By 2003, LVMH had 15 stores.  Here the market was comparatively more

stable and secured from external threats.  The young age of customers in the Korean

luxury segment also represented a tremendous opportunity.

India : LVMH launched its first store in India in 2003  Product brands from its watches and jewellery group-

TAG Heuer and Christian Dior.  India’s growing economy, its English-speaking

population, its improved social & political stability and opening of the economy to outside investors attracted LVMH to invest in India.  LVMH’s major challenges are  To create a culture in India to shop luxury goods & make them

aware of the same .  Convince Indian customers who shop luxury brand to buy from

India.  To face huge competition in watch market  A high percentage of duty charge.

Distribution Management Selective Retailing Gray market control: Smuggling control Private ownership versus franchising Use of Internet marketing Distribution density (pull strategy)

Brand management  Product dominant ( House of brands)  Core competence of LVMH is the unique capability of harnessing

creative potential to make money  The strategy adopted by LVMH is to position each of its brands

as distinct brands in their own right.  Collectively, they offer competition to other companies under all

segments by occupying the entire category. A customer is thus retained within LVMH group: Eg : Gitanjali group  Brands thereby complement rather than cannibalize each other,

though they offer overlapping products.

Brand Analysis

Brand architecture Division-Wise brands catering to distinct

market segments.(Different positioning , product category and sales channels) Competing brands within the group help beat the competition Leveraging on the individual identity and image of the brands- Tag Heuer. Gaining advantage from the cultural origins of acquired brands. Strengthen the existing distribution.

Describe some of the countryspecific target market for luxury goods? Japan: Must win market.(Triad) They are big buyers of luxury brands. Japan accounts for 33% of fashion and leather

category. 20% of Christian Diors sale is from Japan The brand image is everything in Japan were there is little difference between the rich and the poor.

Describe some of the countryspecific target market for luxury goods? China: Has a huge population. Growth rate of 8% and negative inflation rate. Policies of the govt are favourable for luxury

brands. Annual growth rate of premium cosmetic market was a significant 30%.

Should LVMH reach out to new middle- class customers who are willing to purchase luxury items? Yes , if the purchasing power of the new

middle class increases then it is good for LVMH as the customers who can afford it increases . But LVMH should reach this market

segment without tarnishing its brand. They should not decrease the price of their

products. Maintain only exclusive shore rooms.

What advantage does LVMH as a group have over independent brands Knowledge of market Financial strength Use flanking to fight competition ie., use of

different brands under within same category LVMH group to avoid competition Bombarding the market with a variety of brands to cater to different segments.

Describe the counterfeit business today. How is this affecting companies and businesses? Counterfeiting is the illegal use of a registered

trade mark Counterfeits affect the sales of brands by

diluting the brand identity Accounts for 5 to 7% of global merchandise

trade i.e.

$ 150 billion a year

Fail to perform up to the expectations of the

customers May cause injuries to the customers

How should luxury brand fight against counterfeiting? Check on internet auction sites for the sale of

counterfeit products Employ full time staffs to work with

investigators and lawyers to protect the brand Push for better legislation against counterfeits Employ coalitions

Conclusion USP of LVMH is its status factor & “Made in

France” tag Product standardization strategy Macro & Micro economic variables favorable in Asian market Thus it should aggressively expand in Asia without diluting its brand identity

Thank you