Catch of the Week #5
LVMH's dominance, Snapdragon Elite X's performance, Disney's sequels, Howard Marks, why the limitations of the PS1 hardware mattered and more
The House of Arnault - Brad Stone and Angelina Rascouet
The domination of LVMH and its shopping spree of luxury brands
In luxury and fashion circles, Arnault has a reputation as a bully; an aggressive warrior-capitalist who laid off thousands of workers after acquisitions, then tried and failed to snap up rivals Gucci and Hermès through hostile takeovers considered trop américaines in the gentlemanly world of European business. “The wolf in cashmere,” a member of the Hermès family once memorably called him.
…A hit can take years, and the only thing worse than a dud is being so successful that you saturate the market and your brand becomes démodée.
But if you put various luxury brands together, Arnault reasoned, they can reinforce one another. The stronger brands compensate for the weaker ones and give them time to establish an identity and grow, while the entire group shares back-end office functions and becomes a magnet for attracting and keeping talented executives. It was “an idea I had after having bought Dior,” he says. “I saw how the luxury market was made up of many medium-sized companies that, taken together, could be much stronger in a group composed of several brands.” Combining these divisions—which LVMH execs solemnly refer to as maisons, or houses—would “let them be completely autonomous and independent when it came to crafting their image, designing their products and having their own management, but it would provide them with scale benefits such as when buying ad space and finding a good retail location.”
Qualcomm’s new Snapdragon laptop chip is slower than Apple M3 in single-core, and less power efficient - Benjamin Mayo
While reviewers have more testing to do, the initial benchmarks and results paint a mixed bag. While the 12-core CPU Qualcomm chips are posting higher multi-core scores than the 8-core CPU M3 chip found in Apple’s MacBook Air, the M3 is still unbeaten on single core. That means for many tasks, the MacBook Air will still be faster. The M3 chip is also more power efficient than the X Elite…
Disney Is Banking On Sequels to Help Get Pixar Back on Track - Thomas Buckley
Why are there so many reboots and sequels lately? The proliferation of streaming and difficult economic times tend to cause studios like Disney to be more risk adverse. Reboots and sequels often come with built-in audiences, brand recognition, and overall higher predictability which makes it the more prudent choice
Morris’ strategy to turn things around involves balancing original movie ideas with sequels and spinoffs, the better to remind audiences what they once loved about Pixar.
…Pixar is confident enough in the sequel that it’s giving Inside Out 2 a run of about 100 days in theaters—an extraordinarily generous amount of breathing room in the Age of Streaming, when some films are released in cinemas and online simultaneously. Pixar is also releasing a television series based on Inside Out.
…In retreading characters and plotlines that have worked for Pixar in the past, the studio is breaking from a strategy, formulated about a decade ago, of favoring new ideas.
China’s stock market: Beijing issues unprecedented guidelines calling for transparency, risk-management - Zhang Shidong
China has issued an unprecedented set of policy guidelines to push for transparency, security, risk-management and vibrancy in the country’s US$9 trillion stock market, sketching out a view of what the world’s second-largest capital market could look like by the middle of the century as Beijing solidifies its goal of becoming a financial superpower.
Warren Buffett to bequeath vast wealth to new foundation upon death - Eric Platt
“It should be used to help the people that haven’t been as lucky as we have been,” Buffett said on Friday. “There’s eight billion people in the world, and me and my kids, we’ve been in the luckiest 100th of 1 per cent or something. There’s lots of ways to help people.”
[VIDEO] Howard Marks Podcast – In Good Company, Norges Bank Investment Management
“Excessive certainty is the enemy; acknowledging your limitations is your friend”
“In my experience with macro forecasters, basically in my opinion, showed me that it doesn’t work. They are not right consistently enough to follow… An economist is a portfolio manager who never marks to market. If you were an active investor, you wouldn’t hire somebody without looking at their record, but no economist ever presents his record.”
[VIDEO] Why the limitations of the N64 and PS1 mattered - Modern Vintage Gamer
I think this is an example of the the phrase “constraints that de-constrain” – how the technical limitations from the hardware of the consoles at the time forced creativity in game developers.
[PODCAST] LVMH: The Wolf in Cashmere’s Conglomerate - Christian Billinger
On the differences between luxury vs. consumer goods
If you look at what a luxury business is, the business model is pretty unique and luxury businesses tend to do things very differently to most other consumer goods businesses. So for instance, they tend to have a high degree of vertical integration, both upstream and downstream. They tend to produce in high cost locations. So if you look at LVMH, they mainly produce in Western Europe and the US, certainly for their sort of large fashion and leather goods brands. They tend to restrict the production volumes.
And of course, if you look at the US names, in that sense, they are not luxury businesses. So for instance, they have significant wholesale exposure. Now, in some cases, they've tried to reduce that in recent years, but they still have a meaningful wholesale exposure, which you don't see at LV for instance, or Dior. They don't operate with that volume restraint that the European luxury goods groups do.
On the differences between luxury vs. fashion goods
For instance, you're looking at much shorter time horizons, usually, in the fashion business. In the luxury goods business there's an element of timelessness, which is key to the product offering and to the DNA of those businesses. And the fashion businesses tend to be more focused on growing volumes and the business model looks more like any other consumer goods business that you might look at.
On the differences between luxury vs. premium goods
If you look at the Germans, they tend to operate premium business models. And the key difference between the premium model and the luxury model is that premium products tend to be focused on product performance and the consumer can therefore compare them in a way that you can't with luxury products. Luxury products tend to be singular, and you can see that in the way they're being advertised. It's all about nurturing the brand image and it's not about the product and the product performance.
Customer acquisition strategy of luxury businesses
These businesses do things very differently from most consumer goods businesses. And one set of anti-rules or anti-laws that I like to refer to is Jean-Noel Kapferer's anti-laws of marketing. For instance, product performance doesn't really matter as opposed to in the premium space or in the mass prestige space. These businesses tend not to listen to clients. They don't do focus groups. Arnault says he doesn't use these focus groups for product development because he doesn't want to hold back the creativity in any way.
So what's really unique about these businesses is that the offering drives the market development, not customer demand. So what else do they do differently? Often their advertising is not really aimed at their customers. It's aimed at everyone else. And the idea there, of course, is to develop a sense of prestige around the brand and that social element to luxury brands or that social aspect of luxury brands is key. And I guess, finally, in terms of the way these products are advertised and marketed, price, unlike other consumer goods segments, doesn't really matter. And in fact, in many cases, higher prices drive higher demand.
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Disclaimer: Please note that none of the information provided constitutes financial, investment, or other professional advice. It is only intended for educational purposes.