LVMH, Gucci win ‘Business of Luxury Awards’

Seven international luxury brands and companies–LVMH, Chloé, Louis Vuitton, Gucci, Dolce e Gabbana, Tod’s Group and Balenciaga–today were honored with 2006 “Bain Business of Luxury Awards” from Bain & Company, the global business consulting firm and a prominent management advisor in the luxury goods industry.

Bain’s prestigious annual awards, based upon peer evaluation and financial performance, recognize outstanding leadership in management, marketing, brand growth and other categories. (Attention Editors: The
full list of “Bain Business of Luxury Awards” recipients and award categories follows on page 3 of this release.) The awards were presented at the second annual Financial Times “Business of Luxury Summit” in Las Vegas, Nevada.

“These award-winning luxury goods companies have effectively surmounted the difficult challenges of balancing product innovation and consumer insight,” said Bain’s luxury goods expert, Claudia D’Arpizio, a Rome-based partner and co-author of “How More is Better in Luxury”, a study tracking the performance of top international luxury brand houses from 1994 to 2004.  “The leaders need to have the best of all worlds– the best operations, best management team and best growth,” D’Arpizio added.

The Bain research – which defies conventional wisdom and expectations from luxury brand company consolidations – showed that multi-brand houses on average are not outperforming mono-brand (or single brand) firms. Bain’s evaluation of retail data between 1994 and 2004 demonstrates that when factoring out acquisitions, the top-seven multi-brand companies grew just 5.6 percent while mono-brands grew 9.0 percent – or 60 percent faster.

“The benefits of bigness have not yet materialized for the multi-brands,” explained Darrell Rigby, Global Head of Bain’s Retail Practice.  “Quite the opposite has occurred in certain organizations, with ‘brand bloat’, a leading cause of underperformance.  Fortunately, some multi-brand companies have begun to address this problem and reconsider the role that each brand plays in strengthening the entire group.”

Bain advises multi-brand houses to consider how each brand acts as a growth generator, a profit producer, an incubator for creative talent and a training ground for merchandisers. Furthermore, the consulting firm encourages a closer look at how multiple brands can help identify and serve different consumer segments.

For the luxury goods industry overall,  Bain projects 6 percent growth annually through 2010 – a rate three times faster than the 2 percent annual level from 2001 through 2005. Bain expects the greatest growth gains in Asia over the next five years, up 9 percent annually.