Luxury Brand Management in Digital and Sustainable Times. Michel Chevalier
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These figures are based on the authors' discussions with different industry specialists.
| Total (€ billion) | French (%) | Italian (%) | Others (%) | |
|---|---|---|---|---|
| Ready-to-wear | 60 | 20 | 30 | 50 |
| Accessories | 75 | 25 | 35 | 40 |
| Alcohol and expensive wines | 65 | 15 | 10 | 75 |
| Fragrances and cosmetics | 65 | 35 | 5 | 60 |
| Watches | 26 | 5 | 5 | 90 |
| Jewelry | 45 | 7.5 | 5 | 87.5 |
| Tableware | 6 | 40 | 10 | 50 |
| Total | 342 |
Based on these estimates, we compare the relative size of the French and Italian companies, as set out in Table 2.5. Again, these figures are our own estimates and have been rounded up.
In the ready-to-wear category, Italy and France have 55% of the market between them, with Italy clearly leading the way. The others category comprises countries such as the United States and England. However, if we confine ourselves to luxury, and therefore do not take into account brands such as Liz Claiborne, Gap, or Banana Republic, the United States, with the exception of Ralph Lauren or Michael Kors, is not very strong in this category.
In the watches category, which is obviously dominated by the Swiss, the French and Italians are merely secondary players.
Of the overall total, French and Italian brands account for €75 billion and €60 billion, respectively. France's strong position is built around accessories and perfumes. With the exception of Armani, Gucci, and Dolce & Gabbana, Italy seems to have been unable to impose strong perfume brands, and on top of this, those brands are not developed by Italian companies; nor does it have a strong international market in spirits.
However, Italy's strength in fashion is quite visible. Where France has 8 brands with sales of over €1 billion (Balenciaga, Cartier, Chanel, Dior, Hermès, Louis Vuitton, Saint Laurent, and Van Cleef & Arpels), with four whose core business is in the ready-to-wear world, Italy has 15 (Armani, Bottega Veneta, Bulgari, Dolce & Gabbana, Fendi, Gucci, Loro Piana, Max Mara, Moncler, Prada, Salvatore Ferragamo, Valentino, Versace, and Zegna), with 14 coming from the ready-to-wear and fashion world.
This preeminence of Italian fashion will have unexpected consequences in the long run as perfume brands are often built on the strength of ready-to-wear lines. If one day the Gucci, Prada, and Versace perfumes reach parity with those of Chanel, Dior, and Yves Saint Laurent, then Italy could become the number-one luxury operator in the world.
For reasons that will be discussed later, the French have been very slow to develop fashion and ready-to-wear brands over the past 30 years. The two major creations of French fashion brands date back to Saint Laurent and Kenzo; somehow, this looks like ancient history.
Oligopoly or Open Market?
From reading the press, it might be easy to form the conclusion that luxury has become the field of large groups and that there is no place for small operators. In fact, the real picture is quite different, as Table 2.6 shows.
As will be discussed later, small operators, if they have the critical mass to be clearly international, can do quite well in this world.
The Big Three Corporations
In the luxury business, people speak generally of the big three corporations—LVMH, Kering, and Richemont. Actually, Richemont is similar in size to Estée Lauder and L'Oréal, and similar in size to major wines and spirit companies such as Diageo and Pernod Ricard. However, in this section, we will confine ourselves to these three companies. Other companies will be described at length in the next chapter.
LVMH. In Table 2.6, we took LVMH's sales to be approximately €39 billion because we removed the distribution activities from the total of €53.7 billion in 2019. The total picture is presented in Table 2.7.
Table 2.6 Major Luxury Operators, 2019 (or 2018/2019) (€ million)
Source: Annual reports or authors' estimates.
| Luxury Operators | Sales | |
|---|---|---|
| LVMH | 38,989 | Total with distribution 53,700 |
| Kering | 15,383 | |
| Richemont | 13,989 | |
| Diageo | 12,926 | Total with Guinness: 15,389 |
| Estée Lauder | 12,098 | |
| L'Oréal | 11,000 | Total with mass market, etc.: 29,900 |
| Pernod Ricard | 8,448 | |
| EssilorLuxottica | 8,880 | Total: 16,160 |
| Coty | 8,646 | |
| Chanel | 8,400 | |
| Hermès | 5,960 | |
| Ralph Lauren | 5,704 |