Luxury brand marketing is tough. It's an industry where perception drives everything, from sales to value. And one wrong move can bring a brand down fast. Luxury products, clothes, handbags, shoes, and jewelry aren't that difficult to make. All the business requires is to keep shoppers convinced that the brand name alone is worth paying more.
Market research company Millward Brown ranks the top 10 luxury brands globally every year based on "brand value." The company's BrandZ model takes into account a brand's dollar earnings as well as other factors including quality of brand in mind of consumer, potential future earnings, and final "brand value" expressed in dollars. Check out who made the list:
Burberry. Brand value: $4 billion, up 21%
The Burberry was once a stuffy brand that made raincoats for Britain's upper classes. In 1990, it reinvented itself with a full range of clothes trimmed in the classic Burberry plaid.
The company saw £1.9 billion in revenues last year. And has been continuing in expanding its range offering fragrances and high end clothing collection. They've had celebrities like Emma Watson spokesmodel for them as well before.
Burberry is also very digital savvy. They streamed the opening of their flagship store in China on their website for the world to see last year, and even has a click to chat function and its stores carry iPads for customers who want to browse via section.
Moet & Chandon $4.2 billion, down 8%
Moet parent LVMH controls 1,697 hectares of the Champagne growing region in France. They've got champagne brands like Moet & Chandon, Dom Perignon, Veuve Cliquot and Krug, to which they form 18.3 percent of the global market.
Because LVMH essentially controls the region, competitors can't enter unless the company sells. Because people love to drink, a lot of the €1.8 billion of LVMH's revenues come mostly from champagne.
Hennessy. Brand value: $4.6 billion, down 8%
Cumi&Ciki / Flickr, CC
Hennessy managed to revive its brand image in the last couple of years, making it young and relevant again. They've been the top cognac brand since 1890 and has a 41.1 percent share of the market.
LVMH's cognac unit, part of its Diageo drinks division, booked €1.7 million in revenues last year.
Hennessy owns 177 hectares of the cognac growing region, and actually reduced that acreage in 1999 by 60 hectares in a scheme to pay farmers to grow other types of wine grapes, according to its annual report says.
Cartier. Brand value: $4.8 billion, down 9%
ngader / Flickr, CC
Cartier is the only general jeweler to make Milward Bown's list. Owned by the Richemont group, which owns Van Cleef & Arpels as well among others, the brand saw revenue of €4.5 billion last year, up from €3.5 billion the year before.
The only explanation for this is none other than China. CEO Johann Rupert explains it, verbatim from Richemont's most recent earnings call:
I am not going to say that this is sustainable. We have no idea what the currencies are going to do.
... So anybody who’s going to ask, ‘So, what do you think the next year looks like?’, why don’t you just not ask the question, because we’re not going to answer any? It’s not that we’re coy or funny. We don’t know. We also do not know what the currencies are going to do, and we also do not know whether the Chinese are going to continue to buy ad infinitum. We don’t know.
… I feel like I’m having a black tie dinner on top of a volcano. Okay? That volcano is China, but that’s what I feel like. I go, in the morning we put on our ties and our watches and we go, and the food’s better, and the wine’s better, and the weather is great, but let’s not kid ourselves. There is a volcano somewhere, whether it’s this year, in ten years’ time, or in twenty years’ time. We are exposed to China. I think they’re going to travel more. I think they’re going to survive. I think all of these things, but we are now a ‘China play’, and it suits us if the euro gets weaker.
... So anybody who’s going to ask, ‘So, what do you think the next year looks like?’, why don’t you just not ask the question, because we’re not going to answer any? It’s not that we’re coy or funny. We don’t know. We also do not know what the currencies are going to do, and we also do not know whether the Chinese are going to continue to buy ad infinitum. We don’t know.
… I feel like I’m having a black tie dinner on top of a volcano. Okay? That volcano is China, but that’s what I feel like. I go, in the morning we put on our ties and our watches and we go, and the food’s better, and the wine’s better, and the weather is great, but let’s not kid ourselves. There is a volcano somewhere, whether it’s this year, in ten years’ time, or in twenty years’ time. We are exposed to China. I think they’re going to travel more. I think they’re going to survive. I think all of these things, but we are now a ‘China play’, and it suits us if the euro gets weaker.
