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LVMH Enters into Chinese Foods to Counter Declining Sales

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Published on : Jul 01, 2015

The LVMH Group, which is the largest luxury goods company in the world is actively diversifying in other business areas, including food catering services to attract young consumers. The move is mainly to counter declining sales in China, which is a major market for the luxury brand.

Though Louis Vuitton, which is the largest brand in the group positions as the most popular luxury fashion label in China, consumers in larger cities are getting attracted by rival Prada and other luxury brands.

To counter this, LVMH’s venture into food business will open avenues for the conglomerate to explore a totally new consumer base, as per Zhou Thing who is president of Wealth Quality Research Institute based in Shanghai.

In the Asia Pacific region, mainly in China sales revenue of LV products dropped by 1% in 2014, which includes a larger 6% drop in the fourth quarter itself. This led Asia Pacific to be the only region to exhibit negative sales growth, according to statistics announced by the company this year in February.

As per market sources, large number of consumers in tier-one cities are discarding LV as consumers are trying to go for uniqueness rather than follow trend from others, as commented by the magazine.

The trend has also been witnessed by purchases made by Chinese tourists in foreign lands. According to a recent report, only 10.7% of 1277 Chinese travelers voted who purchased luxury goods vouched for LV products in their last few trips abroad, which dropped from 15.5% in 2014.

As per the same report, only 12.9% of high-income travelers (those that have an annual earnings of or over US$55,000) made such purchases, which is a 24.3% drop from 2014.

Bain and Co, a leading management consulting firm said that scale of luxury goods in China inched done by 1% in 2014 from 2013.