A luxury leader goes incognito
By Haig Simonian
Published: July 1 2007 14:41 | Last updated: July 1 2007 14:41
Johann Rupert bats aside arguments that his idyllic attic office in the old wooden chalet at his group’s new headquarters is a perfect setting for a portrait photograph.
The executive chairman of Richemont, the world’s second biggest luxury goods group, has a reason for his reticence. Every so often, explains the 57-year-old South African, he adopts a disguise to check out some of the group’s boutiques. With his latest transformation nearly complete, he does not want an up-to-date snap to give him away.
Quite why a billionaire, who oversees significant private interests as well as Richemont, wants to sacrifice time and shoe leather traipsing around shopping malls is one of the enigmas of Mr Rupert’s management style.
The only one of founder Anton Rupert’s three children to enter the business, he started as a banker in New York and Johannesburg before joining a Richemont predecessor company in 1986.
Since then, he has shaped the group by reducing its exposure to tobacco and building up a stable of 16 luxury brands, including Cartier watches and jewellery, Montblanc pens and Dunhill leather goods.
Yet in spite of his prominence as executive chairman and controlling shareholder, Mr Rupert describes his management style as “hands off”.
“I’ve just come back from a month watching the cricket. I don’t need to worry about operational issues. I know I can trust my colleagues to do that. I’m no longer involved in supply chain management, the IT infrastructure or even, come to that, the financial disciplines. We have the people to do all that. Don’t postpone until tomorrow what you can delegate today.”
Mr Rupert has not always been so relaxed. At the beginning of the decade he steered Richemont through severe difficulties as the end of the dotcom boom was followed by the September 11 terrorist attacks and Sars in Asia. Together, the events sent the luxury goods sector into a tailspin as sales plummeted, while fixed costs remained intractably high.
That all seems ancient history now. Luxury goods empires such as Richemont, LVMH, PPR and Swatch Group are struggling to make enough watches, rings and other items to meet record demand. Economic recovery has revived sales in traditional markets such as Europe and the US and spiralling affluence in Asia has created a new generation of ultra brand-conscious consumers.
Richemont’s net profits jumped by 21 per cent to €1.33bn ($1.8bn) last year. Operating earnings in luxury goods, excluding dividends from its 19 per cent stake in British American Tobacco, climbed by 24 per cent to €916m, while sales rose by 12 per cent to €4.83bn.
Surprisingly, the record results have prompted mixed, even conflicting, reactions in Mr Rupert. Conditions are among the best he has seen. But the market cannot remain this strong indefinitely, he says. His hope is that the industry’s model has changed permanently, with new buyers in emerging markets providing the geographic diversity to offset downturns elsewhere.
“My gut feeling is that the risks are getting bigger and bigger. But, in the meantime, we’re seeing immense wealth creation. Middle classes are emerging in China and India that will in time be as big as in western Europe. I just try to run the business conservatively and hope we’re lucky. Anniversaries, birthdays, and girlfriends are always going to be there.”
Such disarmingly frank remarks are typical of his affable style. A big man, his burly presence belies a passion for sport and draws visible respect from Richemont’s staff.
Yet his thoughtful style hints at a certain personal distance both from glitzy luxury goods and even the exalted business and social circles in which he often moves.
At least Mr Rupert no longer has any concerns about Richemont’s structure. Under changes he introduced, each of its brands – called maisons – enjoys great independence over products, strategy and communications.
That model has become more commonplace in the sector in recent years, matched for example at LVMH. Yet it still contrasts with the more autocratic style of some rivals, such as Swatch Group, or the unremitting focus on a founding figure at smaller marques like Giorgio Armani or Ralph Lauren.
“Richemont is really a holding for a group of individual companies. Years ago, I determined that we would verticalise to the fullest extent. Although that was not the most popular, or financially lucrative, choice, I made sure every brand had its own manufacturing and structure. Each could be autonomous.”
The reason lay in the special nature of luxury goods – especially at the top end, where Richemont is concentrated. With prices sometimes in five or even six figures, brand values and integrity are essential. “Someone spending thousands on a Jaeger-LeCoultre watch or Cartier jewellery wants to be sure what they’re getting.”
Only behind the scenes do synergies come into play. Distribution, IT and finance, for example, are often handled on a group basis for bundles of brands, such as specialist watchmakers, that fit together.
The brands are co-ordinated by a small group at head office. As ultimate guide, Mr Rupert has created and chairs a small committee of leading current and former executives to lay down the law.
The Strategic Product and Communications Committee meets about 10 times a year at Riche-mont’s new Geneva headquarters, in London or at a brand’s base. It examines products, geographical expansion and communications plans. Major brands are reviewed annually and smaller ones, such as Purdey, the UK gunmaker, every two or three years.
“This is the holy grail. I see the committee as the ultimate brand guardian. We have a very collegiate style, and people with immense experience, going back years. We are Richemont’s institutional memory.”
Occasionally, the SPCC will veto a new product if it conflicts with a brand’s values – even if the item might boost sales and profits in the short term by riding on a trend.
“Our role is to make sure the plans of an individual maison’s management fit what is expected of that brand. We could double the turnover of this group if we allowed it to make cheaper products or pick the low-lying fruit. But we don’t just think short-term, but five or 10 years hence.”
So what is the executive chairman doing cruising around his stores in disguise? “I walk around; I sniff; I smell. You ask the doorman, the salespeople. Before I talk with management, I like to see for myself.
“All we’re trying to do is keep the products and the message consistent. If we do that right, the numbers will come out right too.”
‘Do you really think people buy brands because of the boss?’
In an industry characterised by high-profile leaders, Johann Rupert stands out as an exception. Unlike Bernard Arnault, chairman and chief executive of LVMH, or the father-and-son teams at PPR and Swatch Group, the Richemont boss is content – even determined – to remain out of sight.
“Do you really think people buy brands because of the boss? They don’t even buy shoes because of the boss. I’m not the brand and I like my privacy”, he says.
Richemont holds no news conferences and Mr Rupert gives few interviews. The group keeps to the background in favour of its brands. “I even discourage my colleagues from getting into the papers too often. I’m against this trend of turning businessmen into cult figures,” he says.
Despite its reticence, the Rupert family is a household name in South Africa as the country’s second richest clan after the Oppenheimers. Educated in his home country and then a banker at Lehman Brothers in New York, Mr Rupert returned to set up a local merchant bank in the 1970s.
Only on public issues has Mr Rupert broken his silence. He was a prominent white opponent of apartheid. More recently, he has spoken out on the issue of crime, causing some friction with a government he otherwise supports.
“I spoke out against apartheid in the 1970s. I was constantly at loggerheads with the government. Unfortunately, in South Africa, because of my stance on a few public topics, my privacy’s gone.”
Copyright The Financial Times Limited 2007
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