Cigar Aficionado

With his jacket slung over a chair beside the lush, sun-drenched garden, Yves Carcelle bobs through the crowd in his shirtsleeves, pumping hands and pecking cheeks. The exuberant, cherub-faced Frenchman spots a new arrival at his garden party, being held at the suburban Paris workshop of Louis Vuitton, of which he is president. "Ah, here's the most important man in the company," says Carcelle, beaming. He wraps a chummy arm around Kyo Hata, head of Vuitton's operations in Japan.

It's the 100th birthday party of Louis Vuitton--the hugely successful French luggage maker, whose pricey handbags and snooty suitcases have become a global icon of quality and good taste. As he works the garden-party crowd on a muggy summer day, Carcelle has strong reason to celebrate.

A few years ago, many marketing gurus figured Vuitton's phenomenal rise to the pinnacle of the luxury goods business would soon peter out. Conspicuous consumption--that child of the go-go 1980s--was giving way to the downscale understatement of the 1990s. Recession stalked Japan, whose status-seeking consumers for half of Vuitton's worldwide sales. Worst of all, Vuitton's monogrammed canvas products had become so ubiquitous and so widely imitated--both legally and illegally--that the French brand's image seemed to be veering from cachet to cliché.

Such worries have proved wrong. The world's well-heeled shoppers continue to crave Vuitton's stylish goods. From Beijing to Wichita, Vuitton's nubby brown canvas printed with geometric flowers and the "LV" monogram may symbolize material success in the late twentieth century more than almost any other product design.

On a recent weekday, the company's main Paris store on swank Avenue Montaigne bustled with foreign tourists, nearly all of them Japanese. Miki Tsujimoto, a stewardess for Japan Air Lines, has bought a monogrammed canvas handbag as a gift for her mother. "Their products are very beautiful," she says, "and there are so many different things."

Indeed there are--and all of them with stiff price tags. A nice leather weekend-sized suitcase costs $3,800. A modest-sized steamer trunk is $7,100. The store's best-seller is the Noé handbag in monogrammed canvas, at a mere $490.

To keep customers coming back, Carcelle and his colleagues have managed a marketing tour de force. They have broadened Vuitton's cachet by gradually bringing out new product lines--principally Epi and Taiga leather goods. Even more important, they have spread this French symbol of luxury into virgin markets, by aggressively expanding their chain of elegant stores in exclusive locations. (A glossy new one in Paris, next door to the fabled Cafe les Deux Magots on the Left Bank, has outraged lovers of old-Paris charm.)

Ground was broken recently for the fanciest Vuitton outlet of them all: a U.S. flagship store in New York. A 23-story glass building, opening like a flower toward the top, will also house the U.S. headquarters of Vuitton's French parent company, LVMH. That company owns the world's biggest stable of luxury brands, including Christian Dior, Hennessy Cognac, and Moet & Chandon and Veuve Clicquot Champagnes.

The new Manhattan digs are on 57th Street between Fifth and Madison avenues. Vuitton already has a store on 57th, one block east, which will close when the new one opens late next year. Carcelle says his goal is to have the ultimate image-building location, and "we decided this was a better block," he says.

Yet Vuitton's real growth is in emerging markets, where the nouveaux riches are falling in love with conspicuous consumption. China already has two Vuitton stores--in Beijing and Shanghai--and a third will open this year in Canton. Sales in China are brisk: "People with money are eager to show it," says Carcelle. Indonesia and Colombia now have Vuitton shops. Carcelle is even negotiating to build a store in Hanoi, Vietnam--a stunning development only a generation after the Domino Theory and the Ho Chi Minh Trail.

On top of the 194 stores Vuitton now operates, Carcelle plans to open 10 to 12 new shops a year for at least the next five years. He expects to enter a new country almost every month.

Such high global ambitions are a fairly recent phenomenon for this venerable French firm. Up until the late 1970s, Vuitton was a sleepy family-owned business, content to supply customized luggage and leather goods to a tiny, select clientele--just as it had done since the nineteenth century. As late as 1977, Vuitton's sales totaled $13 million. That's small change for a leather coin purse, compared to the $1.4 billion that the company's cash s rang up last year. For the family, tradition counted more than size.

That tradition dates back to 1854, when founder Louis Vuitton opened his first store in Paris. Although this year's celebration is a centennial, it actually commemorates the birth in 1896 of the famed monogram design. The design was inspired by Japanese flower prints, reflecting that era's fascination with Japan. Perhaps this helps explain why consumers in Japan can't get enough of Vuitton's products. There, every schoolgirl's ambition is to own a Vuitton bag. The company now has 35 stores in Japan and will open another at the end of this year.

To mark the monogram's birth, Vuitton commissioned seven noted designers to produce a range of seven limited-edition products, which went on sale early this year. Another limited-edition collection is based on the predecessor design that directly preceded the monogram, a brown-and-tan checkerboard pattern. Ten items will hit stores on Sept. 1, including an update of an old steamer bag and a modern woman's backpack.

