Can Kering’s ‘car guy’ CEO make luxury move twice as fast?
Luca de Meo is ruffling feathers by introducing industrial production methods at the owner of Gucci and Saint Laurent
When Kering chief Luca de Meo gathered his executives last September for a three-day deep dive into the roots of the luxury group’s problems, he invited some unexpected guests: its star designers.
Kering’s creatives, who call the tune at brands including Gucci, Saint Laurent and Bottega Veneta, had long occupied “another planet” far removed from the comparatively humdrum operational machine, according to one insider. On top of that, de Meo’s summit coincided with their preparations for Paris Fashion Week, which began just days later.
The former Renault boss’s decision to summon some of the biggest names in fashion provided an early glimpse of an iconoclastic streak that is ruffling feathers at one of the largest and most troubled companies in the gilded luxury industry.
Informed by decades spent in Europe’s car industry, de Meo is working to fuse the operations of Kering’s independently managed brands into a more integrated industrial machine by standardising production and centralising decision-making.
His goal is to create a more efficient company where 70 per cent of production is handled centrally, with the rest handled by brands independently.
The initiative, carried out in de Meo’s trademark direct style, is “putting a lot of tension in the system”, according to one person close to the company.
Bringing elements of a blueprint honed in car plants into the atelier is turning into a closely watched experiment in the luxury industry, which has long professed a commitment to artisanal craftsmanship as a way of justifying the hefty price tags of its products.
A former Kering employee described de Meo’s “penchant for operational optimisation” as a “fairly novel” approach in the luxury industry.
“No one knows if he’s going to pull it off, but everyone is watching,” the person said.
De Meo arrived at Kering a year ago with a mandate to shake things up.
A protracted downturn in luxury spending has shone a harsh light on the group’s problems, particularly at key brand Gucci, where revenues had fallen by over a fifth in a single year due to weak demand in China and mishandled creative transitions.
Under the long-term leadership of the billionaire Pinault family, Kering’s market value soared from around €20bn in 2013 to almost €100bn at its 2021 peak before tumbling back to a low of €20bn last year. But de Meo’s belief was that Kering’s longstanding structure — a holding company that sits above independently managed brands — was inefficient and in need of an overhaul.
De Meo has repurposed his office in Kering’s Paris headquarters as a meeting room dominated by a large black table where he works with a rotating cast of employees and advisers. When asked which executive car he wished to be chauffeured around in, the Italian opted for an electric van on the basis that a larger vehicle would give him and his team more space to work on the road.
In February, de Meo declared that “the level of bullshit has diminished enormously” within the company. “We say things as they are and we attack them one after the other,” he said.
De Meo also forced a new tempo at Renault after arriving at the struggling carmaker from Seat in 2020. He tried to turbocharge its electric car development by forming a new unit squarely focused on the technology. It succeeded in turning out some hit models, though a slated public listing of the division was abandoned.
“Luca moves fast,” said one former Renault colleague, who credits de Meo with re-energising the company after a period of scandal and financial stress. “He set some sort of event or deadline every six months to force the company to move [forward].”
As he toured his way around Kering’s offices and factories, the group’s new hard-charging chief found examples of loose practice and inefficiency that surprised him.
Among the discoveries were that ready-to-wear collections did not arrive in stores for more than six months after appearing on the runway, while Kering’s various houses all packaged shoes in different types of boxes. De Meo, who was schooled in an industry where every last rivet is jointly purchased and production is timed to the minute, watched with concern as inventory piled up.
“I hate stocks . . . so we will have to design a machine that is different,” he declared on an earnings call in July, noting that product lead times at Gucci were shortening. “That requires a re-engineering of the industrial process plus the ecosystem of suppliers.”
De Meo plans to shrink Kering’s supplier base, which numbers around 4,000 for fashion and leather goods alone, and to double the proportion of products produced in the group’s own 37 plants in Italy.
The luxury industry’s transformation over the past two decades into a €1.4tn goliath has left the maisons of Paris and Milan grappling with how to embrace mass production while retaining the artisanal craftsmanship they made their names on.
De Meo, known for his love of designer watches, believes that jewellery is an ideal product category to marry Renault-style industrial methods with luxury craftsmanship. On a recent visit to a production site for Pomellato, one of Kering’s jewellery brands, he was impressed as he chatted with artisans working by hand, according to one person present.
“What you do is amazing! Now I need you to do it twice as fast,” Kering’s boss joked with a twinkle in his eye.
In another break from luxury’s traditions, de Meo is hiring extensively from outside the industry — particularly from his erstwhile employer. Kering’s newly appointed heads of digital, human resources and investor relations have all arrived from Renault, while the new head of strategy is a former Boston Consulting Group partner who worked with de Meo at the French carmaker.
A person close to Kering said de Meo has also promoted people internally and hired from other luxury companies.
De Meo has also given back to his old employer by signing a deal in May for Gucci to sponsor Renault’s Alpine Formula 1 team, a sport de Meo is personally passionate about.
As new blood arrived, de Meo ordered that Kering’s media buying and planning be centralised, upending decades of working practice which saw campaigns handled by brands independently. Group-wide hubs have been established for industry and client expertise.
Some employees have been unsettled by the changes, which they feel have compromised their autonomy and raised pressure to deliver results at pace, according to people familiar with the matter.
But others believe that de Meo is stoking a much-needed culture clash at a company that has been controlled by the Pinault family since 2005.
“Luca describes himself as brutal. I see him as direct and decisive,” Saint Laurent chief executive Cédric Charbit said in May. “The luxury industry needs more of that.”
Reviving performance at Gucci, which contributes 41 per cent of Kering’s €14.7bn annual revenue and almost 60 per cent of its €1.6bn operating profit, holds the key to de Meo’s goal of doubling profitability in the medium term.
To help get to grips with a brand that the former employee described as “a kingdom unto itself”, De Meo has set up a second office in its Milan headquarters where he spends around two days a week.
Kering’s deputy chief Francesca Bellettini has been appointed to lead a turnaround of the brand. In China, a key market, the plan is to reduce discounting, revitalise the product range and close stores in peripheral cities.
Nick Anderson at Berenberg wrote that while “there is much low-hanging fruit to harvest through simply professionalising the management of the business . . . the plan’s ultimate success depends on how long the structural headwinds buffeting the Chinese and aspirational consumers . . . persist”.
Internally, de Meo will still need to win over luxury lifers sceptical of methods honed in the car industry. De Meo rankles at doubters who dismiss him as a cost-cutting car guy with a blunt one-size-fits-all approach.
“It’s a form of defence from luxury industry people” who are “underestimating the level of intellectual sophistication that I have when I analyse the situation,” he told reporters in April.
“I know that this is a creative industry,” he added. “But it is also industry.”