Empress luxury lines case study

S.T.Dupont - The Renaissance of a French Luxury Brand: Building a Strong Brand across All Touchpoints for Sustainable Growth

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This case was written by Joerg Niessing, Affiliate Professor of Marketing, David Dubois, Assistant Professor of Marketing, and Brian Henry, Research Fellow, all from INSEAD. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

The authors would like to thank Megha Malagatti, Innovation, Category Director & Corporate Strategy Advisor, S.T.Dupont, whose assistance during the preparation of the case was invaluable, and to recognize the contributions of Jenny Mok and Maxime Copin, INSEAD MBAs ‘14D, who conducted the original research.

Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at cases.insead.edu.

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Alain Crevet thought back to the summer of 2008, when he and his communications team first launched a new brand identity for S.T.Dupont, a struggling French luxury brand. Appointed CEO two years earlier, when the firm was almost bankrupt, his priority had been to turn the business around, as well as winning the support of Sir Dickson Poon, the majority shareholder who had bought the brand almost 20 years before.

Alain Crevet, CEO of S.T.Dupont

For the first launch in 2008, Alain and his team had come up with a simple but effective marketing slogan – “Be exceptional” – designed to reflect the luxury brand’s heritage of crafting exceptional products for exceptional people. In addition, they had labelled the four S.T.Dupont product categories as artistic lead points (see Exhibit 1):

� Art of Fire (lighters)

� Art of Writing (writing instruments)

� Art of Travel (hand-made leather goods)

� Art of Seduction (men’s luxury accessories: cufflinks, tie bars, belt buckles and pins)1

When the 2008 branding campaign turned out to be a great success, he had celebrated by jamming with his rock band at a bistro on the Boulevard du Montparnasse, not far from the company’s headquarters in Paris. Seven years had gone by since then and a more mature Alain continued to be inspired by rock music and by S.T.Dupont.

Re-Launching the Brand in 2015

In fall 2015, when Joseph Wan, the former chairman of the S.T.Dupont supervisory board (Wan was also CEO of Harvey Nichols and a close collaborator of Sir Dickson Poon) retired from the board in 2016, he was replaced by Sharon Flood (INSEAD MBA’93D), who was also on the board of the UK’s Network Rail.2 Sharon and Alain agreed it was the time for a

1 http://uk.st-dupont.com/art-de-vivre, accessed 30 October 2015, in the above order 2 https://www.networkrail.co.uk/about-us/board/, accessed 6 January 2017

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second rebranding and they put together a new leadership team3 in order to expand the “Be Exceptional” platform to express a stronger identity, a brand personality focused on the present while paving the way for long-term growth. To express the new identity, the team chose a campaign based on the slogan “Le Nouvel Art-de-Vivre à la Française” to capture the full range of attributes within the core identity of S.T.Dupont that they felt would resonate with the entire S.T.Dupont community – clients, suppliers, employees and shareholders.

However, in thinking about new ways to build exceptional customer communities, Alain decided to take more of a collaborative approach, seeking out potential key influencers that fit with the brand identity. By entering into collaborations and partnerships, Alain and the leadership team began to build entirely new communities where their products played a role.

In addition, they decided to focus on the company’s digital and social media presence, since more and more communities were now using social media as their main source of information. Whereas in the past, S.T.Dupont spent the lion’s share of the marketing budget on in-store activities, Alain decided to split it in favour of digital. He liked to think that the founder of the firm, Simon Tissot-Dupont (1847-1922), would have approved of the way he was building the brand’s identity in the online era.

L’Art-de-Vivre campaign as seen on the company homepage4

Alain wanted to break the news to Sir Dickson Poon. The key message he wanted to get across was that the new campaign would capitalize on S.T.Dupont’s brand equity and move the firm towards a sustainable future. But before picking up the telephone, he wanted to delve into the brand’s history and analyse the reasons why the luxury brand had got itself into such a crisis.

Developing a Luxury Brand in France – Back to the Past

The company was founded in 1872 by Simon Tissot-Dupont, a French entrepreneur, who, with his uncle François Tissot-Dupont, began his career as a photographer to royalty in 1865 (see Exhibit 2). After his photography studio was destroyed in a fire in 1870, Simon Tissot-

3 Leadership Team: Stephane Martin, Creative Director; Megha Malagatti, Innovation, Category Director & Corporate Strategy Advisor; Michel Adé, International Commercial Director; Hanh Guzelian, CFO; Éric Sampré, Director of Communications and a member of the Management Board.

