54, avenue Montaigne
Fax: 1 45 61 46 95
Incorporated: 1854 as Louis Vuitton SA
Sales: FF 7.2 billion
Stock Exchanges: Paris
SICs: SIC 5099 Durable Goods, NEC; SIC 3161 Luggage; SIC 2396 Automotive Trimmings, Apparel Findings, and Related Products; SIC 3429 Hardware, NEC; SIC 2211 Broadwove Fabric Mills, Cotton
Louis Vuitton has been the supplier of luggage to the wealthy and powerful for well over 100 years and is known for combining quality fabrication with innovative designs to reflect the needs of customers and the ever-changing modes of world travel. In 1987, the company became part of Moet-Hennessy Louis Vuitton (LVMH), the world’s largest luxury goods conglomerate.
Louis Vuitton left Anchay, his birthplace in the Jura, for Paris in 1835 at age fourteen. After one year of traveling on foot, he reached the capital and soon became an apprentice packer and trunkmaker. The son of a carpenter, Vuitton mastered the skill of woodworking and designing trunks and, within ten years, had become an expert. During his apprenticeship, Vuitton gained experience in packing by traveling to the homes of wealthy women, where he was employed to pack their clothes before they embarked on long voyages. With his master, Monsieur Marechal, Vuitton went regularly to the Tuileries Palace, as the exclusive packers to the Empress Eugenie and her ladies-in-waiting.
In 1854, Vuitton opened his own business at 4 rue Neuve des Capucines, very close to the couture houses around Place Vendome. Due to his familiarity with wood, silk, and satin, he became well respected by the couturiers, who hired him to pack their creations. His invention of flat-topped trunks, which were more easily stacked for travel than the traditional domed trunks, established his reputation as a master luggage-maker. Vuitton began covering his trunks in grey Trianon canvas, which was both elegant and waterproof when varnished.
As the business grew increasingly successful, Vuitton built workshops outside Paris in Asnieres, where transportation of wood from the south was convenient. When his original store became too small, business was transferred to 1 Rue Scribe, and Vuitton began focusing on trunk-making rather than packing. Vuitton became the supplier of luggage to many of the most famous people of the era, from King Alfonso XII of Spain to the future Czar Nicholas II of Russia. He created special trunks for Ismail Pacha, the viceroy of Egypt, for the inauguration of the Suez Canal as well as a trunk-bed for Savorgnan de Brazza, who discovered the source of the Congo in 1876. The quality of the materials, the arrangement of interiors, and the finishings made Vuitton’s deluxe trunks far superior to anything that had previously been produced.
In an attempt to discourage copying of the Trianon grey canvas in 1876, Vuitton introduced new designs featuring red and beige stripes and brown and beige stripes to cover his trunks. By 1888, these striped canvases were imitated, and a patented checkered material was implemented. A large part of the company’s success was its ability to respond to the changing modes of travel which emerged at an astonishing rate in the second half of the nineteenth century. Vuitton designed classic wardrobe trunks for sleeping cars and lighter versions of the suitcase traditionally used by the English aristocracy. His son Georges played an important role in the managing of the business, opening the first Vuitton branch abroad in London in 1885.
In 1890, Georges invented the theft-proof five tumbler lock, which provided each customer with a personal combination to secure all his luggage. Two years later, the company’s first catalog presented a wide range of products, from very specialized trunks for transporting particular objects to simple bags with the typical traveler in mind. Four years after the death of Louis Vuitton in 1892, Georges introduced a new canvas design in another attempt to thwart counterfeiters. In memory of his father, Georges’ new design featured Louis Vuitton’s initials against a background of stars and flowers; it was patented and became an immediate success.
Travelling to America for the Chicago Exposition of 1893, Georges became convinced of the importance of a sales network abroad. By the end of the century, John Wanamaker began representing Louis Vuitton in New York and Philadelphia, and the London store was transferred to New Bond Street, in the heart of London’s luxury commerce. The company also expanded its distribution to Boston, Chicago, San Francisco, Brussels, Buenos Aires, Nice, Bangkok, and Montreal in the early twentieth century.
