Business Breakdowns
· Matt Reustle
[00:00:00] S0: This is Matt Reustle and today we are breaking down Moncler. You know, their down jackets, their stylized M logo. It's the mix of style and substance that blends into the brand history and evolution of Moncler. I was joined by Chris Davies, investment manager at Baillie Gifford, to cover Moncler's evolution, particularly in the hands of Remo Ruffini. And we get into the push to define luxury outerwear, extend outward into other product categories and keep that core DNA of fashion and function. This is a particularly interesting episode for anybody interested in the luxury market generally and Moncler's push to carve out their own niche. All right, Chris, excited to have you here to cover Moncler. It's a product, a brand that I think most would be familiar with, but maybe we can just start out by covering an introduction to the business itself. What does Moncler entail? And just a little bit of an overview on the business itself to kick off the conversation.
· Chris Davies
[00:00:00] S1: Thanks, Matt. Well, it's a pleasure to be here. So Moncler is a really interesting breakthrough brand, and I'm going to come back to that idea of a breakthrough brand a bit later on. But let's just deal with the basics first of all. So it operates in the luxury outerwear market, so what on earth is that? Well, to put it really simply, it's a segment of the fashion industry that's focused on really high-end outer garments. So think coats and jackets and other things that we all wear outside. Lots of it is linked to the cold, and that's generally where Moncler has made a name for itself. But there are plenty of other brands here as well, such as Canada Goose and Arc'teryx, which people will probably have heard of before. But other parts of the luxury business, generally we're dealing here with very high-quality products. We're dealing with high-quality customer experiences, and we're typically dealing with pretty high price points. So I'll maybe try to sit Moncler in that context. So it was made famous by its puffer jackets. And if you think of most luxury brands, they will typically have some kind of iconic product or a collection that they're associated with. If you think of Hermès, you think of the Birkin bag or the Kelly bag equally. If you think of Cartier in jewelry, for example, you'd think of maybe the Trinity collection. You know, you have those three interlocking bands. Now if you look at the Birkin bags, prices could be $10,000 to $100,000 and way above that. Think of the Trinity collection products. It could be prices getting as high as $20,000. So Moncler has an iconic product. I would say it's their Maya puffer jacket. And this was launched in 2009, but there have been iterations of it in the past. But basically it's a very loud, so typically bright-colored jacket. It's typically made out of very shiny nylon. So it's very, very distinctive. You can tell when someone's wearing one of these things. Various colors have been released since the initial launch in 2009, some of them darker than others, some of them a bit more garish than others. So basically it's this really iconic product that they've come up with that people will think of when they think of Moncler. And it's around that core product that they've then built other things.
· Chris Davies, Matt Reustle
So a lot of other brands that have got these anchor products, they've built other things such as knitwear, footwear, accessories, other things. Because people don't just wear jackets when they go outside, they wear other things as well. So they've very much established themselves in this luxury outerwear space, I think via this really unique core product. [00:00:00] S0: I think you tapped into a lot of what makes Moncler interesting to me as this luxury player. Their garments or their coats, jackets do have a little bit of loudness to them, you know, when someone is wearing them. I'm always interested in the DNA of luxury brands. The history, how did they emerge into this category? So maybe we can cover some of that. The past. I know it goes back before 2009, many decades, so maybe you could just cover some of the history and what went into Moncler becoming the brand that it is today.
· Chris Davies
[00:00:00] S1: That's right. The history does go back some ways. I won't go through every single year, but I tend to think of the history in three phases, if you. So if you go back to the early 1950s, when Moncler was first established, so 1952, it is founded in this village near Grenoble in France called Monestier-de-Clermont. And this is where the name comes from, Moncler. So it is quite a young brand in that sense. You think of Chanel, which I think was founded in 1910, maybe Hermès, maybe goes back to the 1830s. The origins of Moncler really were making equipment for coats. I think they even made some sleeping bags and tents and stuff for people who worked in the mountains, but also for mountaineers. And in 1954, a famous French mountaineer called Lionel Terray discovers this brand, this line of products, is impressed by the quality and begins to collaborate with Moncler on this new line, the Lionel Terray line. But also that year they kit out this Italian expedition to K2. And I think really that early stage in the 50s was really all about building those technical credentials, but it goes a bit further than that. So if you actually go into the late 1960s, around 1968, when you have the Grenoble Winter Olympics, Moncler is actually at this point kitting out the French downhill ski team. So that's the first phase of the company's history that I tend to think about—that was really all about building these technical credentials, which it still very much has a right to claim today. The next phase, which I think is really important, is basically the 1980s. So this is when Moncler came down from the slopes to the streets. This is how they tend to put it. If you were in Milan around this time, you might have seen youngsters hanging out around sandwich shops and fast food restaurants. They'd have been wearing some pretty loud designer clothing. They would have been wearing Timberland boots, Ray-Ban sunglasses, Levi's jeans. They loved American pop culture, motor scooters, fast food, pop music. And actually the original crew of these youngsters hung around a sandwich shop, I think, called Al Paninaro. And this is basically where this subculture is born. And it's called this Paninari subculture. And it's very much associated with enjoying life, expressing oneself, luxury consumption.
· Chris Davies, Matt Reustle
The cultural undercurrent was so strong that actually the Pet Shop Boys sang a song about this called Paninaro, which they released in 1986, which is worth a listen. If anyone wants to get a flavor of that sort of cultural milieu. [00:00:00] S0: Can dub it into the recording, perhaps. [00:00:00] S1: Put it in the show notes. Definitely. So this is the second phase of the company's history. It's quite different to the first. It's much more fashion oriented. And that brings us on to the third phase of the company. So by this point you've basically established that Moncler has these technical credentials in performance, in mountaineering outerwear, but it also has these credentials in fashion as well. Now that's an unusual combination and it's something that was recognized by a guy called Remo Ruffini, who actually starts working for them around the time of the late 90s, early 2000s, and ends up buying the company. Over the course of the next 20 plus years, he basically takes full advantage of this really unique amalgamation of the technical and the fashion and builds Moncler into this gigantic, successful fashion powerhouse.
· Chris Davies, Matt Reustle
[00:00:00] S1: Put it in the show notes. Definitely. So this is the second phase of the company's history. It's quite different to the first. It's much more fashion oriented. And that brings us on to the third phase of the company. So by this point you've basically established that Moncler has these technical credentials in performance, in mountaineering outerwear, but it also has these credentials in fashion as well. Now that's an unusual combination and it's something that was recognized by a guy called Remo Ruffini, who actually starts working for them around the time of the late 90s, early 2000s, and ends up buying the company. Over the course of the next 20 plus years, he basically takes full advantage of this really unique amalgamation of the technical and the fashion and builds Moncler into this gigantic, successful fashion powerhouse. [00:00:00] S0: It's amazing how often, when you look back at history of luxury brands, it does start with earning the credentials in whatever space it may be. Hermès, with their leather actually being used with the horses or in the field with the watch industry, certainly with Rolex watches. There's some overlap here with Moncler. When you think about the brand today, obviously that street style is what I see, at least on a day-to-day basis. Would you say that is the primary focus? Do they still keep that focus on the actual slopes in the mountains and that type of physical exertion type wear? When you think about the brand as a whole, how do you think they approach that?