Longchamp: A long way from pipes in Paris

The bag maker is trying to expand in China just as the luxury boom shows signs of flagging

Hong Kong

Flanked by the top model Coco Rocha, and watched by fashion's glitterati and a crowd of paparazzi, Jean Cassegrain cut the ribbon to unveil his family's new emporium.

Longchamp, the French handbag maker, is in good company. Gold logos from the world's most glamorous and expensive brands – Fendi, Prada and Gucci – glisten opposite. Burberry's black edifice stands defiantly down the street and Louis Vuitton is close by.

With neighbours like that, it's no wonder that Mr Cassegrain needed to go some to stand out. Hence the champagne-tinted steel, golden inlays between croisillon-patterned glass and engraved limestone walls.

The street in question is Hong Kong's Canton Road, the fourth-most expensive street in the world and a bigger, brasher version of Paris's Avenue Montaigne or the Champs-Élysées. If you're big in bling, you have to be here. Asia's appetite for luxury goods has been enormous in the past decade. But as Longchamp opens for business, is the industry heading for a slowdown?

Mr Cassegrain appears unconcerned by the economic headwinds. His firm has been around long enough to deal with swings in trading.

Decades before its Kowloon debut, Longchamp started out making smoking pipes in 1948.

"It's great timing for us to grab the opportunities in China as some of our competitors may shy away from expanding when the economy slows down," he said. "But we believe China will continue to grow fast and we are not seeing any signs of a slowdown."

Today, Longchamp's signature product is a handbag seen on the arms of hundreds of women everywhere from London to Sao Paulo and Singapore. Its Le Pliage foldable handbags launched in 1993 and the company still sells three million of them every year, helping to explain a recent 22 per cent growth in group sales.

Despite its products being a common sight among the masses, Longchamp claims it isn't out of place among Hong Kong's "who's who" of top luxury names. When the firm opened its very first shop, the family picked Hong Kong as the location, even over its home town of Paris.

Back then, in 1979, Mr Cassegrain's father, Philippe, currently the brand's president, travelled by boat to work with a local agent and built up accounts for the brand that was founded by Philippe's father, also called Jean, 64 years ago.

Jean started out making leather coverings for pipes in his family's tobacco business. He took the name Longchamp and the galloping horse logo from the Paris race track that was close to his home.

When the trend for smoking started to wane, Jean decided the business should expand into other leather accessories, from wallets to bags.

This time around, Philippe's trip was altogether speedier, and he was joined by his wife and three children, who all help to run the business.

Philippe, now in his eighties, and his wife still work on the design of products, while son Jean is chief executive, daughter Sophie Delafontaine is artistic director and son Olivier runs its American business from New York. It isn't the only luxury brand that remains tightly controlled by its founding family (see panel).

Mr Cassegrain is aware of the importance of Longchamp's heritage. He explains: "Nowadays people like to know the story behind the brand. We can give authenticity."

Longchamp has kept the feel of a small, family-run business despite now employing more than 2,200 people, running 237 shops globally and turning over €400m (£320m) a year.

It still makes many of its products in the original factory in Segré, in Maine-et-Loire, western France, where it has fashioned the leather into its products since 1959.

"They are a modest family," said Eric Carlson, the firm's Hong Kong architect. "We had to work with their persona. We needed to be seen among the neon signs of Hong Kong, but we needed to weave in the brand image and sing rather than scream."

Hong Kong was the company's first store and Asia is still a huge part of its expansion. That's not surprising, given that China is set to become the world's second-biggest market for luxury goods after the United States by 2017, overtaking France, Britain, Italy and Japan, according to the consumer research group Euromonitor.

Mr Cassegrain thinks the brand could reach up to 50 shops in China, despite fears of a slowdown in the region (see box). He says: "China has been growing for us. Some brands might be more mature but we are still seeing development across the Asian market."

Longchamp already has 100 stores across Asia – 14 in mainland China and nine in Hong Kong. But the new shops won't only be in the Far East; a new London store in Regent Street will open next year, and Brazil and the Middle East are also a focus.

The Le Pliage handbag has caused some experts to be concerned the brand could be too common. But Mr Cassegrain argues that Longchamp "is not a fad".

"We are very selective in terms of who we let sell our product and we keep control of counterfeiting. We also constantly change fabrics and colours and launch new products."

Longchamp is now bringing in new designs and sells a small amount of ready-to-wear clothing. Recent tie–ups to launch new bags have included the designer Mary Katrantzou and artist Tracey Emin.

Mr Cassegrain thinks his bags are democratic and are worn by all "social classes and ages". "The unique thing is it is carried by all sorts of people but it doesn't exclude anybody."

He added: "We never overprice our product. We have not forgone logic when it comes to price like some may have. There is a point when the customer notices and we are known for being good value with sensible pricing and very good quality, which means we will be successful for the long term."

The luxury goods expert Luca Solca at CA Chevreux says: "Longchamp are being super clever, in my view. Their strategy is straightforward: they go to market at significantly lower prices than the mega-brand rivals, and yet with a smart product. They are like the European version of US brand Coach which is having tremendous success."

Back at the store in Hong Kong, Mr Cassegrain is giving the guided tour of his shiny new three-storey boutique. His family grew up above his grandfather's tobacco shop in Paris, so this sort of thing is in the blood.

Is there a succession plan? The families in the luxury-goods sector might own some of the companies but they rarely run them as well.

With all the song and dance around the Hong Kong store, is this Mr Cassegrain's PR stunt ahead of selling or listing the business?

"We are not slaves to quarterly announcements," he retorted. "We do things when they are good for the long term and have no plans to change."

The family has already faced one succession dilemma. Back in 1972, founder Jean Cassegrain was killed in a car accident. Despite losing their "father and boss" the family carried on and retained the business within the family.

But with their enviable growth trajectory – Longchamp grew another 18 per cent during the last quarter – investors in luxury goods would love to get hold of the business, and not just its bags.

Relative values: Deluxe dynasties

LVMH

Bernard Arnault is the man behind the world's biggest luxury goods empire, created out of a string of mergers and acquisitions that earned him the nickname of the "wolf in cashmere". The Frenchman employs his son and daughter in the business whose brands include Thomas Pink shirts, Bulgari jewellery, Hennessy cognac and Kenzo fashions.

PPR

Founded in 1963 by François Pinault, PPR, which is now run by his son, François-Henri, only began investing in luxury brands in 1999 when it invested in Gucci. Today, its portfolio includes Stella McCartney and Brioni suits.

Hermès

Run by Axel Dumas, the sixth generation of the Hermès family which opened a horses' harness workshop in Paris in 1837. Best known for handbags and silk scarves today, they declared war on rival Arnault's LVMH when it emerged that he had built up a 22 per cent stake in their business. Hermès reorganised its holding company to strengthen the family's control.

Ferragamo

The Italian brand started life as a shoemaker in a small room in Florence in 1927 but now makes handbags and silk ties. The family shareholding is complex. Founder Salvatore Ferragamo had six children. His eldest son, Ferruccio, who is now the company's chairman, also has six and there are a total of 23 grandchildren. The sale of a 25 per cent stake in a listing on the Milan stock exchange last year let some of them sell down and gave the business a £2.6bn market value.

Tomorrow: Battling the counterfeiters and how Hong Kong's stock market became home to the luxury goods flotation

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