Georges also foresaw the importance of the automobile as a form of transport and began designing automobile trunks, which imitated the lines of the car, to protect travelers’ effects from rain and dust. Contending that one should be able to take in a car what one could take on a boat or train, he created iceboxes, canteens, and light and flexible steamer bags. Other efforts to adapt to the changes in the travel industry included the manufacture of airplane and hot air balloon trunks and cases for spare tires. In 1914, the company erected a new building onthe Champs-Elysees as the center for its growing network of distribution; this store became the world’s largest retailer of travel goods.
During World War I, production was modified to the needs of the war effort, as simple and solid military trunks replaced delicate and luxurious models. Part of the factory in Asnieres produced folding stretchers which were loaded directly into ambulances leaving for the front. With the 1918 German offensive 60 kilometers from Paris, Georges had difficulty supplying his factory with materials and assuring the safety of his workers. After the war, the Vuittons struggled to supply their stores with what remained of the factory. Although the company supplied Prince Youssoupov with a jewel case to transport precious stones to America before the Bolshevik revolution, such personal orders were less common after the war, and the factory devoted more time to producing showcases for traveling salesmen.
As economic times improved, and Louis Vuitton regained its stylish clientele, special orders increased. The workshop at Asnieres worked to produce orders for Coco Chanel, the Aga Khan, Mary Pickford, the Vanderbilts, and the president of the French Republic, among others. Charles Lindbergh ordered two suitcases from Vuitton for his return trip to America after his famous flight to France. During this time, the company provided some packing services for foreigners who came to buy garments from the Paris couture collections. In the early 1930s, exoticism was in vogue, and Vuitton used tortoise shell, lizard skin, ebony, and unusual woods in its fabrications.
As economic conditions deteriorated worldwide, however, the Vuittons realized the necessity of increasing the company’s profitability. Georges’s son, Gaston, worked with his father to increase efficiency. An advertising agency was set up and a design office was created to make detailed sketches of products to show customers before fabrication. By the time Georges Vuitton died in 1936, special orders had dramatically declined, and the company’s sales depended more than ever upon its catalog offerings, which were expanded to include trunks for typewriters, radios, books, rifles, and wine bottles.
During World War II, when delivery of Vuitton products was curtailed, overseas contracts were terminated, and the Vuitton factory and stores closed. The post-war period involved resup-plying the stores, rebuilding business to pre-war levels, and restructuring operations. Three of Gaston’s sons played important roles, Henry in commercial management, Jacques in financial administration, and Claude in factory management. The first important post-war order at the company was for the President of the Republic, Vincent Auriol, who made an official visit to the United States.
In 1954, the company’s 100th anniversary, Louis Vuitton moved from the Champs-Elysees to Avenue Marceau. As travel times were cut with the development of trains, cars, and airplanes, the company created and improved its soft-sided luggage. In 1959, Gaston perfected a system of coating his motif canvases, making them more durable, waterproof, and suitable for shorter journeys. These lightweight, practical bags signified a new standard in luggage. Gaston invited well known artists to take part in the design of accessories. From 1959 to 1965, an average of 25 new models of Vuitton luggage were created each year.
With the company’s success and reputation for luxury came a vast wave of counterfeit Louis Vuitton products. One year before his death in 1970, Gaston Vuitton decided to take action against the counterfeiters by opening a store in Tokyo; by offering the real Vuitton product in the Asian market, he hoped to better inform customers and discourage the purchase and manufacture of imitations. The company also undertook a successful advertising campaign to battle the increase in counterfeiting.
Henry Racamier, the husband of Gaston Vuitton’s daughter Odile, took over management of the company in 1977. Racamier had founded Stinox, a steel manufacturing business, after the Second World War and had sold it at a huge profit before coming to Louis Vuitton. Under Racamier, the company’s sales soared from $20 million in 1977 to nearly $1 billion in 1987. Racamier recognized that the major profits were in retail and that to succeed on an international level, Louis Vuitton had to expand its presence in stores and distributors in France. As a result, Louis Vuitton stores were opened all over the world between 1977 and 1987, and Asia became the company’s principal export market. Moreover, product diversification ensued, and in 1984, at the urging of financial director Joseph Lafont, the company sold stock to the public through exchanges in Paris and New York.
