The Story of Richemont: From Tobacco to Luxury Dominance

Compagnie Financière Richemont S.A., commonly known as Richemont, is a globally recognized leader in luxury goods specializing in jewelry, watches, and premium accessories. This Switzerland-based conglomerate has delivered an impressive 14% annualized return to its shareholders since its IPO in 1988. This equates to roughly 8,400% in total. This article explores the heritage, brand portfolio, and notable mergers and acquisitions that have established Richemont as one of the largest luxury companies globally.

• From tobacco to luxury: Founded by Anton Rupert in 1941 as a small tobacco business in South Africa, Richemont evolved into a global luxury powerhouse. This transition began with Anton Rupert's entry into the luxury sector through a deal with Cartier in the late 1960s.

• Strategic acquisitions: Under the leadership of Johann Rupert, Richemont aggressively expanded by acquiring prestigious luxury brands. Key acquisitions include Cartier (1993), Vacheron Constantin (1996), Van Cleef & Arpels (1999).

• Brand portfolio and revenue segment split: As of 2023, Richemont's revenue was primarily generated from Jewelry Maisons (67%), with Cartier and Van Cleef & Arpels as major contributors. Specialist Watchmakers contribute 20% with maisons such as IWC Schaffhausen and A. Lange & Söhne, and the remaining 13% comes from Fashion & Accessories brands such as Chloé and Delvaux.

• Controlled by the Rupert Family: As of 2024, the Rupert family, primarily through Johann Rupert's ownership of Compagnie Financière Rupert, maintains significant control over Richemont with a controlling 51% voting stake.

• Richemont's financial performance: Since its IPO in 1988, Richemont has delivered impressive returns of approximately 8,400% to its shareholders. Today, it stands as one of the world's largest luxury companies, both in terms of market value and revenue.

Born in 1916 in Graaff-Reinet, South Africa, founder of Richemont Anton Rupert was not initially destined for a career in business. He dreamed of becoming a doctor, a mission he had to abandon due to lack of funds for his studies. Instead, he turned to science and obtained a degree in chemistry from the University of Pretoria in 1939.

As the Great Depression impacted the Western world during the 1930s, Rupert made an astute observation. Despite the economic crisis, people continued to consume tobacco and alcohol extensively. As the story goes, he began making cigarettes in his garage starting in 1941. Thus, Richemont's story interestingly began with a small tobacco business.

Starting with just £10 and financial backing from two investors, he founded the Voorbrand Tobacco Company. By 1948, this enterprise evolved and was renamed Rembrandt, diversifying into sectors such as wine, spirits, food, mining, and banking.

In 1954, Rupert acquired a majority stake in British tobacco manufacturer Rothmans International. He consolidated Rembrandt's foreign interests in 1972, elevating Rothmans International to the fourth-largest tobacco company globally.

The transformation of Rembrandt into the luxury-focused Richemont, which began just a few years later, is a fascinating story. In 1959, Robert Hocq founded Silver Match in Paris, which was the world's first manufacturer of gas lighters. He started collaboration with Cartier in 1968 when designing a premium gas lighter in gold, seeking a licensing agreement from the luxury brand.

Recognizing Cartier's potential, Hocq explored a buyout with a group of investors. An offer from one Anton Rupert stood out: a 20% stake in Cartier America in exchange for a license to produce Cartier-branded cigarettes. This is where Rupert made his first leap into luxury, and arguably the start of what would later become one of the largest luxury companies worldwide.

Tragically, Hocq was killed in a car accident in Paris in 1979. Rupert then acquired a majority stake in Cartier and consolidated its divisions from France, the UK, and the United States into one entity. Meanwhile, Rembrandt faced challenges as South Africa's apartheid regime ended, risking boycotts due to potential nationalization. Although Rupert, close to Nelson Mandela and a proponent for ending segregation, sought to safeguard his company.

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Anton Rupert's eldest son, Johann Rupert (currently the Chairman at Richemont), served as a banker at Lazard in New York at the time. He proposed dividing the Rembrandt Group into two entities. One would retain South African interests and focus on the Tobacco business, and the other, a new holding company for international assets and the luxury brands, would be based in Switzerland. This led to the creation of Compagnie Financière Richemont on August 16, 1988. Following its establishment, the company was listed on both the Swiss and Johannesburg stock exchanges and Johann was instated as Richemont's CEO.

Johann immediately started with a bold vision: to create a conglomerate that would house some of the world's most prestigious luxury brands. This vision was underpinned by a strategy to acquire companies that had a rich heritage and a strong brand – a strategy similar to that executed by Bernard Arnault with LVMH.

