LVMH buys luxury services five-star Hotel Saint-Barth Isle de France and storied Milanese cafe Cova; As Baby Boomers look for new ways to treat themselves and Millennials define themselves more by what they do than what they own, luxury brands are expanding beyond fashion and accessories

Arnault Lets Them Eat Cake Amid Luxury Hospitality Push: Retail

By Andrew Roberts  Aug 5, 2013

French billionaire Bernard Arnault wants you to spend the night and eat his pastries.

After decades of acquiring luxury goods that consumers can drink and wear, the chairman of LVMH Moet Hennessy Louis Vuitton SA (MC) last week bought the five-star Hotel Saint-Barth Isle de France and in June added a storied Milanese cafe, accelerating his push to meet all his well-heeled clients’ earthly needs. The summer spending spree, which bookended LVMH’s $2.6 billion acquisition of Italian cashmere clothier Loro Piana SpA, expands Arnault’s $95 billion empire in hospitality, part of a broader shift by luxury brands into high-end services. As Baby Boomers look for new ways to treat themselves and Millennials define themselves more by what they do than what they own, luxury brands are expanding beyond fashion and accessories as they aim to keep customers interested.Arnault is seeking “to own the whole spectrum, to have a 360-degree view on what the customer is doing, what they are buying, what they are eating, where they are staying,” said Laura Ford, a strategist at consultant Futurebrand in London. “It’s a move to keep relevant with consumers whose appetite for luxury and definition of luxury are constantly changing.”

LVMH’s push into hospitality follows moves by companies from Giorgio Armani SpA to Gianni Versace SpA to design hotels. Roberto Cavalli SpA is adding cafes, Ermenegildo Zegna SpA is supplying fabric to Fiat SpA (FIAT) Maseratis, while Gucci-owner Kering SA has cozied up to clients with invitations to equestrian events.

Cheval Blanc

By adding experiences, these companies can “offer something truly unique and memorable,” said Jane Kellock, senior vice president of fashion, beauty and color at Stylus, a London-based research and advisory firm.

Successfully leveraging the trend could help restore LVMH’s share price. The world’s largest luxury-goods producer has gained about 1 percent this year in Paris trading, trailing Cartier-owner Cie. Financiere Richemont SA and Kering SA, which have both gained about 30percent.

LVMH shares fell 0.4 percent to 140.10 euros today in Paris. Richemont dropped 0.9 percent, while Kering retreated 0.7 percent.

Arnault’s quest to feed, host and clothe wealthy consumers doesn’t stop in St. Barths, where the acquired hotel is located, or Milan. LVMH is converting defunct Parisian department store La Samaritaine into a five-star hotel, slated to open by 2016. It’s also developing Cheval Blanc resorts from the French Riviera to the Sultanate of Oman, promising impeccable service and unforgettable experiences.

Mongolian Yurt

At one resort in Courchevel, clients can hit the slopes straight from a private chalet — which can run about 7,000 euros a night — while children are minded in a Mongolian yurt. In the Maldives, guests stay in loft villas with private pools and have an improvised dinner on a dhoni.

Hospitality “is a natural extension of LVMH’s activities across the luxury spectrum,” the Paris-based company said when it announced the St. Barths purchase, adding that the category serves as another channel to sell and display its wares, which include Benefit cosmetics and Kenzo perfumes.

“Being innovative along the desires and the interests of these well-off whom we don’t want to get bored is the name of the game,” said Ermenegildo Zegna, CEO of the luxury suitmaker of the same name, which in April signed the Fiat SpA (F) deal.

Category expansion can, of course, lead to overexposure. Pierre Cardin was among the first fashion companies to stretch into fragrance and cosmetics in the 1960s. By 1988, the Cardin name had been slapped on more than 800 licenses including cigarettes and baseball caps, leading profit to slump, according to Harvard Business Review.

Arnault is limiting that risk by only adding brands that excel in specific businesses, according to Armando Branchini, founder of Milan-based luxury consultant Intercorporate.

Ernest Hemingway

Situated next to Prada’s store on Milan’s tony via Montenapoleone, Cova’s location and almost two centuries’ heritage make it a unique and authentic experience for shoppers seeking to indulge a sweet tooth. Like Ernest Hemingway’s hero, who stops off at Cova to buy chocolate in A Farewell to Arms, clients today can order bespoke cakes.

While Cova’s 7.4 million euros 2011 turnover pales in comparison to the LVMH’s 28 billion euros of revenue last year, Arnault is betting he can replicate its success around the world.

“To be memorable, the experience most often needs to combine with heritage,” Branchini said.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

June 27, 2013 5:41 pm

LVMH acquires majority stake in Cova

By Rachel Sanderson in Milan

©Alamy

LVMH, the world’s largest luxury goods group, has bought a majority stake in Milanese coffee house Cova, once the haunt of composers Giacomo Puccini and Giuseppe Verdi, located at the centre of the city’s costly “golden grid” of luxury shopping streets.

The acquisition of Cova, which was founded in 1817, comes as the transformation of the centre of Milan into a giant window for the world’s luxury brands accelerates, with the city becoming a major shopping destination for Asian tourists.

The owner of Louis Vuitton beat competition fromPrada to acquire a controlling stake in Cova for an undisclosed sum from the Faccioli family. It said it planned to maintain the coffee house, which is mentioned in Ernest Hemingway’s A Farewell to Arms, and also to develop the brand internationally. Cova already has franchises in Hong Kong, China and Japan.

Cova, located at the corner of Via Montenapoleone and Via Sant’Andrea, sits at the hub of one of the world’s most expensive shopping thoroughfares. Executives at rival luxury goods stores do not rule out the French group seeking to use Cova’s windows to advertise its own wares alongside the coffee house’s famous Christmas panettone and chocolate cakes.

Around Via Montenapoleone, Bottega Veneta, Loro Piana and Fendi are all constructing new flagship stores. Marco Bizzarri, Bottega Veneta’s chief executive, recently told the Financial Times that investing in stores in Milan had become crucial as millions of tourists descend on the city to shop.

However, such changes are not without victims. In Brera, the medieval core of the city, Gucci at a glitzy event on Sunday opened a new menswear store on a stretch of cobbled street where independent shops and a coffee bar recently closed after a rent increase.

A new Prada menswear store in Milan’s plush 19th century Galleria Vittorio Emanuele II is due to open in the autumn after McDonald’s was ousted from the site a year ago, in what the fast food company described as an unfair public tender.

The real estate held by Milan’s handful of famous old coffee houses is especially attractive for luxury goods brands, as they are located on major shopping thoroughfares. Luxury groups have also looked at Sant Ambroeus, a coffee house famous for its cappuccinos, found at the end of Via Montenapoleone, according to a person familiar with the talks.

The LVMH acquisition of Cova continues a push by the French multinational to buy up Italian family brands as they struggle with funding international expansion and generational change. It has bought controlling stakes in Fendi, Pucci and Bulgari from the founding families.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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