In a bold move, Kering’s CEO Luca De Meo is planning a strategic shift that could reshape the luxury industry. De Meo’s vision, revealed in a memo, involves creating a new investment arm called ‘House of Dreams’ to reduce the company’s heavy reliance on Gucci, which has been facing challenges. But here’s where it gets controversial: is this a sign of Gucci’s decline or a necessary evolution for Kering?
The House of Dreams Strategy:
De Meo’s memo, shared with senior staff in October, outlines a plan to scout and invest in emerging brands, particularly in experiential tech, Indian craftsmanship, and Chinese luxury. This unit will be pivotal in Kering’s innovation push, as it seeks to tap into new markets and diversify its revenue streams. The memo highlights the need to adapt to changing consumer preferences, as wealthy clients increasingly seek experiences over traditional luxury goods.
Trademarking Dreams:
Kering has registered the ‘House of Dreams’ trademark in France, indicating a serious commitment to this initiative. The memo suggests that the unit will have long-term capital to invest in or partner with promising brands, mirroring strategies employed by rivals LVMH and L’Oreal. This approach is reminiscent of De Meo’s previous work at Renault, where he established a division for tech innovation.
Revamping a Luxury Giant:
With a $20 billion luxury conglomerate to revamp, De Meo’s strategy is a response to Gucci’s recent struggles. The memo identifies fixing Gucci, which currently contributes roughly half of Kering’s operating profit, as a priority. The plan is to reduce over-dependency on Gucci and rebalance the group’s portfolio, a move that could spark debate among investors and industry experts.
Emerging Niche Brands:
The new investment arm will focus on taking minority or majority stakes in niche brands, leveraging Kering’s access to high-end consumers. This strategy is particularly relevant as European luxury brands have lost clients due to aggressive pricing, while emerging niche companies, from Korean beauty to Chinese jewelry, are thriving. Kering’s shares have soared since De Meo’s appointment, reflecting investor confidence in his ability to navigate these industry shifts.
The Future of Luxury:
Kering’s statement emphasizes preparing for the possible futures of luxury, suggesting that the ‘House of Dreams’ initiative is just the beginning. As the group refines its strategy for next year’s presentation, the industry waits with bated breath. Will this move revolutionize the luxury sector, or is it a risky gamble? Share your thoughts in the comments below!