Bernard Arnault Empire: LVMH Group Business Model In A Nutshell

LVMH is a global luxury empire with over €79 billion ($83 billion) in revenues for 2022, spanning several industries: wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and selective retailing. It comprises brands like Louis Vuitton, Christian Dior Couture, Fendi, Loro Piana, and many others.

Table of Contents

LVMH’s mission is around three pillars

It all started when the young Bernard joined the father’s company, which primarily focused on construction. Yet when Bernard Arnault joined the company in 1971, the company began to focus on real estate.

Ever since Bernard Arnault grew to become CEO and then drove the father’s company through a series of deals that brought to the creation of LVMH. Today LVM is the largest luxury empire on the globe. Comprising brands like Fendi, Luis Vuitton, and many others.

As clarified in its code of conduct, the mission of the company can be summarized in three fundamental values:

Be creative and innovative: creativity and innovation are part of our DNA. Over the years, they have ensured our Maisons’ success and established their legitimacy. This combination of creativity and innovation is the foundation of our Maisons and figures at the heart of the delicate balance required to continually renew our offering while resolutely looking to the future, always respecting our unique heritage;

Deliver excellence: because LVMH embodies the world of craftsmanship in its most noble and most accomplished form, we pay meticulous attention to detail and to perfection. We never compromise on quality. From products to service, we cultivate our difference through this constant quest for excellence;

Cultivate an entrepreneurial spirit: LVMH has an agile and decentralized organization that encourages efficiency and responsiveness. It stimulates individual initiative by entrusting each person with meaningful responsibilities. Our entrepreneurial spirit encourages both risk-taking and perseverance. It requires pragmatic thinking and an ability to motivate teams, leading them to achieve ambitious objectives.

LVHM Ethical Principles

For a large group that has been able to scale up by keeping its brands highly profitable, setting up ethical principles might be as important as setting up financial metrics.

In fact, when it comes to the luxury industry, the strength of the brand plays a key role. However, it is critical to making the brand grow together with a strong foundation.

In the case of LVMH, this foundation is represented in its code of conduct as a set of principles.

Acting responsibly and with social awareness
Providing a fulfilling work environment and valuing talent
Commitment to protecting the environment
Winning the trust of customers
Winning the confidence of shareholders
Acting with and commitment to integrity in the conduct of business

Around those seven principles, a set of actions are developed and assessed to keep those principles as the guidelines for the company’s ethical growth.

Who owns LVMH?

The Arnault Family has managed to

Source: LVMH Letters to Shareholders

LVMH business model: an ecosystem of Maisons independently managed

When you think of LVMH the brands that comprise the name (Louis Vuitton, Moet Hennessy). However, the LVMH group is a galaxy of luxury brands and Maisons, acquired throughout the years by the development and growth campaign of Bernard Arnault.

Although those Maisons are part of an ecosystem, they are also autonomously run. Thus, each of those Maisons is based on a business model that is unique to the brand.

This kind of organization based on decentralized operations makes the brands part of the LVMH galaxy agile. So that each brand can be connected to its customers, can make decisions fast and still allow its employees to have an entrepreneurial mindset.

In terms of operations the company comprises five main segments:

Wines and spirits
Fashion and leather goods
Perfumes and cosmetics
Watches and jewelry
And selective retailing

Wines and Spirits

In terms of profits breakdown the wines and spirits segment is among the most profitable. As shown on LVMG annual report:

Wines and Spirits profit was 1,558 million euros
Champagne and wines contributed 674 million euros
While cognacs and spirits accounted for 884 million euros

What brands are part of the wines and spirits?

Moët & Chandon: with products like Moët Impérial, Ice Impérial, Nectar Impérial Rosé Grand Vintage 2009
Dom Pérignon: with products like Dom Pérignon Rosé 2005 and Dom Pérignon Blanc 2009, Dom Pérignon P2 2000 (Second Plénitude)
Mercier as accessible prestige champagnes
Ruinart value proposition is built on premium cuvées
Veuve Clicquot with products like Brut Carte Jaune and Brut Rosé
Krug with products like the iconic Grande Cuvée
Estates & Wines with products like the creation of the Termanthia Barrel in partnership with Loewe.
Chandon with products like Chandon Me and Chandon S Orange Bitters
Hennessy which is an important part of the wines and spirits segment
Glenmorangie and Ardbeg a malt whisky, with products like Glenmorangie Bacalta and Ardbeg An Oa
Belvedere highlights the importance of vodka’s place of origin
Volcán de Mi Tierra tequila launched in the United States and Mexico

Fashion and Leather Goods

This segment includes fashion luxury brands such as Christian Dior Couture, Rimowa, Louis Vuitton, Kenzo, Givenchy, Loro Piana, and Fendi. The business group’s operating margin as a percentage of revenue represented the 31.7%. Together with the wines and spirits that is the most profitable segment.