Vuitton's original business was travel software, not hardware. When European aristocrats of the nineteenth century traveled, they called in specialists to pack their suits and gowns--protecting them against wrinkles--in traditional domed trunks. In 1837, Louis Vuitton, a 16-year-old country lad who couldn't find work in the provinces, went to Paris and became an apprentice to a master packer. By age 30, Vuitton was the exclusive wrinkle-free dress packer for Empress Eugenie, the wife of French Emperor Napoleon III.

Then Vuitton had an epiphany. It was a pretty obvious one, in retrospect. Those old domed trunks were fine for horse-drawn carriages, but they weren't very practical for the new transportation world of trains and ships because you couldn't stack them. So Vuitton built the world's first flat-topped trunks. He got the founder of The French Line, whose steamships sailed between and the United States, to give him new designs for cargo holds, and built trunks to fit.

Vuitton's newfangled trunks caught on quickly. The empress took some with her to Egypt when she attended the opening of the Suez Canal in 1869. There, the Pasha of Egypt saw them, and ordered some for himself. Vuitton became established as the leading luggage maker to the aristocracy of the Western world. The business grew as ships, trains and, later, cars greatly expanded leisure travel.

Much of Vuitton's output was custom-made for picky customers, or for special uses. French explorer Pierre Savorgnan de Brazza had Vuitton whip him up a trunk that opened into a bed. Covered with zinc and lined with lead to make it waterproof, this weighty monster must have been pretty tough on native bearers. But it helped the explorer get a sound night's sleep as he grabbed territory in equatorial Africa for in the 1870s.

Later, Vuitton's descendants produced custom-made luggage for such celebrities as the Duke and Duchess of Windsor, Charles Lindbergh, the Aga Khan and Ernest Hemingway. Douglas Fairbanks commissioned a brown leather suitcase with toiletries bottles hung inside. That led to a standard model in the Vuitton line that's still available.

Conductor Leopold Stokowski had Vuitton build an intriguing trunk that opens into a work station where the conductor studied musical scores while preparing for concerts on the road. It includes a writing desk that folds out of the lid, three drawers, and a compartment to store a typewriter. Then there was the Indian Majarajah who had Vuitton design a tea case for traveling. It included a silver container to carry water fit for making good tea, unlike the water he could find on the road. The leather used for this case is the precursor of Vuitton's Epi design, a rugged cowhide embossed with randomly spaced ridges.

Many of these luggage tours de force are on display at a Vuitton museum next to the company's original Paris workshop--site of the recent birthday party. They include the lead-lined explorer's bed and hundreds of other pieces of antique luggage, dating back to the fourteenth century, that were collected over the years by the Vuitton family. To visit, one must make an appointment in advance (phone 331/4688-3838).

The workshop, a spotless white-brick building with black steel girders, was opened in 1860 when Vuitton was just getting started. The founder built it in an area that was then open country north of Paris, near the Seine so that wood for steamer trunks could be delivered easily. Eighteen years later, Vuitton built his family home next to this small factory. The home is a stunning mansion with stained-glass windows and plaster Art Nouveau tendrils creeping across walls and ceilings. Now this complex is a quaint anomaly, squeezed into the drab working-class suburb of Asnières-sur-Seine on the northern edge of Paris. It includes a small area where employees can practice setting up window displays.

Vuitton's original workshop is still in use, although mainly to design new models and produce special items. To build trunks and suitcases, craftsmen shape frames from poplar wood that has been dried for seven years. They stitch leather handles and nail brass studs by hand. Most of Vuitton's products are now made in nine other factories, located in , Spain and Southern California. The company refuses to manufacture in cheap-labor countries of the Third World, allegedly because quality isn't as good, but probably more to preserve a snob image.

The transformation of Vuitton from a small maker of luggage for the idle rich into a broad-based luxury goods company is one of the great marketing success stories of the twentieth century. This feat was largely the work of Henry Racamier, a former steel executive who married a Vuitton descendant and in 1977 was named to run the family company.

A keen businessman, Racamier saw that Vuitton wasn't taking advantage of its posh name. True, the company had moved beyond its original luggage franchise by adding more pliable products starting in 1959. Such items became possible after a new coating was developed that protected cotton canvas from wear and tear, and thus met Vuitton's tough quality standards. Still, the product line was small. The company didn't bother to , and its distribution channels were limited and poorly controlled. Outside Paris, it had no stores of its own.

Racamier went on an expansion binge to democratize Vuitton's products--up to a point. He opened luxurious stores, broadened the product mix and built a powerful brand image through advertising and promotion of upper-crust events. Between 1977 and 1990, when he left the company, sales had soared more than 50-fold.

This savvy marketer made just one mistake--and it was a big one. It cost him his job, and pushed the Vuitton family out of the company.

In 1987, to further Vuitton's growth ambitions by teaming with a financially strong partner, Racamier engineered the company's merger with Champagne and Cognac producer Moet Hennessy. That was the birth of LVMH. The plan was for Vuitton to stay independently managed, with Racamier at its helm. Almost from the beginning, it was a marriage made in hell. Executives of the two companies bickered constantly over who was in charge, ending up barely on speaking .

