Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Burberry Family Lost a British Fashion Icon
Transcript
- Lucas: Luna, when you think about Burberry today, what comes to mind first? Luna: Honestly? The check pattern, the trench coat — and maybe the fact that it's been around forever, but it feels like a very modern luxury brand. Lucas: Right. It's one of the few British houses that survived a near-death experience. But what most people don't know is that Burberry was a family business for over a century — and the family lost control in a very specific, avoidable way. Luna: I've heard bits of that story, but never the full timeline. Where does it start? Lucas: Thomas Burberry founded the company in 1856 in Basingstoke. He was a draper who invented gabardine — a waterproof, breathable fabric that became the foundation for the trench coat. That coat was adopted by British officers in World War One, and suddenly Burberry was iconic. Luna: So the brand was synonymous with function and durability, not just fashion. Lucas: Exactly. And Thomas ran it as a classic family firm. When he died in 1926, his sons took over. But here's the crucial detail: the family never owned 100% of the equity after the 1950s. They took the company public on the London Stock Exchange in 1955, selling about 30% of the shares. That was the first crack. Luna: So they were still majority family-controlled, but the dilution had begun. Lucas: Right. For the next three decades, the family's stake slowly eroded through inheritances, estate taxes, and secondary offerings. By the mid-1980s, the Burberry family collectively owned less than 40% of the company. Luna: And that's when things started to go wrong? Lucas: Well, the business was still profitable, but it was sleepy. The brand hadn't been modernised. Then came the 1990s — and a disastrous expansion strategy. Management decided to license the check pattern to everyone. Cheap scarves, bags, even dog accessories. The brand went from luxury to mass-market almost overnight. Luna: I remember seeing Burberry check on everything in the early 2000s. It became a bit of a joke. Lucas: Absolutely. And the financial toll was brutal. By 1998, the company needed cash. They did a rights issue — basically a discounted sale of new shares to existing investors. The Burberry family didn't have the liquidity to participate fully, so their stake dropped below 10%. Luna: So the family lost effective control not because of a hostile takeover, but because they couldn't write a check. Lucas: That's the quiet killer in family businesses. Illiquid wealth. The family had most of their net worth tied up in the company, but no cash to buy more shares when the company needed capital. They went from being the controlling family to just another shareholder. Luna: And then what happened? Did the family regroup? Lucas: Not really. In 2001, the board brought in Rose Marie Bravo from Saks Fifth Avenue to turn things around. She killed the licensing deals, pulled the check pattern back, and repositioned Burberry as high-end luxury. It worked — revenues tripled within a few years. But the family had no say. The board was now controlled by institutional investors. Luna: So the family that built the brand was just along for the ride. Lucas: Worse. In 2005, the family tried to stage a comeback. A group of descendants — including Thomas Burberry's great-grandson — proposed a slate of directors to the board. They argued the brand was losing its heritage. But the institutional shareholders voted them down. The family had less than 5% by then. Luna: That must have been painful. To watch your family's legacy run by outsiders. Lucas: And it got worse. In 2020, Burberry was hit hard by the pandemic. Sales dropped 30% in a single quarter. The stock crashed. A private equity consortium — led by a group backed by the Qatar Investment Authority — bought a 9% stake and pushed for changes. The family had no seat at the table. Luna: So the final lesson here is about capital structure. If you want to keep the business in the family, you need a plan for future capital needs without diluting yourself. Lucas: Exactly. The Burberrys didn't anticipate the cost of staying relevant. They didn't set up a family office or a trust that could participate in rights issues. They just assumed the business would always generate enough cash. It didn't. Luna: You know, listening to this, I'm reminded of something. Lucas: What's that? Luna: If today's episode was worth even a small coffee to you, honestly, the link is buy me a coffee dot com slash fexingo. It's the easiest way to keep these deep dives ad-free. Lucas: Yeah, it's the smallest ask. If the show moves your thinking forward even a little, that's the link. Luna: And it genuinely helps us spend more time on stories like this one. Lucas: So back to Burberry. The really interesting part is that the family's loss of control wasn't inevitable. There were specific moments where a different decision could have preserved their influence. Luna: Which moment do you think was the biggest missed opportunity? Lucas: I'd say the 1998 rights issue. If the family had a pre-arranged credit line or a family investment vehicle, they could have maintained their stake. Instead, they watched it drop below 10%. From there, it was a slow slide. Luna: So the lesson for any family business is: plan for dilution before you need the cash. Not after. Lucas: Right. And there's another angle — brand control. The Burberry family lost control of the brand before they lost control of the equity. They let the licensing run wild. By the time they tried to pull it back, the market perception had already shifted. Luna: So there's a dual loss: financial and reputational. And one feeds the other. Lucas: It's a cautionary tale that applies way beyond fashion. I think about it with certain food brands, too. You expand too fast, you license the name, and suddenly you're not selling what made you great. Luna: Do you think the Burberry family ever regretted going public in 1955? If they'd stayed private, they might still own it today. Lucas: Maybe. But staying private has its own risks — concentrated wealth, lack of liquidity, inability to attract top management. The Burberrys chose growth and access to capital. They just didn't build the guardrails to keep control. Luna: It's a hard balance. You want the business to grow, but you don't want to lose it. Lucas: And that's the core tension in every family business we cover. The Burberry story is one of the cleanest examples of how that tension plays out over generations. Luna: So if you're listening and you're in a family business — or advising one — the takeaway is clear: get your capital structure right before you need it. Lucas: And protect your brand equity like it's the only asset you have. Because ultimately, that's what the Burberrys lost first — and they never got it back.