It comprises luxury brands like:

Louis Vuitton
Christian Dior Couture
Fendi
Loro Piana
Céline
Kenzo
Loewe
Givenchy
Berluti
Marc Jacobs

Perfumes and Cosmetics

Perfumes and Cosmetics contributed to 600 million euros, to the overall company’s net profits. This growth came from Parfums Christian Dior, Kendo, and Parfums Givenchy. It comprises brands like:

Parfums Christian Dior
Guerlain
Parfums Givenchy
Kenzo Parfums
Benefit Cosmetics
Maison Francis Kurkdjian

Watches and Jewelry

The Watches and Jewelry contributed 512 million euros in profits. With brands like Bvlgari and Hublot, this is a critical part of the overall group. It also has a profit margin of 13.5%. Within this segment there are several brands:

Bvlgari
Hublot
Zenith
Chaumet
Fred
De Beers
Selective Retailing

Selective Retailing

Profit from Selective Retailing was 1,075 million euros. Within these segments there are brands like:

Sephora
Le Bon Marché
DFS
Starboard Cruise Services

What is the fastest growing segment?

Source: LVMH Annual Report 2018

According to the 2018 annual report, the fastest-growing segment is Fashion and Lether Goods. As explained in its financial statements the “very solid momentum achieved by Louis Vuitton and Christian Dior Couture, as well as by Celine, Loro Piana, Kenzo, Loewe, Fendi and Berluti, which confirmed their potential for strong growth.”

What is the most profitable segment?

Source: LVMH Annual Report 2017

With 31.7% in operating margin for 2017, Fashion and Leather Goods is the most profitable part of the business. Followed by wines and spirits with the 30.6% operating margin and Watches and Jewelry with 13.5% in operating margin. The remaining are Perfumes and Cosmetics with 10.8% and Selective Retailing with 8.1% in operating margins.

Where does LVMH make more money?

Source: LVMH Annual Report 2017

France remains the most significant country and the market for LVMH. As the country where LVMH has its home, France also represents an important market for the company, which keeps generating 10% of its revenues. Other markets like the United States and Japan are pretty important too.

Source: LVMH Annual Report 2017

France is also the country where most of LVMH stores are located. Even though way smaller than the US market, France counts about 508 stores.

The luxury empire with agile distribution and decentralized management

One of the critical ingredients of LVMH success is based on its ability to let the Maisons be rung separately while the operations of each are kept agile. This allows the company to be quick at understanding the customers. Also, each mature brand will be used as a cash cow to finance the development of new and less mature brands.

LVMH acquisition of Tiffany

In November 2019, LVMH reaches a deal to purchase Tiffany for over $16.2 billion, which deal would officially close in 2020. This deal gives the opportunity to LVMH to consolidate its empire also within US territory.

That is how a former construction company became a global luxury empire!

Key takeaways

LVMH is a French multinational holding corporation and conglomerate with a core focus on luxury items. The company owes its name to the merger between Louis Vuitton (LV) and Moët Hennessy (MH) in 1987.
In a move that would prove personally disastrous, LVMH chairman Henry Racamier hired Bernard Arnault for support as the battle between the Vuitton family, Moët Champagne, and Hennessy Cognac continued.
Racamier and Arnault clashed over their respective leadership styles, and at some point, Arnault was offered the chance to purchase a controlling stake in LVMH. He then ousted Racamier and built the company into what it is today.

