Kering's CEO on Finding the Elusive Formula for Growing Acquired Brands




When Pinault stepped into the top job at Kering (formerly PPR), in 2003, he faced a key question: Should he leave things as they had been under his father, who had built a conglomerate of eclectic businesses, or take them in a new direction? He felt that the company should become more international, more growth oriented, and more profitable—and that it should build on its ownership of Gucci Group to create a strong position in the global luxury market.

Kering began a series of acquisitions that included Alexander McQueen, Saint Laurent, and Bottega Veneta, and helped its brands develop their own retail store networks. It set out to pair creative directors—who retained a high degree of control—with strong and complementary CEOs. And it introduced operational synergies, coordinating sourcing and creating two product development centers. The transformation of the business has made the company much smaller but far more focused. Since 2003, its profits have risen by about 40%.



The Idea: When Pinault’s team buys a new luxury brand, it drives organic growth by helping the brand with product development, logistics, and retail stores and by pairing creative designers with strong business executives.

In 2003 my father asked me to dinner at his favorite restaurant in Paris, where we both live. He was the chairman of Artemis—the family holding company that controls PPR, the conglomerate he’d founded in 1963, and a variety of other businesses, including Christie’s, the auction house. I had graduated from HEC business school in 1985, had been working at the company since 1987, and had turned 40 a few months earlier. Over dinner my father told me he wanted to step down and make me chairman and CEO of Artemis. I was surprised by the timing and told him so. “What are you going to do if you stop working?” I asked him. But my father was 67 and had recently seen a friend die unexpectedly without having prepared for succession at his family-run business, so he felt it was time.

The dinner took place on a Thursday. When I walked into our headquarters the following Monday, I found entirely new furniture in my office—and my father sitting at the desk. “You don’t work here anymore—you work there,” he said, pointing to the corner office that had been his. He’d had everything moved over the weekend.

In 1992 my father had organized eight experienced businesspeople into a group called the Pinault Trustees. Their job was to assess over time whether I was capable of doing his job. Every year I had one-on-one lunches with each of them and they came to a big dinner at my father’s house. They were amazing people, and I was lucky to get to know them—but I disliked being under the microscope. By 2001 they had decided that I was a suitable successor, so the group disbanded.

Two years after taking over the reins at Artemis, I also became the chairman and CEO of PPR and faced a key question: Should I leave things the way they’d been under my father, or should I take them in a new direction? PPR (renamed Kering in June 2013) owned an eclectic set of businesses. We manufactured building products. We owned retail stores and mail-order businesses in Western Europe and America. We’d acquired Gucci Group, the luxury goods company, in a series of transactions beginning in 1999. I was concerned that our assets were too closely tied to Western Europe, and to France in particular. The company needed to become more international, more growth oriented, more profitable. So I focused on our luxury segment—apparel and accessories—which had strong potential for long-term growth. A few years later, in 2007, we acquired a controlling interest in Puma and decided to build a second strategic pillar in sports and lifestyle around that brand.

During the past decade we’ve sold off the other components of the original company and made a series of acquisitions to strengthen our position in the global luxury market. Today, in addition to Gucci, we own 14 luxury brands, including Alexander McQueen, Brioni, Saint Laurent, Stella McCartney, and Bottega Veneta. One key to this expansion has been our ability to help the brands we acquire find ways to scale. People tend to focus on the deal making, but how we help our brands grow organically and benefit from their collective experience is the most important aspect of what we do. When we partner with a brand such as Stella McCartney or Christopher Kane, we give it access to shared logistics, IT, and invoicing systems. We help it locate and open flagship stores. We help it recruit the right talent.

The transformation of our business has made us a much smaller but far more focused and more profitable company. Since 2003 our sales have declined by more than half, from €24.4 billion to €9.7 billion, but our profits have gone up by about 40%. We have also become a much more global enterprise. Since 2007 the proportion of our revenue that comes from France has dropped from 41% to 4%.


A Focus on Luxury

Pinault has streamlined the conglomerate he took over in 2003 to concentrate on luxury and sport brands.


