Why Is Dior Strengthening Its Vertical Integration Strategy?

In a recent press release, the LVMH group announced its intention to intensify its vertical integration strategy, notably for its Dior house. The company's strategy is based on greater control of the various stages in its production chain. A few months ago, the image of the emblematic house was damaged by a scandal linking the production of certain Dior bags to illegal workshops in the province of Milan.

This summer, following the publication of first-half results, CFO Jean-Jacques Guiony - who will be replaced by Cécile Cabanis on February 1, 2025 - had already acknowledged these problems during the 2024 first-half results conference call. In particular, he mentioned that the Group was planning to bring more production in-house, a process that was already underway at Louis Vuitton, but less advanced at Dior.

Today, the project is taking shape, as Dior has just created its own industrial department. Its strategic objectives are to strengthen production capacity over the long term, preserve the know-how of its craftsmen over the long term, and guarantee the exemplarity of its production processes. At the head of this new department is Italian Giorgio Striano, former Managing Director of eyewear giant EssilorLuxottica and a global expert in industrial management, who will take up the reins as Chief Industrial Officer from January 2, 2025. He will be responsible for all industrial activities and will report directly to the President and CEO of Dior, Delphine Arnault, daughter of Bernard Arnault, himself CEO of LVMH. Meanwhile, Nicolas Carré, with twenty years' experience at Louis Vuitton, will take up the position of Industrial Director for leather goods.

Although the damage suffered by the brand is difficult to quantify, it is plausible that this episode has accelerated the internalization of Dior's production chain, a trend that is now gaining ground among several industry giants. Indeed, the luxury goods industry must meet growing consumer expectations in terms of ethical commitment and transparency. For example, Gucci - part of Kering Group - has adopted a similar strategy by acquiring, via its subsidiary Gucci Logistica, 100% of the Colonna Group, owner of three major tanneries in Tuscany: Marbella Pellami, Conceria 800 and Falco Pellami, all located in Santa Croce sull'Arno, a region renowned for its leather expertise.