4 http://uk.st-dupont.com/?___store=en , accessed 30 October 2015

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Dupont started another business, making carriages at an atelier (workshop) in Paris. This too burned down, in 1872, but a little black book containing the names of his clients miraculously survived the flames (see Exhibit 3).

Soon after the second fire, Simon Tissot-Dupont turned his hand to making leather cases or mallettes (see Exhibit 4), which he sold to clients listed in the precious black book. As word of mouth spread, a new business was born. Within 12 years, the S.T.Dupont brand was known as a supplier of luxury leather luggage to the upper class, many of them of noble rank or titled. To improve brand awareness and increase sales of S.T.Dupont’s handmade products, he selected a well-known Parisian outlet, Les Grands Magasins du Louvre, as the company’s retail distributor.

Three years before his death, at 75, the founder handed over the thriving family firm to his sons, Lucien and André Tissot-Dupont, who continued to build upon the assets they had inherited, particularly the network of retailers and suppliers set up throughout France. Thanks to an increase in demand for travel cases, the brothers bought a workshop at 8b Rue Dieu in Paris (10th arrondissement) in 1921.

Two years after their father died, the brothers relocated to their home town of Faverges in Haute-Savoie, in the foothills of the French Alps, directly in view of the famous Mont Blanc. There they built and managed the factory, which offered far more manufacturing space to create their leather goods, bringing together 17 types of savoir-faire. Faverges was perfectly located to serve wealthy customers such as royalty, bankers and entrepreneurs in nearby Switzerland and Italy, who, in addition to the company’s loyal customers in northern France, appreciated the outstanding quality of the hand-crafted goods and the symbolic benefits of the brand.

The only S.T.Dupont plant still in operation today, the 91-year-old Faverges facility employs many artisans who are descendants of the first generation of workers that Simon Tissot- Dupont hired. Its skilled workforce includes goldsmiths, woodworkers, engravers, lacquer workers, leather workers, stone carvers and locksmiths, who continue to make sophisticated products that have become iconic representations of high society. Over the past century, the company developed many creative designs and innovative processes,5 and its intellectual property is protected by international patents that give exclusive rights to the beautiful products that bear its trademark initials.

In 1929, S.T.Dupont joined forces with Cartier to distribute their products at a shop on New York’s exclusive Fifth Avenue. When supplies of leather began to dry up in the 1930s, S.T.Dupont began to diversify into cigarette lighters. In 1939, the company was commissioned by the Maharajah of Patiala to craft 100 solid gold lighters that fit into handcrafted holders for the ladies of his harem. This marked the birth of the luxury lighter, and subsequently the inspiration for celebrities including Coco Chanel, Picasso, Alfred Hitchcock, Humphrey Bogart, Audrey Hepburn, Jackie Kennedy and Andy Warhol, among others (see Exhibit 5).

5 Some of the most important innovations included diamond leather with diamond-dust polish, hand patina leather with natural oils of lacquer made by the maison S.T.Dupont, Ceramium A.C.T.™ and the micro mechanics of the lighter.

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The prestige of the brand’s leather goods reached a new high in 1947, when French President Vincent Auriol offered an S.T.Dupont mallette to Elisabeth II on the occasion of her wedding to the Duke of Edinburgh (see below).6

While enjoying its status as a brand name to royalty, S.T.Dupont began to reconsider its marketing strategy for luxury lighters in the late 1950s. This coincided with a switch in lighter fuel from petrol to butane gas, as the latter allowed for a controllable flame and is almost odourless. In tinkering with the refillable gas tank, an S.T.Dupont inventor hit upon the idea of a disposable butane tank. Sensing a first-mover advantage, S.T.Dupont launched a throwaway butane lighter, the Cricket, in 1961. To avoid diluting the luxury brand while extending the product line to the ranks of lower-income consumers, the low-price lighter was marketed through an affiliate named Samec, also incorporated in France.

