Brunschwig riding Celine in LVMH handicap stakes

Most chief executives can say they are masters of their own empires. But being boss of one of the fashion brands in the Louis Vuitton Moet Hennessy stable is not that simple, say those who should know. On the contrary, it is a bit like being one of several jockeys riding for one owner who is saddling several horses in the same race. Which one does he want to win? The horse may be called Louis Vuitton, Fendi, Celine or Loewe but to some extent, they all compete against each other while running under the same colours. After 11 years with LVMH, Serge Brunschwig, newly appointed president and chief executive of one of the fashion and leather goods brands (Celine), should know how the land lies. He cut his LVMH teeth with Louis Vuitton itself, firstly as executive vice-president and then president of Louis Vuitton Asia Pacific. By 2002, he was managing director Louis Vuitton Malletier (trunk maker in French). Celine is a lady with a past, a definite plus in fashion terms. Mr Brunschwig cannot spell the founder's surname but explains she was a Polish Jew who fled to France before the second world war. Her customised children's shoes became highly sought after in Paris and by the early 1960s she had expanded the range to include accessories, scarves, hand bags and ready-to-wear couture sports clothes. 'She specialised in elegant, sophisticated clothes for active women,' says Mr Brunschwig. 'For women with something to do, who don't have time to change four times a day.' Celine's Asia connection began in 1969 with the opening of her first boutique in Japan, nine years before Louis Vuitton followed suit. Bernard Arnault, controlling shareholder of LVMH, acquired Celine in 1987, later bringing designer Michael Kors on board. When Mr Kors departed in 2004, style.com wrote: 'He left Celine as he found it, a bourgeois, conservative French lifestyle label with a reputation for quality'. So, internally, how does LVMH differentiate within the group between the several luxury fashion and leather goods brands which ostensibly jostle in the same market? 'All the LVMH brands are different because of their different history,' explains Mr Brunschwig. In Celine's case, this means being able to design and develop ready-to-wear and leather goods. The ready-to-wear side enhances image, status and increases the frequency of visitors to Celine's outlets, he adds. He looks uncomfortable when asked to explain how this yard of unlikely stablemates rubs along together. He is not about to spill any beans on internecine rivalries but a look at the LVMH internal structure shows where particular challenges may arise. Every operating company within LVMH, such as Celine, or Hennessy, for example, has a president and chief executive. Each of these is part of a division: Celine coming under fashion and leather goods, with Hennessy part of wines and spirits. These divisions, in turn, have their own presidents or chief executives. Then, in key areas of the world, such as Asia, LVMH also has a regional boss plus regional divisional people. It amounts to an impressive matrix organisation. One aspect of this 'family spirit that unites us', as the website puts it, could create frustrations for Mr Brunschwig. The president of the fashion and leather goods division is Yves Carcelle, who also happens to be president of Louis Vuitton. Mr Brunschwig reports to Mr Carcelle, his boss, knowing that Mr Carcelle is also head of LV, who may or may not be described as a competitor to Celine. But with both being in the same business, it looks from the outside to be a strange relationship. Predictably, Mr Brunschwig glides over the subject, saying Celine and LV are not competitors, they target different markets. 'We're all part of LVMH. LVMH wants to grow all its brands to 'star stature', whether they are Dom Perignon, Tag Heuer or Moet & Chandon.' His mission, he says, is to expand the business which is growing and profitable. The company acquired a 61.25 per cent stake in Hong Kong-founded duty free luxury brand retailer DFS in 1997. The term 'Chinese walls' was coined to reassure other fashion houses concerned that proprietary information about third party brands would be divulged to DFS's LVMH siblings. The arrangement still thrives. So how do the equivalent Chinese walls work within LVMH itself? 'I'm crossing the Chinese walls for the fourth time now. We know each other very well. We exchange and have discussions, we want to have the best competition between everyone, Loewe, Dior ... it's positive,' says Mr Brunschwig. There are advantages for him in crossing the walls, he adds, especially when it comes to marrying access to media and landlords. Ultimately, the Chinese walls do not matter, since they are all working for the same shareholders. And they will not be complaining, since the fashion and leather goods unit saw a profit rise of 12 per cent from recurring operations to Euro1.46 billion ($13.7 billion) last year. More than half of Celine's business is in Asia, with 45 outlets in Japan, 43 in the rest of Asia Pacific, and a further 40 in Europe and the US. The brand is also strong in duty free. But are these visible but high-rental airport shops there to make money, or just act as billboards? 'No, for us duty free is real business, not just shop windows,' he says. There is no difference in our attitude to duty free and the domestic market. We like the duty free channel and are expanding it.' The scarcity of outlets in a country as vast as China creates an awareness problem, so duty free shops serve as a way to educate new mainland customers while enabling them to find the products. Celine's eyes are focused on China and for many mainland passengers, an airport shop or a trip abroad is their first contact with the brand. Celine's first China outlet opened in Beijing's Palace Hotel in 1992. Now there are seven mainland shops and a further five here, with a new accessory shop opening in Ocean Centre. The target is to open two to three more mainland stores each year. 'China is a big opportunity for luxury customers and it is not just accessories but ready to wear and jewellery too. The average purchase in China is more than anywhere else, even Japan.' Location is as important in China as anywhere else and even he admits much depends on being in the right place and having the right landlord willing to invest. Counterfeiters are a thorn in Celine's side. 'We go after the manufacturers and the logistics. With tightening trademark rules, it's an industry that doesn't have a big future,' he predicts The Chinese government can and will abolish it, when the population is ready, he believes, adding that it is a social issue, too. But as long as brands have logos, they remain a target. 'A brand must have a symbol, it needs to be recognisable. After all, people buy the product for the same reason.'