Lew Frankfort Invented Affordable Luxury with Coach. What Brands He’s Betting on Now

Former Coach CEO LewFrankfort’s new book will be published this week. He now heads the Benvolio Group, an investment firm focused on disruptive consumer brands. (Courtesy the author)

When Lewis Frankfort joined Coach in 1979, the brand was a niche leather manufacturer with less than $6 million in annual revenue. Over the next three decades, he transformed Coach into a global accessible-luxury powerhouse fit to compete with Europe’s most formidable luxury brands.

Frankfort, who made Barron’s annual list of top chief executives more than once in the early aughts, retired from Coach in 2014, but his legacy lives on. Coach raked in more than $5 billion in revenue in its latest fiscal year, generating 80% of parent Tapestry’s total.

Today, Frankfort has partnered with his son and son-in-law to head up the Benvolio Group, an investment firm that focuses on early-stage “disruptive consumer-facing brands.” He has also written a book, Bag Man, subtitled “The Story Behind the Improbable Rise of Coach,” to be published Oct. 14 by Harvard Business Review Press.

Barron’s recently spoke with Frankfort at his office overlooking Central Park about Coach’s past and future, and his outlook for the consumer sector. An edited version of the conversation follows.

Barron’s**: What were the pivotal decisions you made that transformed Coach from a small leather-goods manufacturer into an industry leader?**

Lew Frankfort: When I joined Coach, I didn’t have an understanding of brands or fashion. I had spent 10 years in New York City government. At the time, it was largely a Northeastern brand, and its sales were $6 million and production was limited, but the product had a strong consumer following and people really loved their Coach bags. I leaned into consumer analytics and insights to focus on what the underlying equities of the brand were.

What I learned was that Coach was a durable product that represented good value, and what was beautiful about Coach from the very beginning is that we had natural leather that developed a patina over time. So no two bags looked exactly the same. On that basis, I started to build storytelling that would be able to translate those attributes into lifestyle images and experiences that people could relate to.

Simultaneously, I looked at brands that had withstood the test of time. The brand that I admired the most was a small European brand by the name of Louis Vuitton. They had their own stores. They controlled their destiny. It was clear to me that if we could reach consumers directly, we would be able to help strengthen the bond between Coach and the consumer.

Shortly after I joined Coach, I started the mail-order catalog. And in 1981, I opened the first Coach retail store on Madison Avenue in New York City. It was an experiment, and I was told by many that it wouldn’t be successful. It changed our destiny because we had lines down to the end of the street. In the first year, we did over $1.2 million in sales in just 450 square feet. It was remarkable to understand what you could do with a strong service mentality and treating customers as if they were guests in your home.

A third premise was to focus on the essence of Coach. In America, we didn’t have a history of luxury brands, and we needed to look to Europe to really understand what luxury meant. I interpreted luxury more broadly and used the term “democratized luxury,” targeting the top 20% of U.S. households, with another 20% who would be aspirational.

We understood that there was white space between the European luxury brands—which had very limited distribution in the U.S.—and mass brands, which were dominant at the time. We then created a brand that embodied the spirit of America: accessible, not exclusive. Selective, not pricey, but affordable, with superior customer service, and products made of the same materials that European luxury brands are made of, with superior craftsmanship.

Coach is now undergoing a renaissance, but the brand has faced ups and downs through the years. How sustainable is the current momentum?

Today, Coach has recaptured the hearts of young consumers because it is providing what Stuart [Coach’s chief creative officer, Stuart Vevers] calls “expressive luxury.” When I think of Gen Z consumers today, across my other portfolio companies as well, they are looking for brands to talk to them in a genuine way. They aren’t looking for perfection, and Coach was never a brand that focused on perfection. The Gen Zs we are attracting influence their families and others, so there is a lot of spirit and momentum without sacrificing any of the underlying equities.

When you were building Coach, Japanese consumers were the biggest growth driver, soon replaced by Chinese shoppers. Is there a new growth market in the luxury space that investors should look out for?

In China alone, 40 million consumers enter the middle class each year—more than in Europe and the U.S. combined. So China continues to be a major growth market for brands because the middle class is still rapidly growing. In Japan, it was an entirely middle-class society and the market was mature, so we had to insinuate ourselves as an alternative to the European luxury brands by our distinctive product and much more accessible price points. When I first joined Coach, we established some beachheads in England and Western Europe. However, we knew the opportunity was limited, and continues to be limited, because there are established brands and the markets aren’t growing materially.

There has been a lot of talk about a consumer pullback in spending. How do you see the resilience of luxury, and particularly accessible luxury?

Consumers are smart, and they’re discriminating. There are a handful of legacy brands that can withstand the test of time: Look at Tiffany’s and Nike. But for brands that have grown meteorically and have served consumers for only one generation and then lost them, it is harder to restore themselves. One of the challenges is that you have to innovate into where consumers are traveling, and often brands lose their way. They can develop complacency because they are doing well.

You were an early adopter of the use of consumer analytics to drive growth. With the advent of artificial intelligence, it seems that everybody wants to talk about data. How do you evaluate whether a company is making good use of data?

Over the past 20 years, it has become fashionable in the fashion industry to discuss the use of data analytics and consumer insights. From the very beginning of my tenure, we interviewed tens of thousands of consumers individually over each year. And today that continues worldwide.

Now, when I look at brands, I look at their leadership teams, their track record, and the strategies they are using to move to the next chapter. I’m a keen observer of consumer centricity. You need a 360-degree view of a business, which to me is product, brand, consumer, and marketplace. Frequently, brands focus only on two or three of them, but you need a full understanding of who buys your product, how you sell it, what your product is, and what the competition is like.

Which consumer brands are you investing in as a venture capitalist?

We focus on disruptive early-stage consumer-facing brands. We have many investments but are active only in a handful. One that I have been active with from nearly its beginning is Veronica Beard. I’m both an investor and an active board member. I admired a few things: One, they were focused on the active professional woman. Second, they focused on jackets, a category that has the strongest loyalty among women besides bags and intimate apparel.

Today, Veronica Beard is the leading contemporary women’s fashion brand in the U.S. in multiple categories, but the brand is still anchored by jackets, so having a category where there is substantial brand loyalty that anchors your brand is critical as you develop other categories.

Health and wellness is also a focus of our group. One brand we are involved in is mindbodygreen. It provides women content to help them lead productive and balanced lives, and supplement products that have been tested and are successful. That business has grown substantially. We are involved in another supplement business called Fatty15 which has grown exceptionally.

One of our most successful, well-known investments was in a brand called Body Armor, which entered the sports-drink category as an alternative to Gatorade and Powerade. Ultimately, we sold the business to Coca-Cola when it reached more than $1.1 billion in sales.

Another successful brand where we have been active is Malk. It is a healthy, non-milk alternative, and the brand has developed a strong and loyal following. Building brands is what I love doing because of my interest in consumers and trying to understand who they are.

Thanks, Lew.