6 1957: S.T.Dupont’s order book extended to include the King and Queen of Siam, the Queen of Denmark, the Queen of Romania, the Queen of Egypt, the Empress of Iran, King Farouk of Egypt, King Paul of Greece, the Duke and Duchess of Kent, Sir Winston Churchill, John Asprey, John Davison Rockefeller, Frank Jay Gould, the Duke of Windsor, the Maharajah of Jaipur, as well as great European families such as the Bourbon-Parme, the Agnellis, and the Baron de Rothschild, together with celebrities such as Coco Chanel, Maurice Chevalier and fashion designer Charles Frederick Worth

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Cricket Advertisement

An instant success in Europe, the Cricket ushered in an era of cheap lighters that rapidly put many makers of non-disposable lighters out of business.7

The S.T.Dupont Family Exits; Gillette Inc. Enters

Over a period of four years from 1970 to 1974, the S.T.Dupont family exited the firm in two steps. They initially sold the Samec subsidiary, which included the Cricket disposable lighter business, to the American multinational Gillette, for $4.6 million in 1970 (equivalent to 48% of the firm).8

Best known for its safety razors and disposable blades, Gillette wanted to extend its product range, and introduced the Cricket disposable lighter to the American market in 1972. Cricket held the lion’s share of the disposable lighter market for nearly a decade, but eventually its first-mover advantage began to wane. A competitor, Bic Corporation, a French company known for its cheap ballpoint pens, developed a disposable lighter that could be lit 3,000 times before wearing out. By the late 1970s Gillette had lost its dominance. In 1984 it sold the Cricket unit to Swedish Match AB of Stockholm for an undisclosed amount.9

Meanwhile, the S.T.Dupont family still owned and operated the luxury business, including luxury lighters. In 1973, one of their most famous clients, Jackie Kennedy, asked the company to make a writing instrument to match her favourite lighter, which was engraved with the letter “J”. Her request triggered the birth of the S.T.Dupont’s first luxury ballpoint pen, the Classique. It also marked the introduction of writing instruments as the company’s third product line, alongside leather goods and lighters.

However, in 1974, when it was clear that no family successor would emerge to manage the business, the family decided to exit from ownership entirely. Gillette bought the rest of the S.T.Dupont business (for an undisclosed amount) so that the French subsidiary could continue to supply the parent with its luxury goods.

Until 1980, S.T.Dupont was largely managed by the operations team in Faverges, which distributed its products through wholesalers and independent retailers in France and

7 http://www.toledo-bend.com/VCL/articles/index.asp?request=lighterHistory. Accessed 29 October 2015 8 Gillette Agrees to Sell Its S.T.Dupont Unit To Hong Kong Firm, The Wall Street Journal, 27 August 1987. 9 Gillette Co. to Sell Cricket Operations To Swedish Match, The Wall Street Journal, 5 October 1984

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elsewhere. In the early 1980s, S.T.Dupont sought to expand its distribution channels by opening three company-owned shops in Paris, but they achieved only modest sales and the company eventually closed two of them. The remaining shop, 58 Avenue Montaigne, Paris (8th arrondissement), is still open.

Clearly, S.T.Dupont had undergone a radical change, from being a family-owned business to being a foreign subsidiary of a global company.

A New Owner Who Liked to Take Risks

In 1987, that changed. Gillette sold S.T.Dupont to Dickson Concepts, a Hong Kong marketing group owned by Sir Dickson Poon, for $52 million. With a deal that gave him almost complete ownership (98.3% at first), the Hong Kong entrepreneur wanted to return the brand to its former glory. Gillette’s decision to sell was apparently designed to ward off a takeover from the Revlon Group, but it must have made a handsome return on its estimated $10 million investment to purchase all of S.T.Dupont 17 years earlier.10

Dickson Concepts was founded in 1980, when Sir Dickson Poon opened a retail shop in Hong Kong selling Chopard, Rolex and other luxury watches, as well as clothes, leather goods and accessories for Charles Jourdan. He ultimately owned the Harvey Nichols chain of department stores in the UK. The purchase of S.T.Dupont was driven by his desire to expand the group’s retailing operations internationally and diversify into new brands.11 At the time of the acquisition, S.T.Dupont employed 950 people world-wide and sales of about $50 million in 1986.

Rampant Expansion 1987-2004

Sir Dickson Poon had a strategic vision for S.T.Dupont that was reflected in the milestones achieved between 1989 and 1998, as summarised below:

� 1989: Management launched a major diversification drive, designed to turn S.T.Dupont into a global lifestyle brand in men’s luxury goods.12 By 1992 the company had become one of his most successful businesses, having slashed jobs, implemented a new pricing policy, and expanded the distribution network and product range to include men’s luxury goods.13 The logo was redesigned (see Exhibit 6).

� 1990: Sales were estimated to exceed $85 million in 1990, nearly $35 million more than four years earlier. Men’s accessories included leather belts, cufflinks, tie pins, eyewear and fragrances, and casual and formal attire.

