LVMH opens advance with focus on watches, jewellery

PUBLISHED : Monday, 29 April, 2002, 12:00am
UPDATED : Monday, 29 April, 2002, 12:00am

LVMH, the world's biggest maker of luxury goods, is set to make its first advance into the mainland market with its watches and jewellery lines.

The company, best known in Asia for its Hennessey Cognac and Louis Vuitton leather goods, said it would launch its China sales network in June, which would involve 30 retail points in major cities.

Philippe Pascal, the Paris-based president of the group's two-year old watch and jewellery division, said some of LVMH's other brands, including Givenchy fashions and Christian Dior perfumes, have long existed in China.

But the group's watch and jewellery brands, such as Zenith, TAG Heuer, Ebel and Chaumet, have maintained a presence only on the grey market.

Mr Pascal said: 'We have never sold these brands officially in China, so our sales are nowhere.'

In comparison, he said global sales of TAG Heuer watches ranked fourth in the world.

'In 10 years, we should be in line with our international standing,' he said.

The watch and jewellery unit, for which a general manager has been appointed, will be headquartered in Shanghai and supported by five employees.

But the unit will draw heavily on operational support from the other more established LVMH divisions in China, especially the wine and spirits unit.

As would be expected, a large part of the watch and jewellery unit's budget would be reserved for advertising, Mr Pascal said.

LVMH is under pressure to explore new markets for its products, to make up for the impact of its huge expansion programme over the past few years which has hurt its profitability.

The LVMH group has, to a large extent, long depended on cross-subsidies from several of its profitable core brands, primarily Louis Vuitton, to cover the group's diversification.

Last month, LVMH announced a net profit of just 10 million euros (about HK$69.93 million), down from 722 million euros a year earlier.

Asia, excluding Japan, accounts for about 10 per cent of the group's watch and jewellery sales, which Mr Pascal said was far too small.

He said the company would try to double this figure over the next five years.

Mr Pascal said that selling watches to the Chinese public would to a large degree involve educating them on the quality of the products, rather than merely seducing them to switch from other brands.

'If you want to sell your product, you must educate [the Chinese] on the quality behind the brand name. People in China will not be fooled,' he said.