Their battles eventually erupted into the nastiest takeover fight in modern French history. The winner, in 1990, was Bernard Arnault, a young financial wizard who had worked on Wall Street and then stitched together a textile empire based on Christian Dior. Arnault still runs LVMH. Racamier was forced out, to be replaced by Carcelle, and the Vuitton family sold its 27 percent stake in LVMH. For the first time since the company's birth, the founding family no longer owned an equity stake in Vuitton.

One of Louis Vuitton's heirs is still an executive, however. Patrick Vuitton--a fifth-generation descendant of Empress Eugenie's favorite packer--is in charge of special orders, and also acts as the company's "ambassador" at store openings and promotional events.

Promotional sponsorships are a key element in Vuitton's marketing strategy. The goal is to identify the brand with an upscale lifestyle. In the America's Cup yachting competition, the French company organizes the defender's qualifying races, which are named the Louis Vuitton Cup. Another favorite sponsorship are automotive concours d'elegance. For the past eight years, Vuitton has put on the most important such event in Europe, in Septemberat the Bagatelle gardens of the Bois de Boulogne in Paris. Every June, Vuitton organizes a smaller concours in London at the Hurlingham Club.

A new Vuitton concours d'elegance is coming to New York. During the last weekend in September, some 60 vintage cars will be exhibited at Rockefeller Center. The company intends to make this an annual event, having realized that the East Coast lacks a classic-car show on a par with the concours at Pebble Beach in California.

A luxury profile plus savvy marketing has made Louis Vuitton the crown jewel of the LVMH empire. Its profits are as fancy as its products. Some customers might be stunned to learn that Vuitton made a 49 percent pre-tax profit on its sales last year. And that's after the high cost of its fancy stores, lavish advertising and promotions.

Given such success, it's no wonder that leather goods makers the world over churn out ripoffs of Vuitton's famed monogram design. Imitations of Epi leather are growing, too, many of which are blatant counterfeit copies of the real thing. Sometimes the copiers do excellent work. One former headquarters staff member of Vuitton says she has seen counterfeit monogram handbags from Morocco that in her opinion are as well made as the originals, except for an occasional sloppy stitch inside.

Protecting the brand against rogue ripoffs has become a consuming mission at Vuitton, which spends $10 million a year on this battle. Part of the sum goes for lobbyists, who try to persuade governments to protect brand rights. For example, when the prime minister of Turkey visited Brussels not long ago to discuss a trade deal with the European Union, Vuitton's EU lobbyist was able to bend his ear about policing exporters of counterfeit leather goods. Turkey is among the biggest sources of counterfeit goods, according to Vuitton, along with Thailand, China, Morocco, South Korea and Italy.

Warning: If you should buy a fake Vuitton on your travels, don't take it with you to . The company, in concert with other French makers of luxury goods, has successfully lobbied the French parliament to make the import of even one counterfeit article a criminal offense. No tourist has been jailed yet, but one importer caught with 10 bogus Vuitton products is doing time in a Gallic cell.

Vuitton employs agents who comb the world looking for counterfeiters' factories and export operations, and then report these sites to local authorities. "Almost every month, we get a government somewhere in the world to destroy canvas, or finished products," says Carcelle. Late last year, Vuitton scored a coup in the United States: it helped the U.S. Customs Service seize 100,000 Vuitton fakes that were being imported from South Korea.

Maintaining Louis Vuitton's special cachet in the years ahead will take considerable marketing flair. During the 1989 takeover battle for Vuitton, Racamier was convinced that Arnault of LVMH would end up destroying the brand by milking the new-product possibilities too quickly, thereby watering down the posh image.

Thus far that hasn't happened. Carcelle and his colleagues have cooked up new lines at a sedate pace. Three years ago, Vuitton introduced its Taiga collection, the company's first full line for men. Briefcases, suitcases and desk accessories are made of forest-green cowhide embossed with a cross-hatch design. Vuitton's stores are slowly adding scarves and other accessories. Toward the end of the year, they'll start selling pens. However, "we're in no hurry," says Carcelle.

Carcelle is wary of broadening the product line too much. Clothes, for example, have been ruled out. He sees specialization as a way to preserve cachet. "Our competitors are trying to do everything," he says. "Leather companies are doing fashion, and vice versa." He believes that causes confusion in customers' minds.

Yet Vuitton executives see plenty of potential left in their original luggage business. Visit the company museum in Asnières, and you'll see a stunning set of polished aluminum suitcases that Vuitton designed last year for a futuristic "concept car" built by 's Renault. Production would be expensive, even by Vuitton standards, so there are no plans to market it yet. But the design is so fetching that it would clearly sell. Museum guides say visitors besiege them with offers to buy the cases.

A ball gown of Empress Eugenie's would barely fit in these aluminum masterpieces. Yet the heirs of Louis Vuitton are deg their travel goods for the times, just like their founder. A century from now, the old monogram design may have finally graced its last attaché case. But there seems a strong chance that this famous brand will still be around, selling style and prestige--at lofty prices--to status-conscious consumers.

Stewart Toy is the Paris bureau chief for Business Week.