Vendôme Luxury Group plc History

Address:

27 Nightsbridge
London SW1X 7WB
England

Telephone: (44) 171 838 8500
Fax: (44) 171 838 8555

Wholly Owned Subsidiary of Compagnie Financière Richemont
Incorporated: 1993
Employees: 8,000
Sales: SFr 3.43 billion (US $2.38 billion) (1997)
SICs: 6719 Holding Companies, Not Elsewhere Classified

Company History:

Vendôme Luxury Group plc is nearly synonymous with luxury. Since its formation in 1993, the Vendôme Luxury Group has operated one of the world's most distinguished collections of luxury goods businesses, include its chief revenue generator Cartier, and names including Mont Blanc, Lancel, Baume & Mercier, Vacheron Constantin, Chloé, Piaget, and Alfred Dunhill. The 13 member companies of the Vendôme group combined to create more than SFr 3.4 billion in sales in 1997. These sales are generated through the company's several store brands, including the famed Cartier house and the company's latest venture, the Art of Leather store concept, launched in Singapore in 1998 and offering leather products from many of the group's labels. Vendôme operates nearly 600 company-owned stores in some 140 countries; an additional 10,000 locations are authorized to sell group products.

From its incorporation, Vendôme's chief shareholder has been the Compagnie Financière Richemont, the Switzerland-based holding set up by South Africa's Rupert family to group its tobacco, luxury products, and other interests. Already holding 70 percent of Vendôme, in December 1997 Richemont bought up the remaining 30 percent of the luxury groups, consolidating Vendôme under Richemont's operations. When, in January 1999, Richemont announced its intention to sell its tobacco operations, which included worldwide brand Rothmans and others, to rival British American Tobacco (BAT), creating the world's fourth largest tobacco company, Vendôme took on a central role in the Richemont holding, which also includes media and other interests in the United States and Europe.

After a difficult decade in the 1990s and despite the economic collapse in many of Vendôme's important Asian markets, Vendôme has shown irresistible appeal to the world's wealthy, with sales marking new growth in 1998. Vendôme continues to be led by Joseph Kanoui, the French banker who has long been the chief architect of the Rupert family luxury goods holdings. Kanoui's wife, Micheline, has achieved international fame in her own right as Cartier's lead jewelry designer.

Family Beginnings in the 1940s

When Vendôme was formed in October 1993, the luxury goods group already boasted nearly two centuries of history. The Vendôme Luxury Goods Group was created in that year after the Rupert family of South Africa broke up its holdings into two separate entities, both grouped under the family's Switzerland-based Compagnie Financière Richemont. Tobacco holdings were placed under the Rothmans name, and the family's luxury goods holdings, especially its Alfred Dunhill and Cartier firms, were placed under the Vendôme banner. Richemont sold 30 percent of the new, London-based Vendôme group to the public, retaining 70 percent. Vendôme nonetheless would operate independently for more than five years, before being brought back fully under Richemont's--and the Rupert family's--control.

The Rupert family of South Africa was an unlikely candidate to become one of the world's foremost luxury goods manufacturers. The family empire was started in 1941 by Anton Rupert, who then operated a dry cleaning business. In the late 1940s, however, Rupert decided to enter the tobacco industry, taking out a loan to launch his own tobacco company. The company's first cigarette brand was named Rembrandt, and it became popular among South African smokers. By the 1950s Rupert found himself at the head of one of the continent's leading tobacco firms.

Rupert soon entered the world tobacco market. In 1955 he expanded his business beyond the African continent by buying up the popular European brand Rothmans. Soon after, the company acquired the Peter Stuyvesant brand name as well. By the 1970s, Rupert, who would shortly be joined by son Johann Rupert, had built up one of the top five tobacco companies in the world. Rupert also had begun an interest into other activities, building up a wide-ranging holdings portfolio. Among these holdings was a growing interest in luxury products, including control of the Alfred Dunhill brand of smoking and other accessories and the world-renowned Cartier name. The Chloé label, founded in the 1950s, joined the group's holdings in the early 1980s.

Cartier would take the first steps to joining the growing Rupert empire in the mid-1970s when a group of investors, lead by Joseph Kanoui, bought up the flagging New York branch of the famed jeweler. Three years later, in 1979, the rest of the Cartier operations was acquired. At the same time, Johann Rupert was adding to the family's empire. After pursuing a merchant banking career in the 1970s, with stints at Chase Manhattan Bank and Lazard Frères in New York, the younger Rupert returned to South Africa to found the Rand Merchant Bank. As Anton Rupert looked toward retirement, Johann Rupert took an active role in the family's Rembrandt company, which had grown to become a vast holding vehicle for both tobacco and luxury goods assets. In 1988 the younger Rupert organized a company breakup, splitting the family's holdings into two companies, the Switzerland-based Richemont, which grouped the family's Rothmans and Dunhill tobacco operations, and the South African-based Rembrandt, which controlled the family's other holdings.

