LVMH

**Ben Gilbert** (0:00)
All right, David, you ready?

**David Rosenthal** (0:01)
All right, ready.

**Ben Gilbert** (0:02)
Did you bring a cloth for popping your bottle?

**David Rosenthal** (0:04)
Of course I did. The only way to do it, I could have brought a saber.

**Ben Gilbert** (0:08)
You are far too classy. You did live in France, didn't you?

**David Rosenthal** (0:14)
Cloth is getting in the way.

**Ben Gilbert** (0:16)
Listeners, this is the best. We had planned to open Bottles of Moet to start the episode, and David is struggling to open his.

**David Rosenthal** (0:24)
I'm weak. All right, here we go. Hey. That was a good pop.

**Ben Gilbert** (0:29)
Happy LVMH Day, David.

**David Rosenthal** (0:31)
Happy LVMH Day.

**Ben Gilbert** (0:37)
Cheers.

**David Rosenthal** (0:38)
Cheers, my friend. Santé.

**Ben Gilbert** (0:41)
Ooh, that is good. Welcome to season 12, episode 2 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

**David Rosenthal** (1:07)
I'm David Rosenthal.

**Ben Gilbert** (1:09)
And we are your hosts. David and I have talked about the power of brand on dozens, if not hundreds of acquired episodes at this point. Brand is that unique attribute that will cause people to pay more for a product because it has a certain name or logo on it. But why do people do this? And how can one quantify the impact that a brand has on a business? Well, to study this, we decided to dive into the empire that has done this better than anyone in history, LVMH, the conglomerate of Moet, Hennessey, Louis Vuitton.

**David Rosenthal** (1:42)
Ben, it's not Moet, it's Moet.

**Ben Gilbert** (1:44)
Yeah, what is the deal with that?

**David Rosenthal** (1:45)
The Moet family, even though they are French, it is a Dutch name, so you don't pronounce it like in French, you pronounce it as in Dutch with a hard T, Moet.

**Ben Gilbert** (1:54)
All right, so it is actually Moet.

**David Rosenthal** (1:56)
Brand is so famously squishy in the discussion at all these tech companies. We wanted to dive into a company where it is definitely not squishy. Very quantifiable. Here it is.

**Ben Gilbert** (2:07)
LVMH is the 15th largest company in the world today by market cap. It is the only company in that top 15 that is not technology or oil besides Berkshire Hathaway. And Berkshire Hathaway being 25 plus percent Apple at this point, you could argue their market cap comes from being a tech company. Another crazy thing on LVMH, their market cap has grown 20x in 20 years, which I'll take that any day of the week. Some of you love their products and some of you think they are stupid and frivolous. They have brands across fashion, handbags, perfume, watches, jewelry, wine, spirits, you name it.

**David Rosenthal** (2:47)
Travel.

**Ben Gilbert** (2:47)
They own just an insane number of brands with 75 houses today that include Dior, Louis Vuitton, Moet, Hennessy, Vuv Clicquot, Dom Perignon, Tiffany. And it's not just the brands. They've expanded into distribution with retail like Sephora and all the duty-free shops that you see at airports. And they have even recently expanded into travel with Cheval Blanc resorts and other travel companies. And for those of you who have been sort of reading the headlines, this wide-sweeping empire is owned and controlled by the now wealthiest man in the world more than Bezos, Gates or Elon musk, Bernard Arnault.
And, fascinatingly, this richest man in the world wasn't the founder of any of these brands. This story has a dash of Buffett, a little bit of Steve Jobs, and some unbelievable deal-making stories about how Mr. Arnault turned 15 million dollars of capital in 1985 into the over 200 billion dollar fortune that it is today. I'm also super excited to do the analysis on this one, David, because the luxury industry is like business strategy bizarro world. You need scarcity, so there are constraints on your growth. You can't lower your cost structure too much without devaluing your brand. You can't really outsource activities, even if they're not your core competencies. So like all the lessons that we've learned on previous episode, it's kind of like the exact opposite of what will show up today.

**David Rosenthal** (4:15)
Yeah, everything that makes your beer taste better is ephemeral. So you need everything in house.

**Ben Gilbert** (4:21)
Totally, and listeners, this one's for you. One little detail that I found out before diving into the research, there is literally no one better in the world to cover this than our own David Rosenthal. So David, thank you for agreeing to do this episode. Can you share with us what your college thesis was on?