The Wertheimer family, which controls the Chanel brand, has experienced a century of major changes such as the Franco-Prussian War and the two world wars. When he was involved in world war II because of his Jewish status, he encountered a property dispute and lawsuit by his most important partner, Ms. Chanel. Under the test, the Wertheimer family has shown amazing resilience and successfully achieved the century-old and sustainable development of the family business through the interaction and integration with high-value social capital.
"If you want to be irreplaceable, you have to be different." This quote, which highlights the infinite possibilities of women, comes from the fashion legend Coco Chanel ("Ms. Chanel"). As one of the world's most popular brands, CHANEL has become an enduring legend. Wearing a Chanel suit and having a Chanel No. 5 perfume is the dream of a fashionable woman for a better life.
What is not known to the public, however, is that since the founding of the Chanel brand, it has not been Chanel or her descendants who have been in charge of it, but a very low-key but successful Jewish family, the Wertheimer family. The Wertheimer family has long been at the forefront of the world's richest families, ranking fifth among Bloomberg's richest families in the world in 2019. The French magazine Challenges estimated its family wealth to be as high as 53 billion euros (nearly 420 billion yuan) in 2020.
The Wertheimer family is a French-German family that originated in the Middle Ages. Ernest Wertheimer ("G1 Ennest"), the first founder of the family business, has been in France for nearly 150 years since he immigrated to France in 1874 and has now been passed down to the fourth generation of the family (Figure 2).
The fourth generation of two brothers, Alain Wertheimer ("G4 Alain") and Gérard Wertheimer ("G4 Gehrad"), jointly own and run the family business, including Chanel. According to the 2020 Forbes Global Billionaires List, the two brothers tied for 48th place with a net worth of $17.1 billion each (the two combined $34.2 billion, about 224.9 billion yuan).
In fact, while the great success of the Chanel brand in the 1980s is widely seen as elevating Wertheimer's family wealth to new heights, even without the brand, the Wertheimer family was still a great achievement. In addition to the fashion industries such as cosmetics, perfumes, textiles and clothing, it also includes horse farms, wineries, publishing and finance. According to Bloomberg, Chanel Limited, which is controlled by the Wertheimer family, has 103 subsidiaries.
But the Wertheimer family's low-key restraint stands in stark contrast to the scale of wealth, social status, and international prestige they actually possess. In the more than 40 years of running chanel, the four generations of the two brothers of the family have hardly been interviewed by any media, and chanel's official website is unable to find clues to family information. Even in the Chanel brand runway, which has attracted attention in the global fashion industry, the two brothers often sit in the back seat. Whether it is historians or the public, they know very little about this mysterious family, and tracing the traces of the family can be described as finding a needle in a haystack.
Not only that, between the centuries of establishment, the Wertheimer family and business have experienced a hundred years of great changes such as the Franco-Prussian War and the two world wars, and have also been involved in social unrest and ethnic conflicts many times because of their Jewish identity, and even when their lives are at stake, they have encountered the property dispute and prosecution of the most important partner, Ms. Chanel. Under the weight of many trials and tribulations, the Wertheimer family has shown impressive resilience.
Throughout the entrepreneurial history of this family, social capital has played an extremely important and key role in all stages of development from establishment, expansion to inheritance (attached table).
In the view of economists such as Sang, Stevenson, and Jarino, the social network of entrepreneurs is a high-value, scarce, and difficult to imitate and replicate important resources, which can not only provide the key resources needed for business development, such as material resources, information and emotional support, but also help enhance the reputation and trust of enterprises, promote cooperation with higher value, and thus improve corporate performance. Among the many key factors affecting the performance and inheritance of family businesses, the importance of social capital ranks second. The construction and application of entrepreneurs' social capital is the key factor for enterprises to achieve business success.
Family businesses are the most common form of business organization in the world. Understanding the action strategies of family members and the development path of family businesses helps us to decipher the mysteries of intergenerational inheritance. We also take the Wertheimer family as an example to analyze how four generations of family members have used the power of social capital to achieve longevity in the millennia of grinding.
