LVMH

In 1984, Bernard Arnault bought Christian Dior and began building what would become the world's largest luxury goods company. Conventional wisdom said: brands are assets, manufacture cheaply, outsource production, focus on marketing. Arnault did the opposite. He bought brands - then bought their production infrastructure: tanneries, workshops, vineyards, cooperages, fragrance houses, ingredient suppliers, retail stores. For 35 years (1987-2024), LVMH acquired brands and spent even more acquiring the infrastructure beneath them.

The strategy exploits the luxury paradox: luxury goods derive value from scarcity, so LVMH cannot scale individual brands without destroying their value. Instead, Arnault grows by acquiring brands (from 3 to 75), raising prices 5-10% annually, and expanding geographically while keeping customer count limited. The portfolio provides temporal and functional complementarity - leather goods are recession-resistant, watches are recession-sensitive, cosmetics provide accessible entry points. During 2008-2009, watches collapsed while perfumes held steady. During COVID, fashion cratered while wines surged. Arnault explicitly describes this as 'insurance policy.'

But the real genius is the internal hierarchy. LVMH's 75 brands operate in a clear pecking order: Tier 1 (Louis Vuitton, Dior, Fendi) can veto corporate decisions; Tier 2 (Givenchy, Kenzo, Celine) have departmental autonomy; Tier 3 (50+ smaller brands) follow corporate directives. This prevents internal competition while maximizing status signaling to customers. The result: €86 billion revenue, 28% operating margins (versus 18.2% industry average), and €350+ billion market cap - making LVMH Europe's most valuable luxury company. The lesson: when you can't scale individual products, scale the portfolio. But only if you control the infrastructure that creates authentic scarcity.