Bernard Arnault versus François Pinault, the personal rivalry that saved luxury

“My father and I have decided to unlock a sum of 100 million euros to participate in the complete reconstruction of Notre Dame.

Oliver Thansan
Oliver Thansan
20 November 2023 Monday 09:25
6 Reads
Bernard Arnault versus François Pinault, the personal rivalry that saved luxury

“My father and I have decided to unlock a sum of 100 million euros to participate in the complete reconstruction of Notre Dame.” When the flames were still devouring the emblematic Parisian cathedral, the French businessman François Pinault, owner of the Kering and Artémis holding companies, which bring together renowned brands in the luxury sector, heeded the call to rebuild the temple launched on the fateful April 15, 2019 by President Emmanuel Macron. The announcement soon had a striking counterpoint, and the next morning, Bernard Arnault, a factotum at LVMH, the main group in the sector, doubled the bet with a donation of 200 million euros to the fund intended for reconstruction.

This rivalry taken to the extreme by two of the most powerful families in France did not surprise a public opinion already accustomed to the rivalry between two men who have marked the fight for control of the powerful exclusivity market so far this century. Without any business tradition in this field, Arnault and Pinault have followed parallel trajectories to become the champions of the most hedonistic new trends, feeding on their own rivalry.

Dedicated to the real estate business, Arnault became known in the world of fashion when he took control of Christian Dior, the most prestigious brand of the Boussac textile group, which he came to rescue, although shortly after he got rid of the less profitable assets. To do this, he did not hesitate to take advantage of his political contacts to offer Prime Minister Laurent Fabius, in 1984, the possibility of saving a group condemned to bankruptcy. He did so, investing a good part of the family fortune in the operation, to restructure the group at a significant social cost, get rid of the less interesting assets and keep the historic maison, whose executive presidency he assumed in 1985.

The move, as bold as it was unexpected, earned him the nickname Terminator from the specialized press, although Arnault soon stood out as a financial wolf by taking advantage of Dior's corporate ties with other emblematic brands in the luxury sector. This is how Louis Vuitton and Möet Hennessy arrived to form LVMH, which encompasses more than 95% of their investments (public works and real estate developments remained in the background).

From there, renowned brands such as Givenchy, Marc Jacobs, Celine, TAG Heuer, Chaumet, Fendi, Bulgari and Kenzo, among others, arrived, one after another. At the beginning of 2021, Arnault dethroned Elon Musk as the man with the greatest personal fortune. After being overtaken by the American billionaire, Forbes once again ranked him this October as the richest man in the world, estimating his fortune on October 26 at $211 billion.

Pinault, for his part, also came to the rescue of another historic firm in the sector in crisis: Gucci. A timber businessman, he also had no tradition in the luxury sector, although his successful investments in commercial chains and his perseverance and sense of business, in addition to that financial muscle that had managed to win investment after investment and a high dose of chance led him to 1999 to enter the luxury sector, challenging the until then absolute power of Arnault and LVMH, after assuming control of the Italian brand Gucci.

Then came other well-known brands such as Balenciaga, Bottega Veneta, Alexander McQueen, Stella McCartney or Pomellato, in addition to the assault that same year on 30% of Valentino's capital, which could end the complete acquisition in 2028.

Quickly seeing the potential of the sector, encouraged largely by Arnault's aggressive policy, the newcomer used the same weapons to acquire Yves Saint Laurent, another object of LVMH's desire, in less than a year. Added to all this power in the haute couture sector are prestigious wineries in Bordeaux and Burgundy. Today, Kering and Artémis make up the world's third largest group in the luxury sector, much more than a stone in any of the shoes owned by LVMH. On October 26, Forbes placed Pinault in its top 30 richest people in the world, with a personal fortune estimated at $40.1 billion.

“They are not interested in being richer or more successful, what moves them is greed and what they seek is power,” adds Dana Thomas, author of the book Deluxe. Precisely in the miniseries Kingdom of Dreams (The Kingdom of Dreams, in Spanish), based on Thomas's book, it is told how it all began with the so-called handbag war, which elevated Pinault and that began when the Italian brand Gucci appointed Tom Ford creative director to give a twist to the brand's style.

Arnault had until then shown a limited interest in Gucci and did not see Italian fashion as a threat to his business, although he kept the card of being a shareholder. But business began to take off for the Florentine house and both its fashion collections and its accessories began to become a trend.

“Dior had recovered its splendor and was at that time in full swing thanks to the Lady Dior, the bag designed at the express wish of Bernadette Chirac, wife of the French president Jacques Chirac, as a gift for Princess Diana of Wales on her trip to France. An avant-la-lettre influencer, Lady Di turned the accessory into an object of desire that the house quickly knew how to take advantage of with a more than appropriate commercial name.

Until the new Gucci models burst in,” says Mary Williamson, fashion buyer for the luxury department store Harvey Nichols in London. It was then that Arnault got down to work and began a silent assault that businessman Domenico De Sole and Tom Ford himself managed to dynamite from within.

After meeting personally with Arnault to find out his intentions, De Sole decided to go in search of what is known in economic jargon as a white knight, an investor who defends the interests of a company against any hostile takeover. And he found it in Pinault, with whom he immediately connected. Together they designed the strategy for PPR – now Kering – to take control of Gucci.

“Emulating, intentionally or not, his new business rival, Pinault became the only winner of this move, since both De Sole and Tom Ford ended their contracts with the Italian firm shortly after. They wanted to set the agenda, but Pinault wanted to and showed that the Gucci name was above them,” Michael Holmes, professor at the London Business School, reminds us.

Without acknowledging it – at least publicly –, Arnault and Pinault have mutually benefited for more than two decades from a rivalry that stems from the same lack of knowledge and daring in a sector that was foreign to them and to which they have contributed new financial and commercial practices that They have transformed their business models. Arnault opted from the first moment to give carte blanche to each brand in its strategy, although the benefits have been managed by the group, which has defined the investments based on the needs of each firm.

With a more impulsive disposition, Pinault has let himself be carried away more by the sensations that the managers of each of the businesses he has entered into have transmitted to him. “In any case, the two philosophies that drive the sector have been complementing and feeding each other to make luxury an increasingly secure value, as the pandemic demonstrated. The latest data, however, demonstrate its inevitable exposure to downturns in confidence in the economy. Today, values ​​linked to luxury are in a bearish dynamic in the markets,” says Holmes.

Now is the time for the generational change to define the new foundations for the future. At 87 years old, Pinault passed the baton long ago to his son, François-Henri, married to Salma Hayek, who already took over the transformation of PPR into Kering in 2013. Arnault, for his part, remains linked to his business conglomerate, although he has already begun to distribute responsibilities among his five children. Since last December, his son Antoine has been at the head of the group, and in January he appointed his daughter Delphine as CEO of Dior. Beyond digitalization and sustainability, dream experiences emerge as the new trends in the sector in which both giants work