01 Family generation: accumulate human capital, break through limitations and start a business
The Wertheimer family originally lived in Obernai, the second largest city in the Alsace region of France, which was weakened by the Franco-Prussian War in 1870. After the Treaty of Frankfurt in 1871, alsace and other fortresses were ceded to Germany. G1 Ennest's father, Jacques Wittheimer, remained in Alsace with his wife, Regin Weier, and eldest son, Emil Wettheimer, and chose to be a German naturalizer. The second son, Julian Waitheimer (G1 Julian), and his third son, G1, Ernest, flew to Paris and chose to become French.
When it first moved to Paris, G1 Ernest had nothing. He was first in charge of the export business at the manufacturing company Dreyfus &;;;;; Kaufmann House, and quickly rose to the rank of partner with his ingenuity.
G1 Ennest Wertheimer
Link weak relationships, the family gets the first pot of gold
In 1892, G1 Ernest, who had gained enough experience, founded his own company. Subsequently, he moved to 66 Rue Otterville in Paris, where he greeted the gentlemen who lived on the street every day. It was among these limitedly interactive and intimacy neighbors that an Austrian Jew played a fundamental role in the take-off of the Wertheimer family's business. He is Émile Orosdi, a partner at Bourjois, a well-known parisian make-up and perfume company, who brought G1 Ennest into Myo Paris' social network.
Granovetter, a well-known sociologist at Stanford University, has found that compared with "strong relationships" such as siblings, relatives or close friends, "weak relationships" such as classmates, friends and neighbors can act as "information bridges" between different circles, bringing scarce resources (opportunities, funds, etc.) to individuals and creating opportunities for upward mobility.
Joseph-Albert Ponsin, the founder of Myo Paris, was an actor in a Parisian theatre. He developed a whitening powder for stage actors, improved his previous greasy stage makeup, and officially started his own company in 1863. Run by partner Alexandre-Napoléon Bourjois ("Bourjois"), Myo Paris quickly transformed from stage cosmetics to develop a series of popular products.
Similar to G1 Ernest's experience, Bourgeois started out as a junior employee at Myo Paris, but the visionary young man later acquired the company in 1868. In 1890, Emile Orosdi invested 12,500 francs to join Myo Paris, became a partner with Bourgeois, and the Myo Paris Company changed its name to A. Bourjois＆Cie。
While the business was booming in Myo Paris, Bourgeois died in 1893 at the age of 47. After that, Orosdi continued to work with Boroline Bourjois, the widow of Boroy, and her son-in-law for a period of time, eventually acquiring the entire stake in the Bourgeois family.
In order to expand the scale of the company, Orosdy began to look for a stronger partner. Eventually, he locked in G1 Ennest, which was living on the street. G1 Ernest signed an agreement on 30 July 1898 to buy 50% of the shares and management rights of Myo Paris for 250,000 francs. Since then, he and his brother G1 Julian have embarked on the road to the fashion empire.
Orosdi's brother Leon Orosdi, along with Hermann Back, opened the Middle East's first major department store, Orosdi Back (nationalized by the Egyptian government in 1957 and renamed Omar Effendi, now Egypt's oldest department store chain) in 1893. The department store was a huge success, rapidly expanding to places like Manchester, England, and so were the all-you-seeing of the pink and perfumes. The Wertheimer family thus earned their first pot of gold.
The first investment was a great success
G1 Ernest, along with Théophile Bader and his cousin Alphonse Kahn, were all Jews who had fled the war and had met in Paris, and as various "anti-Semitic" events broke out, they exchanged letters and established frequent contacts and deep friendships.
