LVMH Moet Hennessy Louis Vuitton SA

Company Profile
Publication Date: 30 Sep 2010
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....4 Key Facts.........................................................................................LVMH Moet Hennessy Louis Vuitton SA TABLE OF CONTENTS TABLE OF CONTENTS Company Overview............................................................................................................................................................................................4 SWOT Analysis.......................5 LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 3 ...

3% compared to 2008.1 million) during the financial year ended December 2009 (FY2009).755 million ($2. The net profit was E1. a decrease of 9.302 LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 4 .447.302 people.053 million ($23.3 million) in FY2009.053.0 (EUR Mn) Financial Year End Employees December 77.5 million) in FY2009. The company is headquartered in Paris. a decrease of Phone Fax Web Address Revenue / turnover 17.161 million ($4. KEY FACTS Head Office LVMH Moet Hennessy Louis Vuitton SA 22 avenue Montaigne 75008 Paris FRA 33 1 44 13 22 22 33 1 44 13 21 19 http://www.782. France and employs 77. The operating profit of the company was E3.LVMH Moet Hennessy Louis Vuitton SA Company Overview COMPANY OVERVIEW LVMH Moet Hennessy Louis Vuitton (LVMH or “the company”) produces and retails luxury goods under various categories and brands.408. a decrease of 0. The company recorded revenues of E17.4% compared to 2008.lvmh.8% compared to 2008.

LVMH Moet Hennessy Louis Vuitton SA SWOT Analysis SWOT ANALYSIS LVMH Moet Hennessy Louis Vuitton (LVMH or “the company”) produces and retails luxury goods under various categories and brands. these luxury brands are able to sell their products without mark downs to promote sales. due to such brand positioning. LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 5 . According to a Millward Brown 2010 study. However. and image of the brands as being prestigious and are considered as unique heritage brands. Europe and Japan. Strengths Strong brand positioning Association with celebrities and major events Lower operating gearing compared to peers Opportunities Growing luxury market in emerging economies will drive top line growth Women’s accessories is a pocket of growth amid low growth developed markets Chinese tourism – opportunities for selective retailing division Weaknesses Limited presence in the retail segment increases the vulnerability to retailer destocking Weakness in the champagne segment Threats Luxury markets in the US. Louis Vuitton is the world's 29th most valuable brand and is estimated to be worth $19. on the strength of its brands. declining luxury markets in the US. Europe and Japan are fragile with structural declines estimated in Japanese market Spending on premium wines and spirits is likely to be less as the consumers become frugal Counterfeit products leads to tarnished brand image and increased expenses Strengths Strong brand positioning LVMH has positioned its brands strongly in the luxury segment offering more than 60 different brands under the five core product categories. which is enabling the company to penetrate quickly into new markets for all of its product categories. The company's brands have an established identity and value perception. The brand has an established aspiring customer base across the world. is able to sustain growth in revenues in a tough economic situation. This indicates that LVMH. three key markets for LVMH.8 billion. owing to its superior brand image. value perception. The company over the years built a portfolio of strong brands which enhance the competitive positioning for the company. According to industry reports. LVMH showed a relative resilience against adverse economic backdrop in 2009 as well as in 2008. The luxury brands are less affected by the economic cycles due to factors like high customer loyalty. will impact the revenues adversely.