� 1996: Sir Dickson Poon decided to spin off S.T.Dupont from Dickson Concepts, while the luxury goods sector was enjoying solid growth. Retaining a 56.8% shareholding,

10 Gillette Agrees to Sell Its S.T.Dupont Unit To Hong Kong Firm, The Wall Street Journal, 27 August 1987; Author’s estimate of $10 million.

11 Hong Kong Retailer Buys Control Of Gillette Unit, by David Dodwell, Financial Times, 3 September 1987 12 S.T.Dupont refinances Issue of bonds convertible and/or exchangeable into new or existing shares,

Company Press Release, 24 March 2004 13 Marketing & Retailing: Charles Jourdan Is Purchased By Dickson of Hong Kong, by Robert Sherbin, The

Wall Street Journal Europe, 8 April 1992

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Sir Dickson listed 43.2% of the company on the Second Marché of Euronext Paris.14 By offering 2.65 million shares at a share price of 180 French francs,15 he raised $90 million from the IPO that was used to fund further expansion of his privately-owned holding company.16 Lighters still represented 46% of the business, while pens represented 27% and menswear 6%. Geographically, S.T.Dupont’s business was divided between Europe, 43%; Asia, 48%; and North America, 5%. After the IPO, the company focused on developing its retail network of 23 boutiques, including six that it fully owned.

� 1997: S.T.Dupont launched a new watch division with the introduction of the Geometrie stainless steel watch, and entered into a worldwide licensing agreement with Inter Parfums to develop and distribute S.T.Dupont perfume lines.

� 1998: Riding the wave, S.T.Dupont focused on acquiring customers from the competition, and in so doing expanded into two new categories, men’s ready-to-wear (RTW) and leather goods. In the RTW business, its immediate competitors were Dunhill, which became the benchmark, and Zegna. S.T.Dupont expressed its intention to enter the ‘modern porno-chic era’, and followed in Dunhill’s footsteps as market analysis showed a boom in the men’s luxury RTW market. Decisions for RTW were made in Hong Kong (see Exhibits 7 and 8).

Aiming to double sales within five years, S.T.Dupont launched a major growth plan in 2003, to develop new innovative luxury accessories and strengthen its own retail network.17 At the time, the firm had 14 directly-owned stores, 48 stores under contract, and 216 shops-in- shops.18 William Christie, CEO of S.T.Dupont in Paris, and Charles Jayson, President and CEO of Dickson North America since 1999, were put in charge of the rebranding campaign. Five new senior executives were hired to run a variety of functions and operations in the rapidly expanding organization. A New York-based ad agency that specialized in beauty products was hired to market the new brand.

In 2004 and 2005, S.T.Dupont launched a “shine” communication concept, seeking to modernize the brand towards younger consumers. In December 2004, S.T.Dupont hosted a glamorous launch party, themed “James Bond 007 Limited Edition Series” in the commercial district of Wan Chai, Hong Kong (see Exhibit 9). It attracted over 300 social luminaries including businessmen, top models, celebrities and socialites. Guests were greeted by flashy “Bond girls” who posed at the entrance with replica handguns. S.T.Dupont has maintained the Bond connection: In 2015, an innovative Lighter was created that features a pierced bullet hole for the 2015 James Bond film, Spectre (see photo).

14 Poon’s Midas Touch Faces a Challenge, Hong Kong Retailing Magnate Says He Can Fix Barney’s if Bid Succeeds, by Hal Lipper, The Asian Wall Street Journal, 19 March 1997

15 Poon Sets Offer Price For Listing Of S.T.Dupont, by Penny Chueng, Hong Kong iMail, 4 December 1996 16 S.T.Dupont Seeks Paris Listing, Financial Times, 7 November 1996 17 Jayson Takes S.T.Dupont Post, Women’s Wear Daily, 1 April 2002 18 S.T.Dupont refinances Issue of bonds convertible and/or exchangeable into new or existing shares,

Company Press Release, 24 March 2004

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From ‘In the Red’ to Near Bankruptcy

Less than a year after the James Bond event in Hong Kong, S.T.Dupont was almost bankrupt. It had ended its last three fiscal years ‘in the red’ despite sales of €40 million in fiscal year 2004 alone.19 Some of its recent products, such as a USB key that transformed into a piece of jewellery, failed to meet sales expectations (see Exhibits 10 and 11). In November 2005, Marc Lelandais, who had replaced Christie as CEO in September 2005, said the company would require a major capital increase to avoid a cash crisis and be able to support operating costs to the end of the 2005 fiscal year. As the largest shareholder (56%), Sir Dickson Poon had little choice but to pump €41.8 million into the company to shore up its capital, in December 2005.