In 1893 Bud and Kahn began to establish a fashion store. In 1909, G1 Ennest and partner Orosdi lent Galeries Lafayette 800,000 francs for a building at 23 Rue de la Chaucet to build the galeries Lafayette Haussmann flagship store. After completion, Miao Paris naturally entered the exhibition and sales. With the vigorous development of Myo Paris, the wealth level and social status of the Wertheimer family have been significantly improved.
In 1909 the Wertheimer family contributed to the expansion of galeries Lafayette
Looking back at the entrepreneurial experience of the family generation, it is particularly noteworthy that although the mobilization of social capital helps to enhance the social status, wealth and prestige of the individual, when the individual and the social capital to which he or she is connected are in a lower position in the social structure, due to the generally low value of available information and opportunities, reciprocal activities carried out directly through "strong relations" do not help to improve the level of wealth and social status; on the contrary, if you focus on improving the value of your own human capital (such as improving the professional level, accumulating work experience, etc.) The ability to engage in reciprocal activities with "weak relationships" of higher social status and richer resources will be more conducive to individual upward mobility. This also coincides with the research of Lin, White and others.
02 The second generation of the family: relying on social capital, it is difficult to expand the industry
In 1917, the second generation of the family's two brothers took over the board of directors of Myo Paris. On October 14, 1927, the first generation of founderS, G1 Ennest, died, and the family business officially entered the era of second-generation management.
The younger second-generation brothers are quite similar – poorly educated, a lover of travel, and good at marketing. In 1903, 6-foot-tall, black-haired, brown-eyed Paul Wertheimer ("G2 Paul") officially joined the family business. On September 23, 1905, the boy, who spoke fluent German and Spanish, boarded the French Navy's first-class battleship Lorraine for New York. Over the next few decades, G2 Paul traveled around Europe with suitcases filled with samples of Myo Paris.
G2 Paul studied at he was "pulled" by his uncle Jules Bollack and attended heying the Hector School of Business (HEC) in Paris. But Pierre Wittheimer (G2 Pierre) had little higher education. Like her brother, G2 Pierre took samples of Myo Paris, from the Atlantic coast to the Pacific coast, from the Mexican border to Lake Manitoba, and delivered fat powder and perfume vials to any customer who wanted it.
In the 1930s, bourjois house signed licenses in more than 100 countries thanks to the brothers' continued and tireless promotion. Since 1912, The most popular classic powder in Paris, Java Rice Powder, has sold 2.5 million boxes worldwide every year.
Expand weak relationships and expand the scale of family business
I met Ms. Chanel and founded the Chanel Perfume Company
Coco Chanel was originally named Gabrielle Chanel. With the help of two lovers, Étienne Balsan (French fabric dealer) and Arthur Edward 'Boy' Capel (British industrialist), she founded her first women's hat shop, Chanel Modes, at 21 Rue Combon in Paris in 1910.
Although there were already many clothing stores on Cambon Street at the time, chanel's children's hat business began to flourish after the famous actress Gabrielle Dorziat wore a Chanel hat and starred in the play "Bel Ami". Subsequently, Chanai's children's clothing was also minimalist and practical, liberating the mobility inconvenience caused by the complicated clothing of famous ladies and noblewomen, and was favored by professional women after World War I.
In 1921, Ms. Chanel was introduced by Archduke Dimitri Pavlovic of Russia in exile in France, and met Ernest Beaux, the royal perfumer of the Russian Tsar, in a perfume laboratory in Grasse, France. Not only was Bao a chemist, but he also received the Order of the Cross and the Order of Honor as a soldier in World War I. Bao's brother is an executive at Alphonse Rallet & Co., Russia's largest perfume and soap factory, which employs hundreds of workers exclusively for the royal family.
The baptism of war gave Bao the inspiration and impulse to innovate perfumes. When he returned to the lab, he began experimenting and studying a new chemical component, acetaldehyde, which was the core ingredient of chanel 5 perfume. In Ms. Chanel's own words: "This is what I want, a perfume that smells very different from the past." "The groundbreaking nature of the No. 5 fragrance is not only that the taste completely breaks with tradition, blending luxury and elegance, but more historically, it is the world's first perfume with acetaldehyde mixed floral fragrance.