the first Hollywood star in history to represent a champagne brand. Similarly. Lower fixed costs will also enable the company to effectively adjust its cost structure to the revenues. Weakness in the champagne segment Sales of champagne. This indicates that the company has more cushion to weather a declining revenue scenario effectively. the sales of champagne are highly concentrated. LVMH’s revenues are vulnerable to the stock decisions made by the retailers. since fixed costs have to be covered before a profit can be recorded. The company’s wines and spirits. This leads to reduced business risk. Weaknesses Limited presence in the retail segment increases the vulnerability to retailer destocking LVMH has limited presence in the retail segment and hence highly dependent on sales to retailers. and watches and jewelry brands were most impacted by the crisis due to destocking at distributors and retail traders. Moet & Chandon deployed its communications platform around major film events like the Oscars and Golden Globe awards.LVMH Moet Hennessy Louis Vuitton SA SWOT Analysis Association with celebrities and major events LVMH brand has established log standing associations with celebrities and major events enhancing its luxury positioning. Perfumes like J’adore is represented by Charlize Theron and Hypnotic Poison is represented by Monica Bellucci. Lower operating gearing compared to peers LVMH has lower operating gearing compared to its peers.1 while Burberry’s is 3. Operating gearing is the ratio of a company's fixed costs to its total costs. the greater the risk. and festivals around the world and designed the event with its new international campaign. This is a luxury category that does not benefit to the same extent from strong demand in emerging markets offsetting LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 6 . Also. on an average during 2006–09. LVMH’s operating gearing is 3.3.4 Swatch’s is 3. Retailers have been witnessing low confidence on the markets and are resorting to de-stocking of luxury products to avoid losses. The company has overall continuously involved celebrities and major events in its marketing strategy. where local unemployment is still rising. Building a brand is critical for luxury companies and associations such as these would add to the value associated with the brand. The higher the level of operational gearing. Research shows that this increases the brand visibility and recall. Tag Heur has a close association with Leonardo DiCaprio and has designed products centered around his preferences. it targets the most important aspirational customer base effectively by enhancing the brand image. Therefore.8 and Bulgari’s is 5. a significant category for LVMH has been witnessing difficulties due to its positioning.The dependency on the retailers for sales and limited penetration into the retail channel will also hamper the market reach of these products. About 80% of champagne is sold in Western Europe. In terns of presence. This is because LVMH has lower fixed costs as a percentage of its sales. symbolized by Scarlett Johansson. Richemont’s 3.9.

In another separate study. who have traditionally been the drivers for luxury. Slow growth in the Japanese. Indonesia and Vietnam. Ten of Asia's top 25 billionaires were from India. the US and the European markets has been off set by the strong momentum in Asian markets other than Japan. The combined wealth of Asia Pacific's HNWIs is estimated to grow at an annual rate of 8. which is about 4. the Asia-Pacific region contained eight of the 10 economies with the highest growth in HNWI population.53 billion in annual sales. 23% of the revenues came from the emerging markets and by the end of 2010. The champagne category has been exposed to sluggish markets and low priced alternatives which is leading to a weakness in the product category. down-trading is still a big problem in champagne. Russian luxury is reviving as was noticed that in the first semester of 2010 the market added 15% compared to the same period in 2009. led by Hong Kong where their numbers doubled as the stock exchange soared by 73. Growing wealth of HNWIs and LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 7 . Growing high net worth individuals (HNWI) concentration in these countries is estimated to drive the sales of luxury goods. Globally. The Middle Eastern luxury market is worth about $8. after falling 14. making these countries highly attractive.5%.1%. Singapore. Middle Eastern region comprises the largest share among the high growth economies.5% of world sales. Indian and Brazilian economies comprise a large aspiring customer base. Also limited retail presence and limited presence in emerging markets have been contributing to declining revenues from the product category. Despite this. and real growth made 11%. These factors are estimated to enhance the demand for luxury goods. catching up with Europe for the first time. The Asia Pacific HNWI population rose 25.2% in 2008. India represents only 0. but India remained home to the region's wealthiest individuals. Opportunities Growing luxury market in emerging economies will drive top line growth The luxury market in emerging economies is expected to experience robust growth in 2010. Additionally. during 2003–08. The other Asia-Pacific economies on the global top 10 list were India. China has become the biggest market for Hennessey cognac and has a large customer base for Louis Vuitton brand. In comparison.8% overall to three million.8% until 2018. Taiwan. Russia and Middle East.5% of global luxury sales and Brazil 0. faster than the global average of 7. LVMH has been assessing the trends in these Asian economies and accordingly took initiative to penetrate these markets effectively. The situation is in line with the general trend – along with financial reports for the first six months world luxury market will add 11% for 2010 which is more than the expected 9-10%. 40% of the revenues are expected to be derived from BRIC countries alone. While developed economies are estimated to record flat or no growth in the luxury segment. Australia. LVMH has been focusing on increasing its investment in such emerging economies where high growth rates can be experienced. it was found that China had overtaken India in having the most number of billionaires.7%. in that order. according to recent industry estimates.LVMH Moet Hennessy Louis Vuitton SA SWOT Analysis weakness in developed luxury markets. particularly impacting the group’s prestige vintage volumes in particular. Similar trend is observed in other markets. Asia is estimated to record a growth of 10% in 2010. In 2009.

