Kennon-Green & Co. Fiduciary Financial Advisor, Wealth Management, Global Value Investing

If Creed is the king of French perfume houses, Geurlain is the Queen.  It is one of the oldest perfume companies in the world, and for 166 years between 1828 and 1994, the business was in the hands of the Guerlain family.  

In Walt Disney World’s Epcot French pavilion, I visited the Guerlain store, which is one of only a handful of full-fledged Guerlain boutiques in the United States.  I ended up buying three bottles to sample, with plans on returning for a fourth one (the Tonka Imperial) but it was raining and I worried that I might get it for my birthday later this month because I had mentioned it to some family members.  It was a much better experience than my trip to the store last year.  There was this absolutely charming, beautiful young French woman named Charlotte who helped us during our first stop.  

Going through the products made me realize that many people walking by the store probably don’t know the history of this excellent until-recently family-owned enterprise.  It is as much a triumph of economics as it is a demonstration of art.

[mainbodyad]The firm was founded when Pierre-François Pascal Guerlain began making perfumes and selling them at a store on at number 42, rue de Rivoli in Paris, France.  His two sons worked alongside him, formulating and manufacturing perfumes and colognes from the little storefront, until a dozen years later, when they expanded to establish a flagship retail store, also in Paris.  Within a few decades, the quality of the product and the passion poured into the work paid off handsomely.  Guerlain was making perfumes for the Emperors, Empresses, Kings, and Queens of Europe, as well as all of high society in France itself.  

The scents all contained a similar – something – which has been called “Guerlinade” in the perfume industry.  Chances are, if you smell a Guerlain fragrance, you will know it came from Guerlain without being able to put your finger on the reason.  It was that unique ability to create wonderful fragrances that resulted in significant profits for the entrepreneurial family behind the eponymous business.  It brought them status, prestige, employment, and dividends.  It created memories for countless customers across multiple generations of clients who now associate a Guerlain scent with their mother, father, wife,  husband, brother, sister, grandparents, or lost love.  It was, like Creed, the perfect family business.

Guerlain Boutique Orlando Florida Epcot France

Guerlain only has four full-scale boutiques in the United States, despite being the oldest and most famous of the French perfume houses, alongside Creed. (I think of them as the Queen and King of French perfume mastery, respectively.) The Voyou smells like dry sandalwood to me, and reminds me of the studio where my voice professor in college spent years working with me to perfect some German lieder or a French drinking song for a recital. It made me nostalgic. I was going to go back for the Tonka Imperial but it was raining, so I never made it to Epcot a third time.  The Eau de Fleurs de Cedrat on the right is fantastic – it is lemon, cedrat, and verbena.  In the heat, it is wonderful because it is light and smells like freshly squeezed lemon.

Unfortunately, by the 1990’s, the last remaining family perfumer, Jean-Paul Guerlain, had no one in the family tree that was interested in perfuming and to whom he could pass the company.  Instead, LVMH, one of the two biggest and most successful luxury conglomerates in the world (the other being Richemont), acquired the business, making it a subsidiary that produced global profits in multiple currencies for the parent company, and ultimately, the new owners (the stockholders that risked their money to buy a share).  Jean-Paul Guerlain remained an employee of the firm after the sale, but he was required to compete against other designers for new fragrance launches.  

Guerlain Little Black Dress Fragrance

The Guerlain La Petite Robe Noire (little black dress) was a blend of black cherry and licorice, so I acquired a bottle of it, as well.  It looks like it is marketed to a younger crowd, perhaps less affluent (the larger bottle size is only $115).  It seems … nice … but not something one would remember.  It is nowhere near as rich or complex as Hanae Mori Butterfly, which remains my all-time favorite scent for women.

Traits of the Perfect Family Business

Anyway, back to Guerlain as a company prior to the sale to LVMH.  This is what you should be looking for in a perfect family business:

  • Unique brand name ability that allows people to identify and trust your product based upon a high quality reputation
  • Pricing power that allows for very high margins, providing future cash for expansion or dividends as well as inflation protection
  • Profits should be generated in multiple currencies across the world so you do not rely on any one nation for your standard of living
  • The ability to do what you love, and pour your heart and soul into the product so that it is your own work of art; you’d do it regardless of the money
  • Close, tightly knit group of equity owners who are involved in the day-to-day operation of the enterprise and don’t see it as a piggy bank to be drained
  • Prestige that allows you to meet interesting people and do interesting things

If you could build a niche business that did that, even if you only had $10,000,000 in sales with $1,000,000 to $2,000,000 in profit, you would in the top 1% of wealth and income in the United States, do what you love, and be able to afford almost anything, provided you were smart on your purchasing.  You would never be on the Forbes 400.  You would never be a household name.  I don’t think those things matter.  A big part of success is making money doing what you love.  Regardless of income, you need to want to jump out of bed in the morning and race to the office.  Pierre-François Pascal Guerlain knew this.  That is why I love the company, and his legacy.

Now, we have lunch at Les Chefs de France, which is supposed to be excellent.  The thing I love about the nation pavilions in Epcot is that all of the people are here, from their home country, working on 12-month visas.  It’s the people.  Talking to a German confectionary maker about what he misses from his home in Berlin, or an Italian store clerk about summers in Southern Italy is interesting.  The stores are nice, but it is really the experience of seeing so many different types of people interact in an environment that is unique due to the contrived nature of the park.