Ms. Chanel not only has a keen sense of fashion design, but is also a master of marketing. In order to promote the No. 5 perfume, she specially went to a high-end restaurant to dine, spraying perfume on the ladies who passed by, causing target customers to rush to buy. After the success of the No. 5 perfume, Ms. Chanel and Bao successively launched classic perfumes such as No. 22 and Island Forest. Chanel perfume soon became popular on five continents, and the supply exceeded demand.
By this time, Chanel hats were already on sale in Galeries Lafayette. The savvy Bard saw the market potential of perfumes. He reminded Ms. Chanel that if she planned to sell perfumes in Galeries Lafayette, she would have to guarantee production, and Bao's perfume laboratory was far from enough. So Bud threaded a needle in a Duvier horse race to introduce Ms Chanel to his old friend G2 Pierre. Since then, the Wertheimer family has begun an indissoluble relationship with Ms. Chanel.
In April 1924, G2 Pierre reached an agreement with Madame Chanel to use her name as a perfume brand, but she herself was not involved in the operation of the business. In the same year, the Chanel perfume company Les Parfums Chanel was officially founded. Ms. Chanel owns 10% of the formulation and manufacturing process, Bard, co-founder of Galeries Lafayette, holds a 20% stake, and G2 Pierre provides all the financing, production, marketing and distribution operations, in return, he owns 70% of chanel perfume (Figure 4).
Perfume No. 5 was a great success, but it damaged Ms. Chanel's relationship with G2 Pierre. Ms. Chanel believes she has been treated unfairly because chanel perfume uses her name, but she only gets 10% of the profit. In 1935, in an effort to gain a greater interest, Chanel hired a lawyer to file a lawsuit to renegotiate the share ratio. Her stake in the Wertheimer family's Chanel company ran throughout World War II and lasted for a decade.
Meet Felix Armit and found the aircraft manufacturing company SECM
The second generation of The Wertheimer brothers, while growing the Myo Paris brand and investing in the creation of the Chanel perfume company, were also involved in another promising business - aircraft manufacturing , on the recommendation of their cousin Friborg, who ran the grain trade.
At the beginning of 1916, the European countries that had just experienced World War I were still on alert, and the research and development and production of armaments and materiel were in short supply. The G2 brothers' cousins Jules Friborg and René Friborg met a new friend, the gifted mechanic Félix Amiot.
Born in 1894 to a Christian family in Cherbourg, a military fortress in northwestern France, Amit settled in the Paris suburb of Issy-les-Moulineaus, where French aviation pioneers Louis Blériot, Voisin and the Farman brothers built their planes. Amit was so influenced and inspired that in 1912 at the age of 18 he built the first two-seat monoplane, the Amiot 01. In October 1915, Amit developed a process for assembling metal parts using stamping technology. The technology, which was crucial to aircraft manufacturing, caught the attention of Louis Loucheur, then France's defense minister, who suggested Amit to serve as the director of an aircraft manufacturing plant and intended to order equipment from Amit, but did not provide funding.
On 25 July 1916, the Fribourg brothers, who were optimistic about the prospects of aircraft manufacturing, invested 200,000 francs and participated in the creation of the Stamping Machinery Manufacturing Company (SECM). The Wertheimer brothers, introduced by the Fribourg brothers, joined the commercial venture on 12 March 1918. With the joint investment of the two families, the registered capital of SECM climbed to 700,000 francs, the Wertheimer brothers received a total of 1/3 of the shares, and G2 Pierre became the chairman. In the 10 years after 1919, SECM produced a series of French military aircraft.
In 1928, SECM acquired the seaplane company Latham, and the following year merged six aircraft manufacturers related to the Lorraine-Dietrich brand to form SGA.