The 1980s were profitable years for Louis Vuitton, as the Vuitton name was prodigiously promoted. In 1983, Louis Vuitton became the sponsor of the America’s Cup preliminaries. Three years later, the company created the Louis Vuitton Foundation for opera and music. Also in 1986, the central Paris store moved from avenue Marceau to the posh avenue Montaigne. Production at the factory at Asnieres incorporated the use of lasers and other modern technology during this time, and a distribution center was opened at Cergy-Pontoise, north of Paris. The company allocated two percent of annual sales revenue to the unending battle against counterfeiters.
Under Racamier, Louis Vuitton began to acquire companies with a reputation for high quality, purchasing interests in the couturier Givenchy and the champagne house Veuve Cliquot. Louis Vuitton’s takeover philosophy was personal, courteous, and discreet, rather than systematically aggressive. In June 1987, Racamier signed a $4 billion merger of Louis Vuitton with Moet-Hennessy, a conglomerate with interests in the production of champagne, cognac, wine, and perfume. The merger allowed Louis Vuitton to expand its investments in the luxury business, while saving Moet-Hennessy from the threat of takeover. Moreover, the merger respected the autonomy of each company over its own management and subsidiaries.
As Moet-Hennessy was three times the size of Louis Vuitton, its president, Alain Chevalier, was named chairperson of the new holding company, Moet-Hennessy Louis Vuitton (LVMH), and Racamier became executive vice-president. Massive disagreements and feuding followed, however, as management at Louis Vuitton believed that Moet-Hennessy was trying to absorb its operations. The 60 percent ownership that Racamier and theVuitton family had held in Louis Vuitton became a mere 17 percent share of LVMH.
After several disputes and legal battles between Racamier and Chevalier over the running of the conglomerate, Racamier invited the young property developer and financial engineer Bernard Arnault to acquire stock in the company. Hoping to consolidate his position within LVMH with the help of Arnault, Racamier soon saw, however, that Arnault had ambitions of his own. With the help of the French investment bank Lazard Freres and the British liquor giant Guinness PLC, Arnault secured a 45 percent controlling interest of LVMH stock for himself.
An 18-month legal battle ensued between Racamier and Arnault, after Chevalier had stepped down. Despite Louis Vuitton’s strong performance, accounting for 32 percent of LVMH sales, Racamier could not hold onto his stake in LVMH against Arnault, who had the support of the Moet and Hennessy families. The courts eventually favored Arnault, and Racamier stepped down to create another luxury goods conglomerate, Orcofi, with the backing of French investors such as Paribas and L’Oreal. Arnault weeded out Vuitton’s top executives and began to bring together his fragmented luxury empire.
Guinness had originally been brought into LVMH by Alain Chevalier, who had hoped to find an ally in his feuding with Racamier, in a deal to exchange one-fifth of the two companies’ equity capital. Guinness then united with Arnault to control LVMH. In 1990, when Racamier left, Arnault increased his interest in Guinness from 12 to 24 percent, fueling rumors that Guinness would be his next target. Takeover speculation was also encouraged by the fact that Guinness directors had little power in LVMH, while Arnault had by far the largest shareholder vote in Guinness. However, Arnault’s percentage in Guinness was proportionately equal to the 24 percent Guinness controlled of LVMH. In the early 1990s, Arnault controlled the world’s largest luxury empire, with about $5 billion in worldwide sales. His holdings were structured as a pyramid of interconnected companies with control of LVMH central to his power, as it had a market capitalization of $10 billion in 1990.
The ubiquity of the Louis Vuitton monogram in the mid-1980s had damaged its reputation as a status symbol, and both profits and sales declined in the early 1990s. However, demand for luxury goods was expected to rise again, especially in Japan, Korea, and Chiana, where buying power was growing rapidly. However, the American market, which accounted for 17 percent of LVMH sales, was not expected to remain strong as an upheaval in upscale retail outlets was hurting sales. Arnault planned to create data processing and advertising sharing among his luxury retailers, including Louis Vuitton, Dior, Givenchy, Lacroix, and Loewe.
In the early 1990s, Yves Carcelle, a former textile executive, became president of Louis Vuitton and broadened the range of products distributed to the company’s 150 stores in an attempt to increase sales. Rampant counterfeiting, a difficult world economy, and its own flagging image were Louis Vuitton’s nemeses in the early 1990s. The company’s success in the twenty-first century seemed to depend on its ability to exploit the enormous capital of its holding company and the dynamism of Bernard Arnault, while maintaining the high quality of construction and materials which had established the company’s reputation in the past.
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