Prada. Brand value: $5.8 billion, N/A
Prada's same-store sales were up 42 percent in Q1 2012, and the group booked €541.5 million in total revenues. The reason for its success comes from a massive expansion in the number of its stores. Prada opened 65 between April 2011 and April 2012.
Millward Brown says: "Following its IPO (Initial Public Offering) in June 2011 on the Hong Kong Stock Exchange, which raised over €206 million ($275 million), Prada planned to add about 80 stores annually over the next three years, including a total of 30 stores in China. Most of the openings will be Prada brand stores, reflecting a general trend among luxury brands to assert tighter brand control by shifting away from licensing and franchising. The brand currently operates more than 200 stores worldwide and also distributes through an extensive wholesale network."
Gucci. Brand value: $6.4 billion, down 14%
Holding company PPR scared investors in the first quarter by noting that revenue growth at Gucci slowed in the fourth quarter of last year. We don't know what "slowed" means because in 2011, sales at Gucci were €3.2 billion, up 18 percent on the year prior. They were up by a similar proportion in Q1 2012, too. 56 percent of Gucci's sales come from leather goods.But they're not content either. Gucci is rolling out an extravagant redesign of its major stores, featuring digital video displays.
Chanel. Brand value: $6.7 billion, down 2%
tuxmemento / Flickr, CC
After the death of Coco Chanel in the 1970s, Chanel rescued itself by cutting the list of distributors selling Chanel No. 5 from 18,000 to 12,000, making it more exclusive and difficult to find. Hence, they created desirability. Karl Lagerfeld and Chanel have worked hard to retain the exclusivity and it works for them.
The company reportedly books about €1.8 billion in revenues annually. Chanel has also opened new stores in Asia, and Lagerfeld pays special attention to Japan where Chanel has a store in the Ginza district.
Rolex. Brand value: $7.2 billion, up 36%
Rolex, favored by the super rich, is still as popular as it was back in the day as it is today. Their strategy is targeted at the sports the super rich like to watch and play. So it's no surprise it's always sponsoring world class players. Rolex relies most on print ads and sponsorships of tennis players such as Roger Federer, Ana Ivanovic, Andy Roddick and Justine Henin, but it has also runs ads on ESPN during major tennis tournaments.
The brand got new leadership in 2008 when CEO Patrick Heiniger resigned for "personal reasons" after reports that he had lost $900 million of the company's money in Bernie Madoff's ponzi scheme.
He was replaced by Bruno Meier, who was later replaced by Riccardo Marini in 2011, who was previously responsible for Rolex Italia. The brand's flagship London store was sold late last year for £12.5 million.
Hermes. Brand value: $19.2 billion, up 61%
Chief Executive Patrick Thomas was cautious in delivery his Q1 2012 results, which included a 22 percent increase in sales to €777 million. A reason why Hermes' is successful is because of its management secret - keeping it all in the family.
In June 2013, Axel Dumas will become joint-CEO of Hermès International alongside Thomas—Dumas is a member of the sixth generation of the Hermès family and is currently the COO.
The company is actually very financially disciplined—it sold its stake in Jean Paul Gaultier and expanded into housewares recently. The chain has only 328 stores worldwide.
Louis Vuitton. Brand value: $25.9 billion, up 7%
LoveMaegan / Flickr, CC / lovemaegan.com
Louis Vuitton has a strategy of associating itself with classics. It's latest campaign has Muhammad Ali and his grandson in it. Previously they had Angelina Jolie, and over the years they've had many stars endorse their brand including Mikhail Baryshnikov with Annie Leibovitz; Pelé with Diego Maradona and Zinedine Zidane; and Ali Hewson with Bono.
And just before you go ahead and think it's just bags, no it's not. It's travel. Parent company LVMH did €8.7 billion in leather goods sales in 2011, up €7.5 billion from the year before. It's operating margin is at 35 percent which has gotten bigger in recent years after a 1998 plan to expand its roster of leather suppliers.
LV acontrols its distribution through a chain of 1,200 stores which it owns.
But like any luxury brand, they're experiencing the same thing. Growth is in Asia, Japan and South America. Sales are actually stagnant in Europe and the U.S.
