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Like the exquisite threads of Andes Vicuña, conglomerates are becoming an exotic rarity. The corporate needs for confidentiality means that such beasts appear to be headed more and more towards extinction. However, there are exceptions. It’s a world of luxury goods.
While consumer groups’ Reckitt and Unilever Moult divisions, as well as Industrial Honeywell and BP, are putting pressure on pressure from activist fund manager Elliott Management, companies that respond to style-conscious elites are resisting the trend of deconstruction.
The luxurious multi-brand portfolio shares functionality with industrial conglomerates. In many cases, there is little synergistic effect in sourcing materials and dispersing products. Unlike multi-brands of home and personal care, high-end masons tend to have specialized suppliers and dedicated stores.
However, there are very few monobrands left in the rack. Bernard Arnaud’s LVMH introduces Louis Vuitton, Dior, Serene, Bulgari, Tiffany, and more. François Pineau’s Kering holds Gucci, St. Laurent, Bottega Veneta and more. Monkler recently bought Stone Island. And as Italy’s Prada reportedly implementing the slide rules surrounding Versace, the story of the birth of an Italian luxury conglomerate was caught up in.
So, do you explain the enduring charm of the luxurious giant? The scale is less obvious, but still useful. For example, when LVMH negotiates store space in a new luxury mall, it can use its larger brand to get better deals for smaller brands. Same as ad fees. Hotshot designers participating in conglomerates know that if they shine in the maison, they can increase the pecking order. See, for example, the ongoing speculation that Jonathan Anderson might move from Loew to Dior.
It also helps to grow, considering that high-end groups appear to be involved in a huge exclusive game. Small groups like Prada play this game, but it’s certainly easy for someone like LVMH (a market capitalization of almost 320 million euros) to buy Bond Street.
The freedom to sprawl is not infinite. LVMH’s fashion and leather stable brands may belong together, but in fact, they offer a model that other luxury conglomerates follow, but it is not entirely clear that their drinks and retail sectors are.
Wine and Spirit accounted for 7% of LVMH’s group operating profit in 2024. This is down from about 40% in the late 1990s, as Bernstein analysts have pointed out. And their continued presence may turn off some investors from their investments in LVMH, particularly in the Middle East. Meanwhile, retailers Sephora and DF have lower margins than luxury items. It is not clear that they belong to the clutch.
Taking off such a division may not unlock the big stock price rise. However, simplicity, speed, and management time are valuable resources. Fashionistas can create ensembles from unlikely items, but sometimes conflicts are mere conflicts.
camilla.palladino@ft.com