Acquires 42% of Gucci Group
Acquires Yves Saint Laurent
Acquires 70% of Sergio Rossi


Acquires Boucheron
Acquires Alexander McQueen


Raises its stake in Gucci Group to 53.2%
Acquires Bottega Veneta
Launches Stella McCartney in a joint venture with McCartney
Acquires Balenciaga


Raises its stake in Gucci Group to 67.6%


Raises its stake in Gucci Group to 99.4%
Acquires remaining 30% of Sergio Rossi


Acquires a 23% stake in Sowind (Girard-Perregaux and JeanRichard)


Raises its stake in Sowind to 50.1%
Acquires Brioni


Launches a joint venture with YOOX dedicated to e-commerce
Acquires a majority stake in Qeelin


Acquires 51% of Christopher Kane
Acquires a majority stake in Pomellato
Acquires a minority stake in Altuzarra


Narrowing Down in a Global Economy

I had worked in many of the B2B businesses my father had put together as I came up through the company. I had run a division that made windows. I had headed our African unit, which imported and distributed vehicles in 30 countries. Before we bought Gucci, I had no experience in luxury goods, but then I began serving on the Gucci board and learning about the industry.

When I became the CEO of PPR and started reviewing our strategy, I focused on whether our conglomerate made sense in a global economy. That’s been the big change over the past 15 years. Until the late 1990s expanding overseas was complicated, and companies like ours preferred to diversify across product lines not far from their home markets. U.S. companies have access to a huge domestic market, but France has a relatively small one. PPR had ended up as a conglomerate not because of some grand design but because my father kept acquiring businesses in order to fuel its growth. By the time I became CEO, the company was doing very well but reaching the limits of this model. That’s why I decided to focus on building a group of global brands in luxury and sport.

When I talk about our brands, I avoid using the words “portfolio” and “collection,” because they make our approach sound slightly random when in fact it has been quite strategic. From the start we’ve had a very clear idea of what we wanted to achieve. One of our key assumptions is that a brand cannot cover all segments in terms of price or style. In theory we could have tried to expand Gucci to cover many more segments rather than acquiring other brands, but we think that would have been at the expense of what makes Gucci unique—what we call its DNA. We chose to allow multiple brands to complement, rather than compete with, one another. Today when we think about an acquisition, we try to make sure the brand fulfills a clear mission within our group and matches a distinct segment of the market.

An important way we grow the brands we acquire is by helping them develop a retail strategy. As luxury apparel brands mature, they generally stop being driven by wholesale (selling primarily to department stores and specialized independent retailers) and begin creating their own retail store networks. Flagship stores in markets such as New York and Milan can attract a different kind of customer, and they serve as advertisements as well. Getting the right location on the right terms and at the right moment is the key to success. When a young brand joins Kering, it gains access to a worldwide real estate team: We have people who know the stand-alone store locations as well as the malls of every big city in the world. We have relationships with landlords. We know the fair price for rent. If you’re a small brand in London, opening a store in Berlin or Hong Kong can be daunting. Once your brand is part of Kering, our experts will help you get it done.

But the growth of a retail network has to align with the capabilities of the brand, and that’s an area in which many luxury brands, including some of ours, have made errors. We didn’t always know how to help our newer brands grow. Sometimes brand managers think they can open stores sooner than they should. If you don’t have the product assortment to fill a 3,000-square-foot store and you’ve signed a five- or 10-year lease, you may be facing a disaster. Ten years ago at YSL, we developed the store network too quickly, and some of the stores were too large. We had to close or shrink several and stop opening new ones for five years; we resumed store expansion when we deemed the brand was ready for it. Sometimes it’s the other way around: Brand CEOs are too conservative, and we challenge them to move to the next stage faster than they think they can.

A good example of how we are able to grow brands within the group is the success of Bottega Veneta. In 2001, when we acquired this Italian maker of leather goods, it had sales of €56 million, only 30% of which it did in the 39 stores it operated directly. In 12 years its sales have multiplied by 17, and it now controls more than 80% of its distribution through a worldwide network of 196 stores. In 2012 Bottega Veneta’s operating income reached €300 million. This is an incredible accomplishment that the brand couldn’t have achieved on its own. It was made possible by the resources of the group and our approach to talent management, which we think is fairly unusual in the industry.

Talent and Operational Synergies

Since we bought Gucci, we’ve reached some conclusions about the best way to manage talent for a luxury brand. First, we give the creative people a high degree of control. A brand’s creative director doesn’t just design the product; he or she controls the brand image, the store concepts, and the advertising, with a 360-degree vision. Second, we’re convinced that the creative director must be matched with a strong and complementary CEO. Getting that duo right keeps the strategic vision and the creative vision aligned. As a brand grows, execution becomes really important—and we enable the creative team to flourish by pairing it with business partners.

