In an interview to Corriere della Serra / Economia, Francois Henri Pinault, CEO of Kering Group has spoken about his company’s development plans and the international market conditions.
How is the luxury market really doing? Giorgio Armani said fashion is no longer at the top of people’s desires.
«The luxury market is undoubtedly going through a period of great change. While the key concepts used to be heritage and craftsmanship, today heritage and craftsmanship are merely two prerequisites of fashion: they are taken as given, but are not enough to make people dream and feel good. At the same time, we increasingly focus on young customers, and this is itself a major transformation. If I look at some of my major brands, I see that worldwide sales to people under the age of 35 represented 56% of Gucci’s revenue this year and 65% of Saint Laurent and Balenciaga’s. This age group has approached luxury before the generation that preceded it».
What do these new customers want? «They want emotion. But heritage and craftsmanship alone do not provide enough. Emotion also comes from creativity. This means taking risks, and some brands have lacked the courage to do so. Look at Gucci’s transformation: things were going well, and 2012 was its best year in terms of revenue, while we had two difficult years before. Then it continued to grow, but more slowly. We decided to reposition the brand to reach out to new customers, to focus once more on creative content. We are now seeing the results: it’s a brand whose growth has never been equalled by a luxury brand in the past».
What does this mean?
«That the market is there. The point is how we engage in a dialogue with the customer. When you find a way to be meaningful, there is no limit. Between 25 and 35, you are looking for a way to express your personality, far more than those who are over 40. You’re also a completely ‘digital’ person. That is why, if your communication as a brand is incomplete, it is as though the luxury world were elsewhere. It is very important to understand this, because we are living in a really interesting time; the customer base and its behaviour is changing, and this in turn is changing the whole industry. With Kering we are transforming the communication of many brands, for example Saint Laurent and Alexander McQueen».
What are the foundations of Kering’s strategy?
«First of all, we must remember that since 2011, when we were a group owning a number of luxury brands, we have become a luxury group, which is something entirely different. We are totally integrated now and this makes the interaction with each brand stronger, both in terms of support and responding to challenges. Part of the good period we are going through depends on this. We have changed our work processes, and also a large number of our people, and can now boast an extremely high level of expertise across the board».
No diversification in the pipeline, then? Takeovers?
«Absolutely no plans to diversify: Kering will remain one of the most important person-centered luxury brands. As for the second point, what we are doing with Gucci, Bottega Veneta, Saint Laurent and Balenciaga is much better than running the risk of a takeover. All our brands have potential for growth and are moving fast. What I want to achieve is a fairly balanced portfolio: today we have three brands worth over €1bn, we will probably have another two or three in the next 10 years. But without getting into the hotel or car industries. We want to widen our range of brands in the same segments, not in others; the danger of diluting the brand would be too great».
Your presence in Italy is very strong. Can you confirm your projects? «My strength is my Italian part! What makes Italian and French brands great is precisely their “made in”: made in Italy and made in France. It’s a piece of history you find everywhere, not just in the product. If you are an American luxury brand you can produce anywhere».
You pushed Kering towards sustainability, on social issues. Has the entrepreneur’s role changed?
«By definition, an entrepreneur has always been someone who takes risks. However, while everything they used to do was related to their business, they now also have a social role, for example with regard to the environment. There was no such sensitivity 40 years ago. The way I see it, you cannot be a successful entrepreneur unless you have environmental and social responsibility; especially if you are running a large company, since it has a greater impact than a small one. Young people are committed on this front: if you want to work with them, you have to keep these issues in mind».
Why did you create a foundation to fight violence against women and why this more general commitment to women?
«Firstly, it’s a question of how I was brought up. I have always heard my father say that if you want other people to believe in you, you have to be an example, getting them to involve you in their lives. In addition, with the group’s managers I thought that if you want to be consistent and give something back to society, you need to commit to causes that are close to who you are as a company, to the people who work there. When we moved from being a conglomerate to becoming a luxury group, 80% of our customers were women and over time, the majority of employees also became women, about 60%. While I was considering these issues, I met my wife [actress Salma Hayek, Ed.] who made me discover the reality of violence against women, something I knew existed but which I perceived as a distant problem Instead, when taking part in a meeting in New York with Eve Ensler, author of The Vaginal Monologues, I realized that violence against women is everywhere, especially in developed countries. In 2006, it was not a topic that public debate focused on. I told myself that if Kering should support a cause, this was the one, because we are a company full of women and because nobody addressed the issue, and we could be of help. When we took over Puma we discussed whether it was enough to take part in the Peace Day or whether we could do more to tackle the situation of women in sport».
So an entrepreneur needs to have a vision that goes beyond financial statements.
«What makes a company last in the long term is the strength of its culture. And the strength of its culture depends on how honest it is. This was the change ten years ago: all my goals regarded sustainability, while today sustainability is already part of our culture and we aim to recruit people who are committed to our causes. This is the soul of our company. I was in China two weeks ago and told our managers that I do not want anything that is not sustainable».
This means higher costs.
«That’s why most companies will wait. For us now the challenge is to reduce costs as we did with ethical gold: at the beginning we spent 25% more, now we are only spending 5% more, maybe next year we will buy ethical gold for all our brands.” You are a listed company; do investors understand and follow you? “Not really at first. It should be said that it is easier to think about sustainability in the creative phase, while once you are up and running it is more difficult. When, in 2007, we decided to go 100% PVC free with Bottega Veneta, I talked to designer Tomas Maier, and in the space of a week he found a solution. We are now working to establish a material innovation workshop in Novara with 3,000 fabrics accessible to all our brands».
There has been heated debate, also regarding you, over anorexic models treated like objects. A few weeks ago, you agreed on shared regulations to address the issue with your competitor Arnault. Will it really work? «It has to work: it’s not an option. That’s why I wanted to do it quickly and why it was applied immediately, also in the fashion shows already in progress. The brands are now directly responsible for the models that work in fashion shows; they can no longer say that the choice was made by the agency. When you see a 16, 17 or 18 year old girl treated like an animal, do you sit back and do nothing? This is something I cannot understand. When I saw what happened to Balenciaga [girls held for hours in the dark waiting to be chosen or discarded, as reported by the James Scully casting director, who also pointed the finger at other brands such as Lanvin, Ed.], I was with the team and I said “we have to move, and fast” [the casting directors were dismissed and the fashion house apologized, Ed.]. I have a 15-year-old daughter who could be treated this way; I’m committed to fighting violence against women, we cannot let this kind of thing happen. We have also asked brand managers to consider the impression given by advertising after the controversy over the Saint Laurent campaign, shot by a photographer for a woman-run fashion house: a small photo has a different impact to a giant billboard».
The model was also anorexic.
«It was a question of picture angle; I met her and she was not anorexic».
Might you enter into other agreements with LMVH?
«If they help the industry, yes. We are competitors, obviously, but when we had to respond to this problem, we found a solution».
Francois-Henri Pinault, CEO Kering
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