A month later, Lelandais left the company after clashing with the owner over strategy. Christie was brought back in as interim CEO until a successor could be found. Three months later, Charles Jayson left. In March 2006, the company announced a five-year restructuring plan, resulting in lay-offs of 200 of its 850 employees, including the loss of 125 of 430 jobs at the Faverges production site. It also closed four of its 15 boutiques, one in France, one in the UK, and two in Japan. In May 2006, S.T.Dupont issued new shares priced at €0.10 each, with the aim of raising €42.3 million in fresh capital. As a result of his participation in the share offering, Sir Dickson’s had increased his stake to 68.9%.

In September 2006, Alain Crevet was named CEO. An experienced executive, he had been CEO of Givenchy Perfume & Cosmetics (an LVMH brand) and a former senior manager at P&G. Soon after assuming the position, he closed down the men’s luxury ready-to-wear division and seven retail shops.

In January 2008, S.T.Dupont fell victim to a third fire, which destroyed a good part of the Faverges facility. All existing inventory was destroyed, disrupting the company’s supply chain for the next nine months. Competitors were quick to take advantage of its inability to stock shelves. Just as the company had managed to rebuild its inventory, the global financial crisis hit.

Despite the pressure, Alain Crevet performed well in his first few years, and was proud of the “Be exceptional” campaign in 2008. His decision to introduce new products and return to the roots of the brand brought many S.T.Dupont customers back into the fold (see Exhibits 12 to 16). From 2010-2016, revenues increased from €54 million to €71 million, an increase of 31% over seven years.20

Back to the Present: 2015

Alain felt that the timing was right to launch the new brand personality. He saw the L’Art de Vivre campaign as a starting point to reposition the firm more firmly in its niche market, and was confident that he could get Sir Dickson’s support.

19 Le président de S.T.Dupont est révoqué quatre mois après sa nomination, Le Monde, 12 January 2006 20 http://luxurysociety.com/articles/2016/02/in-conversation-with-alain-crevet-ceo-st-dupont, accessed 11 February 2016; Wright’s Investors’ Service, dated 24 March 2016

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Exhibit 1 Advertising: The Four Arts

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Exhibit 2 Origins of S.T.Dupont

1865: Simon Tissot-Dupont, photographer to the royal court

1872: S.T.Dupont brand was born

1870: Carriage business 1872: Fire in the carriage atelier

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Exhibit 3 The Little Black Book

Exhibit 4 Various Mallettes Made by S.T.Dupont:

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Exhibit 5 Ambassadors for S.T.Dupont

The Minaudière Bhupinder Singh “the Magnificent” US President Harry Truman:

HRH Queen Elisabeth II and her S.T.Dupont Travel Case

The Duchess of Windsor: Duke and Duchess of Cornwall

Jackie Kennedy

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Exhibit 6 Evolution of the Logo

Exhibit 7

Advertising for Men’s Ready-to-Wear

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Exhibit 8 Advertising for D-LINK

Exhibit 9 James Bond Campaign

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Exhibit 10 Share Price of S.T.Dupont, January 2006 – February 2016

Exhibit 11 S.T.Dupont Revenues and Profits, 2002-2014

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Exhibit 12 New Products (2014/2015): Leather Goods, Defi Pen, Defi Extreme

and MiniJet Lighter

Exhibit 13 Orient Express, Introduced in 2013 – Limited Edition

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Exhibit 14 Gifting – Haute Creation

Product Lines and Tariffs (2014/2015), Haute Creation

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Exhibit 15 Store Concepts

Exhibit 16 Product Lines and Tariffs (2014/2015) – Core Collection

Category Product Line No. of SKU Price Range (€)

Lighters Line 2, Defi Extreme, Maxijet, Minijets

70 1,300 – 2,700

Writing Instruments Line D, Defi, Liberte, Classic

81 1,150 – 2,700

Accessories Cufflinks, Tie bars, Key rings & Cigar Acc.

69 245

Small Leather Goods 77 110-980 Large Leather Goods 44 85 – 15,000

Belts 92 465 – 1,750 Total 433

Leather Goods