One of the first major luxury brands to join the conglomerate was Cartier. The relationship between the Ruperts and Cartier dates back to the late 60s as previously mentioned, but it was only in 1993 that Richemont acquired a controlling stake in the luxury brand. This acquisition was not just a business transaction; it was a statement of intent, showcasing Richemont's ambition to play a leading role in the luxury market.

In 1996, Richemont made another significant move by acquiring Vacheron Constantin, one of the world’s oldest luxury watchmakers, founded in 1755. This was followed by the acquisition of Van Cleef & Arpels in 1999, a Parisian jewelry company renowned for its craftsmanship and innovative designs. During the 2000s, Richemont expanded to include brands like IWC Schaffhausen, Hackett London, and Roger Dubuis, laying the foundation for what Richemont is today – the third largest luxury company in the world by both market value and revenue.

Richemont M&A History

As of 2023, Richemont's revenue was divided by 67% Jewelry Maison, 20% Specialist Watchmaking, and 13% Other (which is predominantly composed of the Group's Fashion & Accessories Maisons). Here's an overview of some of the key brands in Richemont's portfolio:

• Cartier: Founded in 1847 in Paris, Cartier is renowned for its exquisite jewelry, watches, and accessories. The brand is a symbol of timeless elegance and artistic creativity, boasting a legacy of patronage by celebrities and royals​​. The initial investment in Cartier in the late 60s was Richemont's first big step into the luxury space, mirroring the significance of Dior to Bernard Arnault and LVMH. The deep connection and personal attachment the Ruperts have for Cartier is similar to what Dior represents for Arnault and LVMH.

• Van Cleef & Arpels: Established in Paris in 1906, this legendary luxury goods company is celebrated for its exceptional jewelry, timepieces, and accessories. The brand became part of Richemont in 1999.

Richemont's 2023 Jewelry Maisons Financial Performance:

Richemont's FY23 Jewelry Maisons Financial Performance

• Baume & Mercier: A Swiss luxury watchmaker established in 1830, recognized for its classic and elegant watches. Richemont acquired Baume & Mercier in 1988​​.

• Jaeger-LeCoultre: Established in 1833, this Swiss luxury watchmaker is known as "the watchmaker of watchmakers" and was acquired by Richemont in 1988​​.

• Piaget: A Swiss watch and jewelry brand founded in 1874, celebrated for its ultra-thin movements and luxurious designs. The brand became part of Richemont in 1988​​.

• Vacheron Constantin: One of the oldest continuously operating watchmaking companies, established in 1755. It is celebrated for its fine craftsmanship and was acquired by Richemont in 1996​​.

• Panerai: An Italian luxury watchmaker known for its distinctive timepieces, combining Italian elegance with professional functionality, acquired by Richemont in 1997​​.

• A. Lange & Söhne: A German watchmaking company founded in 1845 known for its high-quality, expensive watches made from precious materials. The brand was acquired by Richemont in 2000​​.

• IWC Schaffhausen: Founded in 1868, this Swiss luxury watchmaker is known for its pilot's watches. The brand joined the Richemont portfolio in 2000​​ and is considered one of the best acquisitions in Richemont's history.

• Roger Dubuis: Known for its avant-garde designs and exceptional watchmaking expertise, Roger Dubuis was founded in 1995 and joined Richemont in 2008​​.

Chloé: A French luxury fashion house founded in 1952, known for its feminine and bohemian designs, becoming part of Richemont in 1985​​.

Delvaux: The world's oldest fine leather goods house, founded in 1829 in Brussels. Delvaux joined Richemont in 2021​​.

Dunhill: A British luxury goods brand established in 1893, known for men's accessories. Dunhill was acquired by Richemont in 1993​​.

As of 2024, Compagnie Financière Rupert, a holding company primarily owned by Johann Rupert, holds significant shares in Richemont. It owns 6,263,000 Class A and 522,000,000 Class B shares, representing 10% ownership and 51% voting power, meaning that the Rupert family holds a controlling position of the conglomerate.

Established in 1988, Richemont has evolved from a modest tobacco business started by Anton Rupert in 1941 into one of the world's largest luxury goods companies. Richemont's commitment to heritage and quality, evident in its consistent financial success, shares many similarities with Bernard Arnault's journey in building LVMH. With a diverse range of high-end brands, the company continues to shape the luxury industry, demonstrating resilience, adaptability, and a deep understanding of luxury consumerism under the leadership of Johann Rupert.