Although the Wertheimer brothers and Amit earned high dividends for shareholders, the frequent high-priced M&A deals in a short period of time resulted in a loss of 55 million francs for SECM. To avert the crisis, the government authorized aircraft manufacturers Marcel Bloch (renamed Marcel Dassault, After World War II), Henri Potez and Amit to acquire SGA's assets. On 30 July 1934, the Brothers Amit, Wettheimer and Fribourg bought back the SECM for up to 9 million francs.
At this point, the relationship between the Wertheimer brothers and Amit has gradually deepened with the continuous development, growth and setback of SECM, forming a "community" with interests tied, status and prestige. Safeguarding the interests of this community collective and improving the survival chances of collective members is also conducive to safeguarding the interests of individuals. Thus, as a member of the community, Armit played a pivotal role in preserving SECM and the Wertheimer family estate after the Wettheimer family members fled to the United States.
Maintain strong relationships and protect the family and business in times of crisis
In 1939, World War II broke out and France fell. The Nazi government vigorously promoted "Aryanization" and implemented anti-Semitic policies. A member of the Wertheimer family, a Jewish member, with the help of Linnold Paul's old hector (HEC) classmate of G2 Paul's Parisian high merchants (HEC), he obtained a Brazilian visa to travel to Rio de Janeiro, and then arrived in New York in batches. Machado is the president of the Rio de Janeiro Jockey Club, has aristocratic ancestry, and shares common hobbies with the Wertheimer brothers – horse breeding, horse racing.
In June 1940, during a military conflict between Germany and France, three of SECM's workshops on the outskirts of Paris were destroyed. In October, Amit received an advance payment of 3 million francs from the Ministry of Aviation, evacuated more than 3,000 employees to the south of France, and moved the factory to Junkers Flugzeug-und-Motorenwerk in Germany.
Throughout World War II, Amit mediated between the Nazi government in Germany, the Vichy government in France, and the French Resistance.
In order to make up for the loss of LATE PAYMENTS by SECM, with government funding, Amit established a company on the territory of the Vichy government of France. In 1940, the government of Nazi Germany asked Amit to work with Junkers to build 370 Ju 52 transport aircraft. It was the first large order worth 1.2 billion francs, and Amit agreed to it, but he gave two orders to the company's management: first, to slow down production as much as possible without attracting the attention of the Nazis; second, to reorganize the Marseille factory and demand the employment without discrimination of all kinds of groups, including those persecuted by the Nazis, to provide job opportunities. After World War II, when Amit's case of cooperation with Nazi forces was examined, his actions were given extra consideration.
As Amit mediates between the various forces, Chanel's dissatisfaction with the distribution of shares is escalating.
At this point, the Wertheimer brothers, who had fled to the United States, were unable to confront Ms. Chanel head-on, but as early as May 1940, the two brothers transferred control of the family business to Amit. In order to avoid "Aryanization" of SECM and the Wertheimer family business by directors appointed by the French Vichy government, Amit covered up the minutes of the board meeting and tampered with parts of it, so that the names of the Wertheimer brothers disappeared from all company documents. In October of the same year, G2 Pierre authorized his friend Georges Petit-Barral in New York as his legal representative to conduct a fictitious transaction in which their assets in France, including all of SECM's shares, Chanel Perfume and Miao's majority stakes, were transferred to Amit's custody. These legal documents were formally signed in 1941.
But the Germans soon found the light, and the Nazi and French Vichy governments demanded that Amit provide evidence of the "Aryanization" of The Wertheimer Enterprise. Under suspicion, Amit had to pay a consideration of 55 million francs (about $10.24 million now, financed by credit, backed by $2 million that the Wertheimer family gave to Amit, to persuade Credit Suisse and Comét France, which worked with the Wertheimer family, to lend money).
The storm seems to have settled. But on April 3, 1941, Amit was ordered to accept questions about the trading of shares in The Paris and Chanel Perfume Company. At the time, chanel 5 perfume had annual sales revenue of $9 million (equivalent to $240 million today). Such high profits made Ms. Chanel determined to regain control of the Chanel company from the Wertheimer brothers.