By the time Johann Rupert took over the family's business in 1993, the Rembrandt-Rothman group had taken control of more than 85 percent of South Africa's tobacco industry and had taken the number four position among world-leading tobacco companies, behind Philip Morris, British American Tobacco, and RJR Nabisco. The continuing strong tobacco sales and profits would provide fuel for Rupert's further expansion of the family empire, as he transformed Vendôme from a holding organization for the family's luxury goods businesses to one of the world's leading collections of exclusive luxury goods brands.

By the late 1990s the Vendôme name seemed synonymous with luxury. Strong growth, despite a sustained European economic recession, had enabled the company to top SFr 1.7 billion in annual sales. The booming economies of the Asian region were chiefly responsible for the company's continued profits, as some of the Vendôme stable found as much as 60 percent or more of sales in that part of the world. The collapse of the Asian economic miracle in 1997 would seem to end Vendôme's own growth. If nothing else, Vendôme's share price was battered by an increasingly nervous market, dropping by more than 40 percent in 1997.

Buoyed by Richemont's strong tobacco performance, Johann Rupert launched a bid to regain control of the remaining 30 percent of the Vendôme empire. Reasoning that the group's luxury brands were not well understood by the stock market, Rupert would pay approximately US $2 billion to bring Vendôme fully under Richemont control. Full control of Vendôme seemed to have inspired the Ruperts to begin a transformation away from tobacco. In January 1999 Richemont announced its agreement to merge its Rothmans tobacco group with British American Tobacco, creating the world's third largest tobacco company. The Rupert family had not fully divested of the product that had helped found their empire, however; the Rothmans sale gave the Richemont holding company a 35 percent stake in BAT.

Grouping Luxury in the 1990s

By the start of the 1990s, with the family's luxury goods holdings pressured by the poor worldwide economic climate and the family's tobacco holdings under pressure from a growing antitobacco sentiment, the family's holdings were once again reorganized, creating publicly held Vendôme Luxury Goods PLC, with Richemont holding 70 percent of the new company's shares, and the Rothmans International group, directly controlled by Richemont and including the Rupert family's vast tobacco interests.

Foremost among the new Vendôme company's subsidiaries were its Cartier and Alfred Dunhill operations. Both enjoyed long-held reputations among the world's most exclusive brand names. Cartier was founded by apprentice jeweler Louis François Cartier, who purchased the jewelry shop of his Parisian mentor in 1847. Cartier's simplified lines contrasted with the era's more flamboyant designs, bringing the young Cartier to the attention of the Parisian nobility. A series of private commissions, notably from Princess Mathilde, cousin to Napoleon, who would become an early Cartier patron, helped establish Cartier as a leading name in Parisian jewelry design. Cartier's son Louis François Alfred would help solidify the Cartier reputation, but it was Alfred's three sons who took Cartier worldwide. Louis-Joseph Cartier took the lead of the original Paris branch, Jacques-Théodule Cartier brought the company to London, and Pierre-Camille Cartier opened Cartier's New York branch. Among the company's successes would be Cartier New York's sale of the Hope diamond, the launch of the famed Panther icon, and the introduction of the invisible setting.

If the Cartier name had maintained its luster through the first half of the 20th century, the deaths of the third generation of Cartiers would bring on a slow decline of the company's fortunes. In the 1970s the Cartier house was taken over by Robert Hocq and Joseph Kanoui, who, with managing director Alain Dominique Perrin, would revitalize the Cartier name and extend its products to include a vast array of accessories, ranging from handbags to pens, lighters, and perfumes. At the end of the 1970s Cartier was bought up by the Rupert family, joining another family holding, Alfred Dunhill.

Alfred Dunhill already had undergone a similar expansion from its original leather goods focus to include a broad range of exclusive products, including watches, cigarette lighters, pipes, and other smoking accessories, as well as its own line of men's clothing. Beginning with his family's harness-making business in 1893, Alfred Dunhill began producing related products such as saddles and clothing suitable for equestrian sports. A commitment to high quality would serve Dunhill in his next venture, that of the introduction in 1896 of a range of motorist clothing and accessories, becoming one of the first to cater to the newly emerging automotive market. The success of Dunhill Motorities, as the line was called, extended to products such as watches, goggles, headlamps, horns, and luggage. The company's move into pipe tobaccos and smoking accessories followed at the turn of the century, including the introduction of the famed Unique lighter, which would remain a company hallmark through the end of the century. Dunhill would capitalize on its brand name, expanding throughout Europe and opening a string of retail shops around the world, moving into North America and Hong Kong in the 1950s, and extending to Australia and Japan in the 1960s. After introducing its men's clothing line in the 1970s, Dunhill joined the growing Rupert empire, which also included famed fountain pen maker Mont Blanc.

