For many years now, the wealthiest people list has been dominated by tech giants like Bill Gates, Jeff Bezos, Elon Musk, and Mark Zuckerberg. We even saw some billionaires in the richest people list from finance like Warren Buffet and Bloomberg. But it’s the first time we see a luxury brand owner as the wealthiest person and that to a non-American. It was the first time that a European is holding the title of the wealthiest person. In this post, we’ll explain the story of LVMH and Bernard Arnault and explore many interesting things behind the rise of this fashion tycoon. We’ll figure out how Bernard Arnault became the richest man in the world.
Bernard Arnault, a French businessman, and the CEO of LVMH (Moët Hennessy Louis Vuitton) has dethroned all the tech & finance moguls and became the richest person in the world with a net worth of a whopping $190 billion. LVMH has recorded a revenue of $54.9 billion in the first 9 months of 2022. It owns 75 prestigious brands, which include Louis Vuitton, Tiffany, Christian Dior, Marc Jacobs, Fendi, Sephora, and Benefit Cosmetics. LVMH is one of the rare companies that creates products in Europe and sells it in China, unlike other companies that make and assemble products in China and then sell it to the rest of the world.
But do you know LVMH has neither a market cap of trillion dollars (market cap $348 billion) as other top companies like Apple, Microsoft, Google, Amazon Tesla, or Meta nor does LVMH make anything that creates value in people’s day-to-day lives? Then how come Bernard Arnault became the richest person in this digital era? Also out of all the luxury brands that LVMH owns none of them are created by Bernard Arnault, unlike all other tech giants who were founders of their companies.
The fascination for Christian
Bernard was born on March 5, 1949, in a wealthy family in Northern France. His father had a construction business. Bernard graduated from the École Polytechnique, France’s leading engineering school, and joined his father in his business. Three years later, Bernard convinced his father to shift the focus of the company to real estate. And sold the industrial construction division, and rose to become the president of the company.
Bernard briefly shifted to the US as well in an open reaction to the rise of the French Socialists and their determination to tax the rich. He spent three years in the United States, growing his family’s real estate business but moved back to France in 1983. In fact while in New York, Bernard once during a ride in a taxi, asked the taxi driver if he knew the president of France. Then the taxi driver replied that he didn’t know the president of France but he did know Christion Dior. This small conversation also gave Bernard recognition of the French brand and made him proud to be French. Bernard understood what luxury brands mean and their value.
In 1984, the parent company of Christian Dior, Boussac, went bankrupt. Bernard heard that the French government was looking for a buyer to take over the Boussac empire. With the help of Antoine Bernheim, a senior partner at a financial management firm Lazard, Bernard won the bidding for Boussac. But Bernard was interested only in Christian Dior and sold all other assets of the company and laid off 9000 employees. By 1987, the company was profitable again but Bernard was named “The Terminator”.
The wolf in cashmere
After successfully acquiring Christian Dior and making it profitable again, Bernard wanted to grow in the Luxury business, so he met with Alain Chevalier, CEO of Moët Hennessy, and Henry Racamier, president of Louis Vuitton, to form LVMH. He later acquired the majority of shares in LVMH and became the chairman and CEO of LVMH. And then began one of the fiercest battles in the French fashion world. Bernard fought to oust first the former chairman Henry Racamier and then many of the top executives. He gained a reputation for ruthlessness, along with the nickname ‘the wolf in cashmere’.
Bernard proceeded to make a series of brilliant business decisions. He wanted to expand, but only with the best. In the next few decades, Bernard acquired many other top labels in the world into the LVMH group like Celine, Kenzo, Marc Jacobs, Sephora, Fendi, Bulgari, and the latest they acquired Tiffany in 2021 which is believed to be the biggest luxury brand acquisition ever.
LVMH Brands
LVMH brands are divided into 6 major sectors- Fashion Group, Wines and Spirits, Perfumes and Cosmetics, Watches and Jewelry, Selective Distribution, and Other Activities.
There is Louis Vuitton in Fashion & Leather. Wine & spirit is dominated by Hennessey. There is Christian Dior for Perfume and the cosmetics sector is dominated by Sephora. There is jewelry with Bulgari and watches with Tag Heuer.
The group extends to the famous Hotel Cipriani in Venice, a range of top hotels with Michelin-starred restaurants called Cheval Blanc in Courchevel in the French Alps, and the historic Paris department store Le Bon Marche. Bernard himself owns properties across the world and a private island in the Bahamas. Apart from LVMH, Bernard Arnault likes to invest his money. He has invested in a variety of startups, including Netflix and Boo.com, Libertysurf, and Zebank. Years ago, he entered the yacht (Yaats) business as well and purchased Princess Yachts for over $200 million and Royal van Lent for a similar price.
But now coming back to the original question, even though Bernard is not creating any valuables for everyday life, why are people so interested in buying these luxuries and making LVMH so big? Although it’s a very difficult question to answer generically, we can share our POV. You know Luxury gives the feeling of being successful, the feeling that you’re a special and higher class above the others who can’t afford this luxury. Though there is not much practical value in these luxurious products yet these luxury brands are able to convince the most intelligent & successful people in this world to be excited to give their money every single day to buy these luxuries.
Bernard became the person to bring all these luxuries under one roof. Though it seems good, it is extremely difficult to bring the most innovative and creative people to work in collaboration and it’s a skill that made Bernard successful. As per Bernard “Luxury goods are the only area in which it is possible to make luxury margins.” And he has proven himself right while bringing this into reality.
Controversies
Today, the seventy-three-year-old Bernard Arnault and his five kids oversee LVMH. They are the who’s who of overpriced luxury fashion brands. But Bernard Arnault has been in many controversies since he took over the Boussac empire. Bernard received lots of backlash from the media when he fired 9000 employees within 2 years after taking over Boussac. He was named “The Terminator” for his ruthless business practices. He was also named “The Wolf in Cashmere” when he took control of LVMH and fired all top executives.
In 1999, Bernard decided to buy Gucci and started buying shares of Gucci. The CEO of Gucci at the time, Domenico De Sole, and the board was aware of Bernard’s business practices. But before they could do anything Bernard bought 34.4% shares of the company. But Gucci went ahead and created an Employee Stock Ownership Plan reducing LVMH ownership from 34.4% to 20%. Later Gucci went ahead and sold 42% of the stake to the Kering group. And Bernard was not able to take over Gucci but was criticized for his questionable business practices. In 2012, Bernard planned to leave his home in objection to raising taxes but seemingly got shamed into staying by the country’s press. This time, the media called him a traitor for seeking Belgian citizenship for tax avoidance.
Sudden rise during Covid
Bernard’s fortune keeps climbing as he strengthens his monopoly on luxuries that rich people buy. According to the World Bank, during the COVID pandemic, the rich got richer than at any point in recorded history. Bernard was one of the world’s wealthiest men, who collectively doubled their fortunes from $700 billion to $1.5 trillion — at a rate of $15,000 per second or $1.3 billion daily.
Bernard’s yacht of cash grew from $76 billion in 2020 to $190 billion in just two years. With a 96.5% stake in Christian Dior and a 46.84% stake in LVMH making him the wealthiest person in the world. With all this, Bernard Arnault and his LVMH empire show no signs of slowing down. Forbes has described Bernard as ‘one of the world’s ultimate tastemakers’.
Bernard’s story is not exactly rags-to-riches, but it does reveal a man driven by ambition who built his own empire. The key to his business method is timing. As he said himself, “I think in business, you have to learn to be patient. Maybe I’m not very patient myself. But I think that I’ve learned the most is to be able to wait for something and get it when it’s the right time.”