On May 5, 1941, Ms. Chanel, citing herself as an "Aryan," wrote a petition to Georges Madoux, a German official in charge of disposing of Jewish assets, requesting that her exclusive right to Chanel perfume be granted legally. "I have an indisputable priority because the business of this company is my exclusive creation, and the proceeds I have received in the past 17 years are disproportionate to the benefits I have received..." She angrily declared: "G2 Pierre is a robber who plunders me!" Because Perfume No. 5 is the most lucrative product of chanel perfume companies."
The German government eventually commissioned the Aryan man Madhu to verify the authenticity of the Chanel perfume company "Aryanization". Madhu believed that chanel perfume company was still a Jewish company. In fact, Ms. Chanel and Madhu have known each other for a long time. Long before World War II, he was sales director for Chanel perfumes and haute couture director for Chanel House.
To win the battle for control of the company, Chanel hired Renéde Chambrun, the son-in-law of Pierre Laval, prime minister of the Vichy government of France, as a lawyer. In September 1942, Amit was even interrogated by the German Gestapo, but with his connections to the Nazi government, he was able to thwart Chanel's plan to seize control of the company.
Unbeknownst to Ms. Chanel, after the Wertheimer brothers fled to New York in 1940, they began to develop the Perfume Market in the United States. G2 Pierre contacted Arnold van Ameringen, president of the American Federation of Perfume Makers, who is also the boyfriend of Estee Lauder, the founder of a well-known makeup brand. The American funded the brothers' factory in New Jersey and promoted chanel 5 perfume through massive advertising campaigns.
But the important raw material for making No. 5 perfume, Grass Jasmine, is only produced in the aldehyde peaks of Grasse, France. The brothers recruited Gregory Thomas, a shrewd manager, to source key ingredients from France, such as jasmine and tuberose. The task of obtaining supplies during the war was daunting, and Thomas secretly exported gold to France, then took Jasmine Essence from Grasse and quietly transported it into the United States. This path worked until December 1941, when the United States entered World War II. He later became president of Chanel USA, a position he held for 32 years.
When Ms. Chanel finally learned that the Wertheimer brothers had built a factory in New York to manufacture Chanel perfume and signed a distribution agreement with the U.S. military, she was furious. But as World War II drew to a close, her relationship with Nazi officer Hans Gunther von Dincklage was revealed and she was interrogated by the French Liberal Purge Commission on suspicion of espionage. Eventually, she was acquitted for failing documentary evidence of cooperating with the Nazis. Ms. Chanel once said: "It was Churchill who set me free. ”
Immediately after her release, Ms. Chanel fled from France to Switzerland and began a new "revenge" program to undermine customer confidence by destroying chanel 5's brand image. On the one hand, she announced that she would create a new Chanel 5 perfume, naming it "Mademoiselle Chanel No.5", which is only available to a small number of high-end customers; on the other hand, she filed a lawsuit again.
The New York Times reported on June 3, 1946, that "Ms. Chanel's lawsuit demanded that the French parent company (Chanel Perfume) cease manufacturing and selling all products named after Ms. Chanel and return to her ownership of the products, including the products, formulations and manufacturing processes, on the grounds of 'inferior quality'".
Sure enough, after the launch of "Miss Chanel 5", the sales of "Chanel 5" plummeted, but for the Wertheimer brothers, what is more severe than the impact on revenue and profit is how to maintain Chanel's brand image, after all, litigation will inevitably lead to public and customer troubles.
At the critical moment, a prisoner of war returned to France from a prisoner-of-war camp near Hanover, Germany, helping the Wertheimer brothers regain control of Myo Paris, and he was Baron Robert de Gay de Nexon. G2 Pierre recruited Nixon, a World War I hero and French bridge champion, in 1932 and appointed him chairman of Myo Paris. Nixon's half-brother, Baron Maurice de Nexon, was Madame Chanel's uncle.