inbound industry in China will witness a significant growth during 2011–13. Chinese tourism is estimated to witness a robust growth. Moreover. That translates to an increase of 9 share points in handbags with that price point. driven by a solid performance in women’s handbags. Of these five provinces. Some of the drivers behind the growth can be found in the sales of handbags with an average price of $100. Dollar volume sales of total women’s handbags were up 31% compared to the same period in 2009. fashion accessories sales were up 17%. the tourist receipts received by top five provinces in China accounted for more than 60% of the total receipts generated during 2008. Increasing number of tourist arrivals and simultaneous rising per capita spending by tourist will boost the tourist receipts in coming years. China is branding and positioning its tourism industry at the global level to fuel growth in tourism industry. and suggests that women are beginning to spend on handbags again. Total women’s fashion accessories were up 20%. China is expected to become the world's number one travel destination by 2020. According to a research report. and as a result. It was sales of women’s accessories that led the way for the first quarter of 2010.LVMH Moet Hennessy Louis Vuitton SA SWOT Analysis access to a large customer base which in turn is growing at a fast pace will enable the company to enhance and diversify its revenue stream. The tourism industry in China is one of the fastest growing industries and has witnessed continuous development and transformation driven by two decades long economic liberalization and the government's favorable policy framework. Purchases of wallets. the market was down just 6% for the 12 months ending March 31. LVMH has been focusing on establishing its selective retailing in China and presence in the segment will position the company at an advantageous position to enhance revenues from the growing tourism. Inbound tourism is projected to grow at a CAGR of around 8% during 2010–13. Chinese tourism – opportunities for selective retailing division The selective retailing segment has bee witnessing constrained spending owing to lesser number of travelers. Women’s accessories is a pocket of growth amid low growth developed markets Women’s accessories market is expected to record strong growth rates. sales were up 3%. however. fueled by overseas investment and opening the domestic tourism market to foreign companies. which in turn will increase tourism receipts. The small leather goods category for both men’s and women’s had been a bright spot for all of 2009 and continues to post positive results for the first quarter of 2010. mobile phone cases and wristlets were some of the key drivers of this growth. easing VISA regulations. Threats LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 8 . Several key markets for LVMH have been suffering low growth owing to the adverse economic conditions and sluggish recovery. The fashion accessories market was down 10% from January through December 2009. a strong first quarter in 2010 hints at a recovery. However. and the government support the industry is estimated to witness strong growth in number of tourist arrivals. Besides. 2010. Dollar volume sales of small leather goods for both men and women were up 9% for the first quarter of 2010 and for the most recently reported 12 month period ending March 31. Women’s accessories provide an opportunity for growth in these markets. During the period January to March. 2010. Guangdong witnessed more than $9 billion in receipts. Backed by cultural promotion. Sales of those bags comprised 46% of the total dollar sales in the handbag market.

