The MBS Group

Luxury & private equity: a marriage made in heaven or hell?

I have been to many breakfast discussions in my time, but the one that we hosted last Thursday really stood out for me. Marcello Bottoli, a world expert on the luxury, private equity and consumer sectors, led the exceptionally thought-provoking and stimulating discussion. We are living through very unstable times and the term luxury itself is a changing concept – as Marcello noted, luxury is shifting away from tactile, ‘look at me’ product to the more experiential. This is all the more evident when one considers brands such as Armani, Cavalli and Versace, all of which have broadened their traditional product categories to include nightclubs, restaurants and hotels.

We also looked at the differences between decreasing custom in established luxury markets, such as the UK and US, whilst ‘emerging markets’ are purchasing at a higher rate than ever before. Indeed, Marcello does not even use this label to refer to China and the Middle East anymore, such is the blurring of the boundaries between the mature and these supposedly ‘emerging’ markets. This same blurring can be seen in what Marcello calls ‘the fading clarity on the true nature of luxury’. He gave us a test by showing us two ad campaigns using the same model (Scarlett Johanssen), one upmarket and one mass, with the logos removed. He looked on in amusement as the discerning group of experts struggled to tell which was high street and which was luxury (these turned out to be campaigns for Louis Vuitton and Mango).

While this distortion of luxury can be seen in ad campaigns across the sector, it is particularly apparent in the myriad of collaborations of established fashion houses with accessible apparel brands with the likes of TopShop and H&M. There is hope on the horizon, however: even though customers hailing from ‘emerging markets’ are interested in purchasing brands that are iconic in their homelands, for instance Mulberry in London, there is still a demand for new labels from customers in established markets seeking out new, hot local brands. This in turn provides significant opportunities for entrepreneurs to develop and revive business in local markets.

Private equity has its own challenges to deal with in the luxury sector. The most cited successful marriage of luxury and private equity is Jimmy Choo, with its several successful past rounds of fund-raising. We were lucky enough to have Robert Benssousan, former CEO of Jimmy Choo, with us to shed some light on it all. In addition to top-notch management, key to Jimmy Choo’s triumph is that at the time of each exit, the business still managed to offer the potential for significant growth opportunity to future investors. One potential problem with this is that there have been relatively few other examples of such successful brand-building in conjunction with private equity support: let me know if you can think of any other examples apart from Jimmy Choo! I would love to know about them at moira@thembsgroup.co.uk. In the meantime, if you would like to read a longer write up on the breakfast, just download the PDF below. In the meantime, let’s all get ready for the opening ceremony next week. Hello London!

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Category: Discussion breakfast


Tags: Luxury, Private Equity