Louis Vuitton Hennessy Moet is the largest luxury brand retailer in the world. French owned LVMH, is publically traded on Euronext – European Stock Exchange under symbol MC. In the last year company posted over €37 billion in assets. Among companies largest subdivisions are well known luxury brands Luis Vuitton, Dior, TAG Heuer, Marc Jacobs and recently acquired Bulgari. A company is big on acquisitions, and over the last few years has been making on average 3-4 large buyouts per year.
But large acquisitions are not the only mechanism for LVMH to keep organic growth. Private investments via its Venture Capital funds is another, very active method for effective growth. Being a global company LVMH has interest in international emerging brands, lately specifically Asian based labels.
L Capital Asia fund is created to do just that – swallow emerging Asian companies in China, India and South East Asia. L Capital Asia is currently a $650 million fund and is head quartered in Singapore. Fund capital was syndicated by LVMH and US and Asian investors with LVMH investing close to 10%.
According to Ravi Thakran, the fund’s managing partner L Capital Asia is concentrating on brands that offer unique products and have capable entrepreneurial managers. Unlike its parent group LVMH, which concentrates on the top tier of the luxury sector, he said the fund focuses exclusively on promising Asian labels looking for a big breakthrough, particularly in the Chinese and Indian markets.
To date L Capital Asia fund has invested $23.5 million in Charles & Keith, Singaporean shoe retailer. The deal was announced on March 22, 2011. LVMH acquired 20% of stake in Charles & Keith.
In the prior deal, announced on February 11, 2011, LVMH purchased significant minority stake in Gitanjali Gems – Indian jewellery brand for $100 million.
Other deals totalled $90 million of stakes in two Singaporean fashion companies and a Hong Kong-listed watch and jewellery company. Very active fund is currently working of another number of deals to be announced shortly via LVMH press centre.
Based on these deals we see that fund is concentrating on well established companies with wide retail operations and proven market success. This investment strategy is in line with LVMH overall investment history where company biggest value add is in growing operations for its subdivisions utilizing the economy of scale for bulk purchased ad space in print media, TV and runway show participation.
In the past few years company showed that they are very serious about their presence in Asian market. According to recent studies conducted by ARC China, sale of luxury goods almost doubled in the past year. Greater China represents 28.0 percent of sales for Swatch, 18.0 percent for Gucci, 14.0 percent for Bulgari and 11.0 percent for Hermes.
LVHM showed zero tolerance for any hint on destructing their reputation among Chinese consumers. Recent fire of John Galliano from House of Dior who publically offended Asian men and Jewish woman, followed shortly by removal of the designer from his own label John Galliano. Sharon Stone remarks against Chinese people after the earthquake in 2008 resulted in stripping of all her Dior ads the following day after the incident in every Chinese mall.
Thus LVMH has set their long term strategy to tapping into fastest growing consumer market in Asia proactively – by not just opening retail locations for their primary brands in China and India, but also investing in promising Asia based labels to grow them at home and world wide.