Don’t worry, Tiffany & Co faithful. The little blue box is safe.
The $16.2 billion sale of America’s most iconic jewelry brand to European conglomerate LVMH Moët Hennessy Louis Vuitton will end nearly 200 years of independence for Tiffany’s as the luxury goods space is becoming more and more consolidated. But the cash deal announced on Monday morning leaves Tiffany lovers little reason to fear an existential shift in the brand’s core identity, based on sleek diamond engagement rings, its New York roots and innocuous pendants. lock and key come in the brand’s coveted robin’s egg blue packaging.
On the contrary, the executives hinted that the sale will allow Tiffany to double down on its ongoing campaign to restore its exclusive status in the luxury market, while LVMH will leverage the household name to expand its reach in the United States and China. .
“This transaction, which comes at a time of internal transformation of our legendary brand, will provide additional support, resources and momentum for these priorities as we evolve to become The Next Generation Luxury Jeweler,” said Tiffany CEO, Alessandro Bogliolo, in a statement.
Tiffany, faced with declining sales, launched a comeback piece that refocused the brand on its more expensive product lines while downplaying entry-level silver-cast gift items, which had somewhat diluted the brand and alienated its well-heeled clientele, management concluded.
For example, as part of the re-emphasis on luxury, the brand launched its first new engagement ring design in a decade last year – a large square colorless diamond on a plain platinum or 18k gold band that subtly integrates the brand’s design. namesake ‘T’.
“We plan to invest even more in our fine jewelry offerings and plan to continue to introduce even more gold with and without diamonds and diamond products,” said Mark J. Erceg, executive vice president and chief financial officer of Tiffany, during the latest results. call in August, adding that the result will be higher prices and more prestige.
Tiffany also presents LVMH with a huge growth opportunity in China, where the brand consistently ranks second among Chinese people’s favorite fine jewelry brands after Cartier in HSBC’s consumer surveys, says Erwan Rambourg, global co-head of Tiffany. consumer research and retail at HSBC.
The brand operates several dozen stores in mainland China, where it has doubled down on marketing, tapped into endorsements from Chinese stars and even sold limited-edition Tiffany diamond pendants through the country’s favorite social media platform, WeChat.
“There is a lot of potential for Tiffany with Chinese consumers,” says Rambourg. With its vast resources and long-term vision, LVMH will help accelerate the push into China.
“Tiffany has immense potential. The problem is that he was half asleep until the new management team with Alessandro started waking him up,” he added. “LVMH will bring a sense of urgency, and it will provide the means in terms of capex and in terms of stores” to revitalize the brand.
As Tiffany accelerates these changes under LVMH, the European giant will gain a much better foothold in the United States
Tiffany has the potential to double watch and jewelry sales at LVMH, which has just six brands in its current portfolio. The conglomerate recorded 4.12 billion euros ($4.45 billion) in watch and jewelry sales in 2018, roughly equivalent to Tiffany’s revenue last year, according to their respective financial statements.
But Tiffany, which has held a special place as the ultimate aspirational brand in American pop culture since Audrey Hepburn’s 1961 classic Breakfast at Tiffany’s, could multiply by five the sales of watches and jewelry of LVMH in the United States. Last year, LVMH recorded 371 million euros in such sales, a fraction of Tiffany’s nearly $1.8 billion sales in the United States, according to year-end financial statements.
LVMH is also bringing a supply chain brand into its portfolio that prides itself on sustainable sourcing, which is of paramount importance to younger generations of affluent U.S. and European shoppers, Rambourg says.
“They are able to tell you what it is, if it comes from such and such a mine in such and such a country. It’s a key competitive advantage,” says Rambourg. “If you walk into a Cartier store and buy a two-carat stone and ask where it’s from, the person behind the counter won’t be able to tell you.”