With the staggeringly large deal for the American jeweller, Tiffany & Company, the French luxury group LVMH (Louis Vuitton Moet Hannessy) looks both east and west to grow its influence.
The owner of high-end fashion houses like Dior and Givency, and a leader in luxury wines like Moët & Chandon, LVMH, itself the world’s largest luxury firm has now made the largest acquisition in the sector, bringing in Tiffany for a cool $16.2 billion.
Opinion over who is getting the better end of the deal is divided: for one, in its key markets, Tiffany doesn’t command the same prestige the brand had forged in the movie Breakfast at Tiffany’s, which appeared in the early 1960s. Since then, it has – according to Euromonitor – moved a little further into the more affordable end of luxury. Sales declines across the board are just the latest in a three quarter struggle.
However, its popularity with key audiences is important. In particular, the brand’s historic strength has been among Asian consumers coming to the US as tourists. Tiffany’s Fifth Avenue flagship is a tourist attraction in its own right. Under the current CEO, Alessandro Bogliolo – formerly of Bulgari – the company has built impressive in-roads in mainland China, a key area of growth for the luxury sector on the whole.
That strength is important to LVMH, but so is the greater involvement in the luxury sector’s hard side – most of its brands are on the soft goods side – adding to the company’s 2011 acquisition of Bulgari, the Italian jeweller, and creating a more powerful force in the fastest growing segment of the sector.
It also adds a major American brand to what is otherwise an extremely euro-centric roster. Tiffany’s retail footprint across the US is similarly important.
Overall, however, weakening demand from Chinese tourists to the US has made expansion both in the country and across the continent of Asia – as pointed out in a recent Morgan Stanley report – a necessity. Not only is luxury more and more available in China, the study says, but brands are also becoming more competitive in pricing. To do this, you need muscle on the scale of LVMH.
“This transaction, which occurs at a time of internal transformation for our legendary brand, will provide further support, resources and momentum for those priorities as we evolve toward becoming The Next Generation Luxury Jeweler,” said Bogliolo, in comments reported by Market Watch.
Sourced from the Financial Times, Euromonitor, Tiffany, Jing Daily