In the end, under pressure from many sides, Ms. Chanel had to "surrender". The Wertheimer brothers and Ms. Chanel finally reached a new agreement on May 17, 1947, in which the latter received $400,000 in wartime profits from No. 5 perfume (equivalent to $9 million today), plus 2 percent of all future Chanel product revenues, as a royalty for Ms. Chanel's name (estimated at up to $25 million per year).
The new agreement made Ms Chanel one of the richest women in the world at the time. In addition, G2 Pierre agreed that Chanel would pay for all the living expenses of the rest of her life, from taxes to stamps. After the agreement was reached, Chanel stopped producing perfume herself, and at the same time gave up the exclusive right to her name and lived a good life in Switzerland with her lover Dinklag.
By 1954, the Wertheimer family had finally taken full control of Chanel's perfume and fashion business.
Looking back at the experience of the second generation of the Wertheimer family, the power of social capital is particularly remarkable. The "weak relationships" of the new connections (such as Ms. Chanel, Amit, Arnold van Ameringen, etc.) play a crucial role in the growth of family wealth, the expansion of business size, social status and prestige; the existing and later established "strong relationships" (such as Machado, Amit, etc.) play a decisive role in turning the tide in times of crisis. This also validates the research of Lin, Granovetter and Uzzi.
With the joint efforts of the second generation of the family's brothers, the Wertheimer family's social network and business scale are no longer what they once were, and they have jumped to a higher platform (Figure 5).
G2 Pierre eventually chose to naturalize in Mexico, which has no inheritance and gift taxes and is one of the most property-friendly countries in the world.
03 Three generations of the family: addicted to horse racing, social network stagnation
When G2 Paul died in 1948, G2 Pierre acquired the entire stake in the family business from his brother's widow and children. In 1965, G2 Pierre died and the stake was passed on to his son Jacques Wertheimer ("G3 Jacques"). But the artistic third-generation leader is known for his management of the family's racecourse and horse racing business.
G3 Jacques was very indifferent to the family business, and his father made no secret of his contempt for his son, both in public and in private. When a business collaborator asked G3 Jacques for his opinion, G2 Pierre preemptively replied: "Don't ask him his opinion - he is stupid." In 1974, G3 Jacques was expelled from the family business for mismanagement, but he remained a member of the Supervisory Board until June 1978.
G3 Jacques's ex-wife, Eliane Fischer, contributed greatly to the Wertheimer family. They married on March 26, 1947, and divorced on September 11, 1952. Later, Fisher remarried Didier Heilbronn ("Didier").
Didier's great-grandfather, Léopold Louis-Dreyfus, was the founder of Louis Dreyfus, one of the world's four largest grain merchants. Fisher and Didier's son, Charles Heilbronn, later co-founded Mousse Partners Limited, a single family office with the fourth generation of the Wertheimer family, G4 Alain and G4 Gerrard, who were half-brothers.
The common mother of the three brothers, Fisher, was a law-abiding woman. In 1978, she co-founded the law firm Salans LLP (founded as Salans Hertzfeld & Heilbronn) in partnership with American lawyers Carl Salans and Jeffrey Herzfeld. Her first client was Chanel. Fisher is well versed in both intellectual property and retail trade. She not only advises the Wertheimer family on the law, but also helps them close deals.
In 2013, Salans LLP merged with SNR Denton in the UK and Fraser Milner Casgrain in Canada to form Dentons, and in November 2015 with Dentons in Beijing to form Dentons.
In 1996, G3 Jacques died, and the fourth generation of the family's two brothers, G4 Alain and G4 Gerrard, inherited their father's shares, and the two shares were exactly the same. Although the third generation of young people did not have much success, and the performance of the company declined significantly, due to the stable socio-economic environment at that time, the family business did not suffer a serious blow that affected its own survival (Figure 6).
04 Four generations of the family: reform and reorganization, create brilliant again
After G3 Jacques was expelled from the board in 1974, his 25-year-old son, G4 Alain, persuaded Chanel's board of directors to take over the company. G4 Alain had little business experience, but he quickly found a direction of reform – returning to the core business, vertically integrating upstream and downstream, and reshaping the sense of brand scarcity.
First, G4 Alain withdrew Chanel perfume from the pharmacy channel and focused on high-end store distribution. At the same time, in order to create a more scarce feeling for the market, G4 Alain quickly reduced the number of Chanel 5 perfume stores in the United States from 18,000 to 12,000, while spending a lot of money to promote Chanel perfumes and cosmetics.
Second, G4 Alain refuses to relinquish control of a variety of products: from $200 per ounce of perfume and $225 in ballet shoes, from $11,000 dresses to $2,000 leather handbags, which he personally manages. In fact, CHANEL is still one of the few companies in the cosmetics and apparel industry that does not license perfumes, cosmetics or clothing to other manufacturers or distributors.
By the 1990s, despite the global economic downturn, Chanel 5 not only maintained its position as a global perfume leader under the leadership of a new generation of leaders, but also became the industry's top innovator. In the 1980s and early 1990s, CHANEL's performance was enviable.
Third, in order to maintain existing resources and get more "strong relationships" to help, G4 Alain hired his mother's law firm as the company's general counsel. His younger brother G4 Gerald settled in Switzerland and was in charge of the Chanel watch department. In 1987, half-brother Charles Heilbronn also joined the Wertheimer family business.
Finally, in the late 1980s, G4 Alain transformed the Chanel fashion department into a profit center and moved its headquarters to New York. On the one hand, he increased his investment in Chanel's fashion business, acquiring textile manufacturers, integrating upstream and downstream industrial chains, and expanding new product lines (Figure 7); on the other hand, he boldly divested companies with weak relevance to the core business (such as the sale of the long-established family business Myo Paris to Coty in the United States for about $239 million in April 2015).
An important reason for chanel's success at this stage also included the hiring of the famous designer Karl Lagerfeld in 1983. He not only succeeded in maintaining Chanel's classic brand image, but also washed Chanel's "anti-Semitic" image.
Chandler, a well-known scholar of corporate history at Harvard University, studied the development of American enterprises in the 100-year period from 1840 to 1940 and found that the growth of family businesses is a process of gradual socialization, which will eventually develop into professional managers. The further development and growth of the enterprise after the succession of the fourth generation of brothers in the family is also related to the gradual institutionalization and standardization of the management method of the family enterprise, and the professionalization and specialization of the senior management team.
In 2007, the family hired Maureen Chiquet, a manager who had worked for Gap and L'Oréal, as CHANEL's CEO (now retired). Under the management of Kirkett, CHANEL's performance has been greatly improved, and its international organizational structure, cultural atmosphere and leadership position have also been greatly enhanced (Figure 8).
We are not yet able to give an exact picture of the changes in the social network of the fourth generation of the two brothers, but it is obvious that the Wertheimer family has undergone a century of tempered development, the family business has continued to integrate with "high-value" social capital in the process of growth, the organizational structure has been continuously improved (Figure 9), and the profitability and capital scale have also increased significantly.
05 Social capital is the final arbiter of victory in a long competition
The growth history of family businesses is essentially a development process that constantly integrates with social capital. Looking back at the development process of the four generations of the Wertheimer family, from the first generation starting from scratch, to the second generation growing their careers in the dangers of war, to the third generation of unfavorable operation and the fourth generation of brilliant achievements, under the objective conditions of only two family members in each generation, this family has successfully achieved the improvement of social status, prestige and wealth level through interaction and integration with high-value social capital, and has also brought long-term competitive advantages to the family business.
The experience of four generations of the Wertheimer family in co-founding the Chanel business empire is a powerful illustration of the assertion that social capital is the final arbiter of victory in a long competition.
This article originated from New Fortune