Key Highlights

LVMH Overview:
- LVMH (Moët Hennessy Louis Vuitton) is a global luxury conglomerate with over €79 billion ($83 billion) in 2022 revenues.
- It operates in wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and selective retailing industries.
- Brands under LVMH include Louis Vuitton, Christian Dior Couture, Fendi, and more.
Mission and Values:
- LVMH’s mission is founded on three values: creativity and innovation, delivering excellence, and cultivating an entrepreneurial spirit.
- Creativity and innovation are core to their success, delivering excellence through attention to detail, and fostering an entrepreneurial mindset.
Ethical Principles:
- LVMH follows a code of conduct with seven key principles, including responsible actions, valuing talent, environmental commitment, customer trust, and integrity in business conduct.
Business Segments:
- LVMH operates in five main segments: wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and selective retailing.
Profitability by Segment:
- Fashion and leather goods segment is the most profitable with a 31.7% operating margin, followed by wines and spirits, watches and jewelry, perfumes and cosmetics, and selective retailing.
Global Presence:
- France, the United States, and Japan are key markets for LVMH’s revenues.
- France hosts a significant number of LVMH stores (508) despite its smaller size compared to other markets.
Agile Distribution and Decentralization:
- LVMH’s decentralized management allows its brands to operate autonomously, fostering quick customer understanding and innovation.
- Mature brands fund the growth of new and less mature brands, driving continuous development.
Acquisition of Tiffany:
- LVMH’s strategic acquisition of Tiffany for over $16.2 billion solidified its luxury empire and expanded its presence in the United States.
Fastest Growing Segment:
- The fashion and leather goods segment, driven by brands like Louis Vuitton and Christian Dior Couture, demonstrates rapid growth potential.
Most Profitable Segment:
- Fashion and leather goods hold the highest operating margin at 31.7%, followed by wines and spirits, watches and jewelry, perfumes and cosmetics, and selective retailing.
Ethical Principles:
- LVMH’s code of conduct includes principles like responsible actions, valuing talent, environmental commitment, customer trust, and business integrity.
Innovative Financing:
- LVMH utilizes mature brands to fund the growth of new and less mature brands, fostering continuous innovation and development.
Autonomous Brands:
- LVMH’s decentralized management allows its brands to operate autonomously, promoting quick customer understanding and innovation.
Global Presence:
- France, the United States, and Japan are key markets for LVMH’s revenues.
- France hosts a significant number of LVMH stores (508) despite its smaller size compared to other markets.
Acquisition of Tiffany:
- LVMH’s strategic acquisition of Tiffany for over $16.2 billion solidified its luxury empire and expanded its presence in the United States.

Element	Description
Value Proposition	LVMH offers the following value propositions for its customers: – Luxury Brands: Providing access to a prestigious portfolio of luxury fashion, accessories, perfumes, and wines & spirits. – Quality and Craftsmanship: Offering products known for exceptional quality and craftsmanship. – Exclusivity: Exclusive and limited-edition products for discerning customers. – Heritage and History: Brands with rich heritage and history. – Innovation: Incorporating innovation in design, materials, and production. – Sustainability: Commitment to sustainable and responsible business practices. – Cultural Patronage: Support for arts, culture, and heritage.
Core Products/Services	Core products and services provided by LVMH include: – Fashion and Leather Goods: Luxury fashion, handbags, and accessories. – Perfumes and Cosmetics: High-end fragrances and cosmetic products. – Watches and Jewelry: Luxury timepieces and jewelry collections. – Wines & Spirits: Premium wines, champagne, and spirits brands. – Selective Retailing: Operates upscale boutiques and department stores. – Hospitality: Luxury hotels and resorts under the LVMH Hotel Management. – Cultural Initiatives: Supports cultural institutions and events. – Sustainability Efforts: Commitment to sustainable practices.
Customer Segments	LVMH targets various customer segments: – Luxury Shoppers: Affluent individuals seeking high-end fashion, accessories, and lifestyle products. – Connoisseurs: Collectors and enthusiasts of fine wines, spirits, and perfumes. – Global Audience: International customers across regions and demographics. – Art and Culture Enthusiasts: Patrons of the arts and culture. – Hospitality Seekers: Luxury travelers and guests at LVMH hotels. – Selective Retailers: Partnering with luxury department stores and retailers. – Sustainability Advocates: Consumers looking for sustainable luxury options.
Revenue Streams	LVMH generates revenue through several revenue streams: – Product Sales: Earnings from the sale of luxury fashion, accessories, perfumes, wines & spirits. – Retail Boutiques: Revenue from physical boutique sales. – Distribution and Licensing: Income from distributing and licensing LVMH brands. – Selective Retailing: Profits from upscale boutiques and department stores. – Hospitality Services: Revenue from luxury hotels and resorts. – Cultural Patronage: Support for arts and cultural initiatives. – Sustainability Efforts: Investments in sustainability with long-term financial benefits. – Investments and Divestments: Capital gains from investments and divestments.
Distribution Strategy	The distribution strategy for LVMH emphasizes exclusivity and brand presence: – Physical Boutiques: Operating upscale boutiques and stores worldwide. – Luxury Department Stores: Partnering with luxury department stores and retailers. – E-commerce Platforms: Maintaining online shopping platforms for global reach. – Exclusive Events: Hosting exclusive events and fashion shows. – Cultural Patronage: Supporting cultural institutions and events. – Sustainability Initiatives: Promoting sustainability through products and practices. – Global Brand Promotion: Global marketing and brand promotion campaigns. – Hospitality Services: Managing luxury hotels and resorts.