This is the who’s who of luxury brands and brand recognition for who is the best at selling luxury goods. According to the inaugural Global Powers of Luxury Goods report issued by Deloitte Touche Tohmatsu Limited (Deloitte Global) the average size of the Top 75 companies was $2.3 billion in luxury goods sales… The world’s 75 largest luxury goods companies generated luxury goods sales of$171.8 billion through the end of last fiscal year (fiscal years ended through June 2013) despite a slowdown in the global economy.
The report identifies the largest luxury goods companies around the world—with LVMH ranking No. 1. It also provides an outlook for the leading luxury goods economies, insights for mergers and acquisitions (M&A) activity in the sector, and discusses the major trends affecting luxury goods companies including the retail and e-commerce operations of the largest 75 luxury goods companies.
The report focuses on the high concentration of luxury goods companies headquartered in France, Italy, Spain, Switzerland, the United Kingdom and the United States. These six countries represented nearly 87 percent of the Top 75 luxury goods companies and accounted for more than 90 percent of global luxury goods sales in 2012. France, Italy, and Switzerland achieved strong composite luxury sales growth in 2012, with France and Switzerland outpacing the 12.6 percent composite growth for the Top 75 at 19.4 percent and 14.8 percent, respectively. Italian luxury goods companies grew in tandem with the Top 75 at 12.4 percent. Countries trailing the Top 75 composite were Spain, the United Kingdom and the United States, with the United States having the smallest growth at just 5.6 percent.
Key drivers of M&A activity in the luxury goods sector
Globalization – Growth of wealthy and upper middle class consumers in emerging markets has been the biggest driver of M&A activity in the luxury and premium goods space in recent years. Asia Pacific, Latin America, and the Middle East and Africa accounted for a combined 19 percent of the luxury market in 2013 and the regions are projected to grow to 25 percent in 2025, according to Euro monitor.
Value chain integration – Luxury goods companies keep tight control over all aspects of business from product design and sourcing of raw materials to manufacturing, marketing, and distribution. Ownership of all aspects of the value chain for the company’s product(s) helps ensure that quality and service can be maintained, thus protecting brand heritage. As a result, vertical integration has become another important driver of M&A activity in the luxury goods sector.
Consolidation as a growth strategy – Industry consolidation is another factor driving M&A activity, with the consolidators taking a number of different forms. The large luxury conglomerates operate in diverse subsectors, the common denominator being a broad expertise in luxury including an intimate understanding of the luxury consumer. Seasoned investment firms are also contributing to the greater consolidation of luxury brands into a smaller number of holding companies or groups. All of these consolidators are seeking scalable brands, including distressed or under performing businesses that simply do not have the experience, knowledge, or resources to manage ever-expanding operations.
The Global Powers of Luxury Goods report is focused on four broad categories of luxury goods: designer apparel (ready-to-wear), handbags and accessories, fine jewelry and watches, and cosmetics and fragrances. The report excludes the luxury categories of autos, travel and leisure services, boating and yachts, fine art and collectables, and fine wines and spirits.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a U.K. private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients.