February 20, 2024 • 4hr 10min
Hermès
Acquired
Key Takeaways
- Hermès is a 187-year-old French luxury brand that has remained family-owned and committed to craftsmanship and exclusivity over mass production.
- The company has reinvented itself multiple times, most recently by scaling handcrafted production under 6th generation leaders Axel Dumas and Pierre-Alexis Dumas.
- Hermès successfully defended against a 2010 takeover attempt by LVMH's Bernard Arnault by having over 50% of shares locked up for 20+ years.
- Key pillars are creation, craftsmanship, and an exclusive distribution network - everything is handmade by trained artisans with a 2+ year apprenticeship.
- Iconic products like the Birkin and Kelly bags are made to order with years-long waitlists, fueling their desirability and brand mystique.
Introduction
In the luxury goods industry, Hermès stands apart from every other brand. For 187 years and across six generations of family leadership, the company has remained steadfastly committed to craftsmanship, exclusivity, and a rejection of mass production. This has allowed Hermès to cultivate an unparalleled brand mystique and desirability around iconic products like the Birkin and Kelly handbags.
Topics Discussed
Origins and Reinvention (0:00)
- Hermès was founded in 1837 in Paris by Thierry Hermès as a harness workshop for horse-drawn carriages
- It transitioned into leather goods and accessories for the automobile era in the early 1900s under Émile Hermès
- The iconic "Haut à Courroies" bag (later the Kelly) was introduced in 1892 to carry saddles and boots
- In the 1930s, Robert Dumas brought whimsy and art with the first silk scarves and other imaginative designs
The Kelly & Birkin Bags (1:06)
- The "Sac à Dépêches" bag was renamed the Kelly in 1977 after Grace Kelly used it to hide her pregnancy
- The Birkin was created in 1984 after Jean-Louis Dumas had an encounter with Jane Birkin on a flight
- Both bags became wildly popular and developed years-long waitlists, fueling their desirability
- They are made entirely by a single artisan over 20+ hours using saddle stitching and exotic leathers
Defending Against LVMH (2:14)
- In 2010, LVMH's Bernard Arnault began secretly acquiring shares of Hermès using equity swaps
- The Hermès family formed a holding company (H51) with over 50% of shares locked up for 20+ years
- Though Arnault still profited by eventually selling his stake back to LVMH, Hermès remained independent
Scaling Craftsmanship (2:48)
- Under Axel Dumas and Pierre-Alexis Dumas, Hermès found a way to scale handcrafted production
- They train hundreds of new artisans per year through in-house schools and apprenticeships
- Production is split across 31 workshops of 200-300 artisans each to maintain an intimate environment
- Hermès aims to increase production capacity by 7% annually while retaining craftsmanship
Brand Philosophy (3:22)
- Hermès embraces scarcity, with artificial supply constraints fueling desirability
- They have no official marketing department, instead relying on craftsmanship and events to convey brand values
- Products are quietly branded and never promoted with celebrity endorsements
- Retail stores are curated by local managers rather than a centralized corporate strategy
Conclusion
Through steadfast commitment to craftsmanship, exclusivity, and family ownership across nearly two centuries, Hermès has cultivated a brand mystique unmatched in the luxury industry. By finding innovative ways to scale handcrafted production while rejecting mass marketing and celebrity endorsements, the company has transformed from a niche saddlery into a $200 billion market cap giant without compromising its values. Hermès' success demonstrates that creating value through scarcity and craftsmanship can trump conventional wisdom around economies of scale.