7% in the 52 weeks ending January 2010 in the same channels. high-growth markets. This indicates that more consumers are shifting to value priced private label products. meaning 3. In addition. for US food. the priorities of the Japanese consumer are also changing and maturing. The time of the aspirational consumer and frivolous consumption in Japan is considered to be over and the economic indicators are still bleak. but that has slowed to about 1% in 2009. The luxury market in Japan has structural issues that is likely to drive the market down even after many of the developed economies recover. On the other hand. established wine and spirits companies that are positioned in multiple pricing categories and channels LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 9 .LVMH Moet Hennessy Louis Vuitton SA SWOT Analysis Luxury markets in the US.7%. Spending on premium wines and spirits is likely to be less as the consumers become frugal Recent industry reports suggest that frugality is wide-spread among the consumers and willingness to spend on luxury wines and spirits has declined. As a result. ultra-premium priced spirits were flat. and Japan. far less than had been forecast. Japan’s second quarter 2010 GDP grew by only 0.1%. drug. . Consumers’ propensity to trade down during the recession reverses an industry-wide trend of moving up to high-end luxury wine and spirits.7%. The US will generate a decline of 4%. pose substantial threat to its revenues.4 million people were out of work. liquor and other select channels. As noticed by the end of 2009. handbags. with Europe and Japan are estimated to decline by 3% by the end of 2009. small leather goods or shoes.They are no longer so aspirational and are now buying mostly fast-fashion pieces and incorporating them with a high-end to luxury piece. the luxury markets in the US. Europe and Japan are estimated to record a decline in 2010. high-end spirits saw growth of up to 14% a year. the second highest since November 2009. while sales of wine costing $3 to $5. these markets still being some of the largest markets for LVMH. Although this still constitutes a significantly better performance than in the recent past. Mid-priced spirits saw sales increase by about 1. The recent prevalence of online price comparison. Europe and Japan are fragile with structural declines estimated in Japanese market Despite signs of recovery. value-priced spirits had the largest gain as sales rose by 2.3%. The slowdown of luxury sales in these markets will impact the revenues adversely despite increasing focus on emerging. there are several other major obstacles which make Japan a difficult market for existing brands to expand. the US.2% in 2009 and private label wine is growing at a 30% clip over 2009. These factors are driving down the luxury market in Japan and the recovery has also been very slow compared to other markets. usually an accessory. convenience. exclusive shopping sites and the popularity of auction sites as well as Japanese consumers engaging in holiday shopping is making the luxury market even more competitive than ever. LVMH derives more than two-thirds of its revenues from Europe. Besides the recession and a decrease in the discretionary spending of consumers in Japan. well over the category as a whole. Sales of wine priced more than $20 a bottle fell by 3. Until some time ago. unemployment rate for the month of June 2010 was 5.99 increased by 8. The numbers are not expected to get much better in 2010 as unemployment continues to hover around double digits. The current landscape for luxury brands in Japan is oversaturated and many retail shops and fashion brands are completely closing down operations in Japan.

LVMH has been having legal battles with some of the most popular retailers like eBay and Wal-Mart relating to sale of counterfeit products. gross revenue for super premium and high-end premium spirits fell 4.5 billion). The abundance of counterfeit goods and accessories is adversely affecting the sales of branded products. LVMH and other makers of premium labels like Bollinger were forced to slash prices of some bottles by as much as 50% in the UK. as the recession causes consumers to pare spending. Counterfeit products leads to tarnished brand image and increased expenses For companies like LVMH. the largest market after France.9) brand Jeanmaire. It is estimated that the loss due to counterfeit products convert into around E6 billion ($8. including LVMH. brand is its biggest asset and counterfeit products tarnish the image. More than $389. Counterfeit products.6 million have been seized from a dozen stalls in a shopping mall and two warehouses in the Philippines capital. low on quality. in the backdrop of rising counterfeit crimes. as well as the $4. similar trends are witnessed. The trend threatens the prospects of champagne titans. Spirits drinkers also are trading down to value-priced drinks over high-end beverages. LVMH has been developing its presence in the luxury spirits segment and has presence in luxury wine segment.1% respectively while gross revenue for value-priced spirits increased by 5. French shoppers selecting a champagne for holidays are increasingly choosing cheaper options like Laurent-Perrier’s E10 ($13. The value of champagne sold is set to fall at almost twice the rate of volume this year in France.000 worth of counterfeit merchandise was seized by special agents with the US Immigration and Customs Enforcement Office of Homeland Security Investigations during a two-day enforcement operation targeting flea markets in the South Florida area that were suspected of selling counterfeit trademarked goods. This is also hurting the company’s relations with the retailers. which goes for E10 at Auchan stores. leather cases and accessories worth $4. LVMH’s brands have been facing increased counterfeit issues. LVMH Moet Hennessy Louis Vuitton SA © Datamonitor Page 10 . Such litigations are also expensive and time consuming. LVMH will have to divert significant amount of resources to protect its brands.1% in 2009. the drink’s home and its biggest market. The weakness in the segment is likely to hamper the development plans for the company and revenues from wines and spirits segment. according to an industry report. Brands being its main assets. hurt customer loyalty when they buy such products by mistake. With the advent of digital channels there has been a surge in the sale of counterfeit products and online sales of these products increased by 9% in 2009. Even in France. Similarly. which costs as little as E8. to over some such shift in consumer behavior. Increased counterfeit crime will hurt the brand image and converts into losses.90 at Carrefour or Champagne Paul Breteuil. in another case fake Louis Vuitton hand bags.4 billion global industry. In 2009.1% and 2. Hubert de Claminger.LVMH Moet Hennessy Louis Vuitton SA SWOT Analysis stand the best chance of turning profit in 2010 as consumers continue to trade within the segments.

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