HONG KONG, China — When Taiwanese entrepreneur Wang Shaw first bought Lanvin in 2001 she was considered a pioneer. But many Asian investors have since followed, pouring hundreds of millions into established European luxury houses in need of a makeover and a cash injection: there are the Fang Brothers (Pringle of Scotland), Singaporean magnate Christina Ong (Mulberry) and Megha Mittal (Escada). In 2011, William and Victor Fung of Fung Group (owner of global sourcing giant Li & Fung) joined their ranks, forming First Heritage Brands, a subsidiary of Fung Investments and Singapore-based investment firm Temasek, with the aim of investing in European luxury brands to develop their international potential, especially in China.
Spearheaded by LVMH veteran Jean-Marc Loubier, First Heritage Brands acquired French shoemaker Robert Clergerie, as well as Delvaux, the oldest luxury leather goods manufacturer in the world, both in 2011. The following year, the firm added ready-to-wear brand Sonia Rykiel to its portfolio, relaunching the label with a new artistic director and opening stores for company’s contemporary line, Sonia By Sonia Rykiel.
BoF sat down with Jean-Marc Loubier, CEO of First Heritage Brands, to talk about bridging East and West, the next wave of luxury consumption, and his global investment strategy.
BoF: Why did you form First Heritage Brands?
JML: The idea came from the fact that the word is getting bigger, richer and also changing in the sense in that it’s balancing. In the 19th century, Europe dominated in terms of consumption. And after World War II, it shifted to America. Today, there is a new balance being created between East and West, especially when it comes to the luxury industry. The Chinese are already the number one buyers of established brands and, as people [here] have more money and wealth, there is a growing need for [brands] with a different take on luxury. Our assumption is that there is a need for product that’s fresh, interesting and has substance. We are looking at companies with idiosyncrasies, product and know-how that haven’t been so well [leveraged] in the last 20 years, but have something to say in the future. We want to make them global.
Our analysis is that we are experiencing the second wave of the development of luxury consumption after its world massification. The early but important actors with their powerful and huge brands will stay and develop, but there is an interesting space and need for a new offer.
BoF: How do you choose the brands you invest in?
JML: All our brands are different — [Robert] Clergerie rose to fame in the 1980s, while Delvaux is the oldest luxury house in the world. Before we invest, we have to determine whether we can bring something new to the table. Do we understand the brand? Do we think we can move it worldwide? Can we do it better than others? It’s easy to judge what people have done with a brand in the past, but we have to prove that we can do it better. Our job is to realise its potential.
Often, it’s not about choosing something that’s already known or popular. Most important is the quality of the assets. Look at Delvaux. We chose it because it evokes desire; because of its heritage and know-how. When we bought Rykiel, it wasn’t making billions, but it was a company we thought we could develop. We are industrial; we are not just another rich hedge fund interested in opening 500 stores.
BoF: What role does the Fung family, with its global manufacturing and industrial background, play in First Heritage Brands?
JML: What we bring is management, vision, strategy, confidence and money, while helping brands think globally. We also protect the differentiation between them, while moving them forward. So while we continue to use factories in Europe for Delvaux, we use Li & Fung’s sourcing capabilities to produce Sonia Rykiel’s contemporary line, Sonia By. It works on many levels. We don’t build each one the same way, but we apply the same background thinking.
BoF: China-based companies are increasingly acquiring Western luxury brands. Why do you think this is?
JML: Traditional luxury became a global industry because of the huge economic development of Asian countries. Before this, the luxury houses were rather small companies that were part of the lifestyle of the European elite. But the rise of the Asian economies, starting with Japan, then Korea, then China, has changed their scale by driving 50 to 80 percent of their sales. In the world of open economies, it’s normal that powerful corporations try to buy valuable brands. Japanese groups did it in the 1990s, now it’s China and also Qatar. Inventing and building a quality brand is a long process, but buying a good one can accelerate things.
BoF: What are the elements that make a successful brand?
JML: Putting a famous name on it isn’t enough. A talented designer helps, but they need to be relevant and meet the requirements of the industry. There’s also a huge need for authenticity — and it’s not something that comes from an illustrious past or know-how. It’s about integrity and being consistent in creating something with meaning. Then, there’s the design. It must be real, fun and not just something you buy and throw away.
BoF: Thus far, First Heritage Brands has acquired only Western brands. What about Asia-based brands?
JML: We have always been open to it from the beginning. The difference is that when you are new in the business, you need credibility. Now we are credible, we can continue to build our portfolio. I definitely envisage Chinese brands being a large part of our portfolio, whether it’s organisations or people. And we are not just looking at luxury — it’s more about substance and know-how for us. We try to mix the idea of bridging East and West, the best of each side, with care for what is local or different, but with a global perspective.