The Wolf is on the Hunt

            Over recent months LVHM's possible takeover of Hermes has garnered extensive press. Bernard Arnault, the "wolf in cashmere" as he is know in business circles, founder of LVHM, is the shrewdest of businessmen and the toughest opponent in the industry of luxury goods. The company portfolio is vast including not only their namesake items but also brands such as Marc Jacobs, Fendi, Dom Perignon, Givenchy, and most recently majority stock in Bulgari to name a few.
           It was revealed a few months ago that the "wolf" had been quietly acquiring shares of Hermes, a family owned and operated enterprise for generations. Currently LVHM owns a 20% share in the company up from 17.1% in November. Though Arnault claims his interest is to be but "a long-term shareholder of Hermes", can he really be trusted? It would appear through Arnault's continued acquisition of shares that the "wolf" is on the hunt. Stalking his prey in a slow and calculated manner with the lethal strike imminent.The tale it seems, has the makings of a true David and Goliath story. But in this case who's to say that David emerges the victor? The financial might of LVHM may prove too much over time.
          While I admire the man for his ability to craft such a paramount luxury empire, I tend to agree with his critics who blast Arnault for "trading class for mass". Over the past two years the trend, brought on in part by Arnault himself, has been to acquire small family owned businesses and steer them away from the niche markets they once served in favor the masses. The result, in my opinion is a sort of degradation of the brand. Specialness and exclusivity are usurped from the image in favor of profitability. And while I am all for profits, they sometimes do come at a price.
          Past decisions of Arnault have included the sale of Dom Perignon at Costco beside Korbel, and Fendi becoming available outlet malls. In my mind one of the clearest examples of "class for mass" can be seen in the loss of exclusivity that Louis Vuitton bags have experienced. They seem, at least to me, have lost the cache that catapulted them to success in the first place.
           In a recent interview with China Daily Hermes CEO says "LVHM's participation is neither required nor desirable." The fear of many regarding this issue is that if Arnault were to become more than just a "long-term shareholder" of Hermes, as he claims is his sole interest, he would do what he has done in the past and diminish the heritage and craftsmanship associated with the brand. As it stands Hermes handbags such as the Kelly, are coveted possessions of the wealthy. Even the recession did not effect the year long waiting list. They are prized for their quality. Each bag is made by a single craftsperson with a single piece of thread from beginning to end. There is no doubt in my mind that this practice would surely fall to the wayside should Arnault continue to acquire shares in the company.

        Though often, as I have said before I am of the mind that business is business, in this case I'm routing for the underdog. What are your thoughts?










   Content provided by Newsweek, Forbes, and China Daily
   http://blogs.forbes.com/hannahelliott/2011/03/07/lvmh-acquires-majority-stake-in-bulgari/
   http://www.chinadaily.com.cn/xinhua/2011-03-05/content_1939918.html
   http://www.newsweek.com/2010/11/12/the-looming-battle-for-hermes.html