Kering LVMH Rivalry Set to Intensify with Moncler Tiffany Acquisitions

Both LVMH and Kering recorded satisfactory 2019 revenue results despite a relatively tough environment this year. Going forward, however, the luxury giants are set to deepen their rivalry with strategic acquisitions that will have far-reaching implications — particularly in the Greater China market.

Having confirmed its purchase of the iconic American jeweler Tiffany & Co. last month for US$16.2 billion, LVMH has its eyes firmly set on deepening its accessible jewelry portfolio and capturing a greater share of the Chinese middle class as well as U.S.-based Chinese students and U.S.-bound Chinese tourists. As Jing Daily previously noted, the most immediate impact of Tiffany’s takeover by LVMH would be a boost to the group’s footprint in the U.S., which currently makes up around 25 percent of LVMH revenue.

The other benefit for LVMH is a boost in the group’s watches and jewelry roster, which lags behind that of its other major luxury rival, Richemont (owner of A. Lange & Söhne, Jaeger-LeCoultre, and Cartier). Boasting watches and jewelry brands such as Ulysse Nardin, Boucheron, Girard-Perregaux, and China’s own Qeelin, Kering, too, is fighting an uphill battle in the segment against Richemont.

But it’s where these two benefits meet that Tiffany’s strengths lie for LVMH. Although 2019 marked a decline in Chinese travelers heading to the U.S. and a slower pace of Chinese student enrollments, there are signs that both could recover in 2020. Similarly, the mid-market jewelry segment in China remains ripe for continued growth, and this sits right in Tiffany’s sweet spot. This would be good news for Tiffany & Co, which has struggled with a slowdown in its home market and needs a rebound in Hong Kong to make up for a sharp drop in its 3Q earnings. But it also opens up LVMH to tap more of the Chinese middle class, which also favors the group’s higher-end offerings.

Gucci owner Kering, too, continues to focus on strategic acquisitions that could give it a stronger position in China. Most recently, it was announced that Kering is in preliminary discussions with the Italian apparel brand Moncler, whose high-priced puffer jackets are a regular sight in Beijing or Shanghai.

As Reuters noted, “A deal for Moncler would give Kering a label whose growth has stood out over the past decade, even in a booming luxury sector. As bankers shuck suits, ties, and overcoats in favor of more casual attire, its $2,000 puffy down jackets have moved beyond the ski slopes of St. Moritz to the conference rooms of the World Economic Forum in Davos.”

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With nearly 50 stores in Greater China, Moncler already has a strong stance in the country and is a popular purchase for Chinese tourists from Los Angeles to Milan.

Looking ahead to 2020 and a China market that is by no means as certain as it was in previous years, both LVMH and Kering know that diversity is key. The luxury market in China is becoming younger, more diffuse — with customers trying out far more brands than before rather than fixating on a handful of “giants” — and more interested in things like sustainability and even second-hand luxury.

Kering must know it cannot depend so much on Gucci to power through an uncertain global economic environment or continue printing money in mainland China. LVMH can’t expect younger Chinese customers to be as enthusiastic about heritage Louis Vuitton collections as their parents. To stay on top and compete with one another, it’ll take smart additions to their portfolios, and now the question is who’ll be smarter in the new year.