Being part of a bigger company creates back-office synergies. We know all the suppliers for all types of fabrics and leather, so we can help our brands find whatever they need. Of course, each of the various brands has full control of its sourcing strategy, supply chain, and production. Obviously, they have very different needs: For example, Gucci and Bottega Veneta use completely different types of leather. But coordinating sourcing still enables us to help each of them find new suppliers around the globe, and enriches their expertise.

We have two product development centers, one for ready-to-wear (near Milan) and one for leather goods (near Florence). These centers help some of our brands speed the process of turning a designer’s initial concept into something that can be manufactured for sale in stores. Not all of them need the centers, because the more mature ones have separate infrastructures. In any case, we make sure that each of our brands has full control of its creative process, including research and innovation. People tend to associate luxury brands with Fashion Week, which showcases design, but the reality is that to succeed, a company needs a logistics system that can deliver finished products to stores anywhere in the world very quickly. After Fashion Week, buyers place orders for collections, and we start the production process. After the spring-summer fashion shows in September, we have from October until early February to make our first deliveries. These are not T-shirts—the process is complicated, and the products have a life cycle. If a delivery is late, you can’t recover—and if you can deliver a week early to start the season, that means extra sales and extra profit.

To become a global company, we’ve had to transform our culture. In 2008 only one of the 150 people working at our headquarters was not French. By the end of 2012 we had 18 nationalities there. We have more Italians than French now. Today our average employee tenure is four years—much shorter than in the past. At the same time, we try to move cautiously and remain aware of our roots: Many of the practices we follow, notably our decentralized approach to the management of each brand, were already in place.

Taking Luxury Online

The way we acquired Christopher Kane, a London-based women’s apparel brand, is a good example of how we approach deals. We announced the acquisition in January 2013, but we’d been watching the company for several years. We saw it as having a very promising brand and a strong creative vision that complemented what we were doing. I met with Christopher early in the process—more than a year before the deal was announced. I went to his studio and saw his collection. He and his sister, who’d built the company together, weren’t looking to sell, so I explained to him how we operate. “If you ever need a partner, we are very flexible,” I told him. In the end we didn’t buy 100% of the business—we bought majority control, and Christopher remains a shareholder.


Kering Facts & Financials

Founded: 1963 (as Etablissements Pinault)
Headquarters: Paris
Employees: 29,378
Number of Brands: 22

Since 2003 Kering’s sales have declined by more than half, but its profits have gone up by about 40%.

Source: Kering


After the deal was signed, we sent in a small integration team, which works mostly to create a reporting system so that we can track financial results. We also worked with Christopher to find a CEO. We had explained to him that we think it’s important for creative directors to be able to focus on creative tasks. We’re preparing to open a flagship store in London in 2014. Without Kering, Christopher Kane wouldn’t have had the means to do that.

We’re still looking to build our group of brands. We view luxury goods as ready-to-wear, accessories (primarily leather), and jewelry and watches. Until a couple of years ago, we owned only one jewelry brand, Boucheron, which is very high-end, and the only watches we sold were Gucci’s. Since then we’ve bought Girard-Perregaux and JeanRichard, two prestigious Swiss watchmakers; Qeelin, a maker of fine jewelry and our first Chinese brand; and Pomellato, a midrange luxury jewelry company. But we’re still a work in progress in watches. We’ll be much stronger in that category in 10 years.

We’ll also grow stronger in e-commerce; our goal is to create a platform across all our brands. We’ve entered into a joint venture with an Italian company called YOOX that specializes in luxury e-commerce sites. E-commerce is especially challenging for luxury, because it’s difficult to re-create the quality of the in-store experience online. Websites are about photos and shopping carts and checking out, and it’s hard to distinguish mainstream from luxury on them. We think we can differentiate the experience by developing completely new services that won’t be accessible by mainstream brands. For instance, in ready-to-wear today, people can order two or three sizes or two or three colors, try them on at home, and return what they don’t want. But what if we could send one of our store tailors by appointment to your house to make alterations? That’s the kind of thing I have in mind for the online customer’s experience of a luxury brand. It will be a high priority over the next decade.

A version of this article appeared in the March 2014 issue of Harvard Business Review.