The launch of the Vendôme group brought together not only Cartier and Alfred Dunhill, but noted Paris designer group Chloé--which would receive worldwide attention when it appointed Stella McCartney, daughter of Paul McCartney, as its lead designer--and other world renowned names, including Piaget and Karl Lagerfeld. In the 1990s Vendôme continued to expand its holdings, acquiring famed fountain pen maker Mont Blanc and Geneva-based watchmakers Baume & Mercier and Vacheron Constantin, which, together with Piaget, produced much of the world's most exclusive timepieces. Italian watchmaker Panerai joined the Vendôme group in the late 1990s, bringing that company's exclusive watches&mdash′eviously limited to the Italian navy&mdashø the general public for the first time.

Watches took on even greater importance to Vendôme's sales in the 1990s. After acquiring famed watchmaker Baume & Mercier, Vendôme reached an agreement with Sheik Ahmed Zaki Yamani to buy the former Saudi Arabian Oil Minister's stake in another Geneva-based watchmaker, Vacheron Constantin. For a purchase price estimated as high as SFr 110 million, Vendôme added one of the world's most exclusive ranges of watches. With prices of Vacheron Constantin watches beginning at US $6,000 and reaching US $3 million and beyond, the Vacheron Constantin name added yet more luster to the Vendôme roster of exclusive worldwide brands.

In 1997 Vendôme added the Lancel brand name and that company's exclusive line of handbags and other leather goods and accessories. The purchase, for SFr 342 million, brought in Lancel's 85 boutiques. Primarily located in France, the Lancel stores included the company's landmark Place d'Opera boutique, which had opened in 1929. Under the purchase agreement, Vendôme acquired 90 percent of Lancel, with an option on the remaining shares over a five-year period. The addition of Lancel boosted the leather goods category to the second place of Vendôme's top revenue generators.

The Lancel brand brought a younger image appeal to complement Vendôme's existing lineup of leather goods brands. Lancel expanded a product category already represented by the Seeger label, one of the world's most exclusive producers of suitcases, briefcases, purses, and other travel, business, and handbags. In the 1990s Seeger, too, launched itself into the retail arena, opening its first boutiques in Hong Kong, Singapore, and Frankfurt, Germany in 1995. Over the next three years the Seeger chain would expand to include locations in Bangkok, Berlin, Costa Mesa, Jakarta, Kuala Lumpur, Madrid, New York, Osaka, San Francisco, and Sydney.

The appointment of Stella McCartney as Chloé's lead designer in 1997 received international attention; widely considered at the outset as an excellent publicity stunt, the move would take on more legitimacy with the highly successful reception of McCartney's first collections. Whereas Chloé represented the luxury ready-to-wear category, Vendôme's other garment interests reached into separate niches. For one, the company continued to work on rebuilding the Sulka name. Acquired by Richemont in 1989, Sulka had enjoyed a period of unrivaled popularity among the world's elite during the first half of the 20th century. But the famed Sulka men's suit faded into near-oblivion in the second half of the century after the death of the company's founders, surviving more as an exhibit in the Metropolitan Museum of Art than as a retail item. In the 1990s, however, Richemont and, later, Vendôme would work to revive the Sulka name, targeting once again an exclusive clientele. The company launched a new Sulka shop concept in Chicago and Beverly Hills, which, in addition to the complete line of Sulka products (the company aims to dress the "Sulka Man" completely) also offered laundry and dry cleaning services for Sulka products. The successful launch of the new concept was to be extended to Sulka's New York and London branches; expansion to ten boutiques worldwide was expected to be achieved by the end of the first decade of the 21st century.

Vendôme would take on even greater importance for the Rupert family as the 20th century drew to an end. After selling off its control of its tobacco interests to BAT, Richemont would become even more focused on its luxury goods holdings. The move seemed well-timed: the tobacco industry could only look forward to increasingly embattled positions, while the luxury goods market, after years of pressure from a slow worldwide economy, appeared to have once again returned to a growth cycle. Vendôme's collection of exclusive names promised to keep the company at the top of the luxury industry.

Principal Divisions: Cartier; Alfred Dunhill; Lancel; Mont Blanc; Piaget; Vacheron Constantin; Hackett; Chloé; Sulka; Panerai; Purdy.

Vendôme Luxury Group plc History

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