Nearly 20 years ago, the "LV" of Louis Vuitton got together with the "M" and "H" of Moët Hennessy to create LVMH, the first large-scale multibrand company in the luxury-goods industry. Within months, the Wall Street Journal ran an article that predicted the luxury segment would soon be dominated by a few conglomerates that would own all the prestigious brands.

The logic of the prediction was unassailable; the luxury climate had changed. Retailers in the industry were consolidating, and they'd soon need stronger vendors to support them. The market was becoming more global-and increasingly volatile. Multibranding, the reasoning went, would avoid the overextension and cheapening of mature brands. It would build diversification, spreading risk across brands, geographies and product categories. If handbags ebbed, fragrances might flow.

Industry gurus also looked to multibranding to create a host of potential synergies—economies of scale in real estate, advertising, production, distribution, financing and information systems. These companies could lower costs, consolidate management expertise and provide better career paths to develop and retain talented merchants. Indeed, the coming of LVMH cleared a wide path for the march of other multibrand giants such as Richemont, Estée Lauder, Gucci Group, Marzotto and Hermès.

There was only one problem. Someone forgot to tell the "monobrand" companies (Ralph Lauren, Rolex, Chanel, Dolce & Gabbana, Armani, Burberry and others) that they were destined for extinction.

A recent study by our firm found that these monobrands actually grew 60% faster from 1994 to 2004 than the names owned by the multibrand giants, and with roughly equal profitability. (To ensure comparability, we corrected for the effects of acquisition and divestiture, and also converted local-currency data into Euros at the average exchange rate for each year.) Do our findings mean that the benefits of bigness somehow don't apply to the luxury-goods industry? Not quite. Most likely, our data indicate that multibrand conglomerates have been slow to capitalize on their natural advantages.

These companies' most powerful advantage—and, hence, their biggest opportunity—lies in the effective management of the three different portfolios (groupings of physical as well as intellectual goods) that they possess. Such corporations quarter a broad portfolio of talent. Management, therefore, can select its most gifted and insightful people and shuttle them from one brand to another, applying fresh insights and creativity where these would do the most good. The multibrand company also possesses a portfolio of consumer insights that can be used to determine each brand's strategic moves in the market.

But most of all, the big companies have a portfolio of the brands themselves. Like members of any great team, brands can learn to play coordinated, complementary roles in a company's strategy. Some can be called upon to produce profits, while others generate growth. Some brands will become creative playgrounds and proving grounds for up-and-coming designers, while others can train merchandisers to play more commercial roles. Most important, a company can aim each brand at a specific consumer segment, retail channel, customer lifestyle and purchase occasion. That is the classic strategy of consumer-goods giants such as Procter & Gamble, which carefully segments its brands so that they complement one another while simultaneously forming a barrier to competition.

These strategies remain relatively new for the luxury category, but some of the conglomerate corporations do seem to be catching onto the opportunities. Gucci Group CEO Robert Polet, a veteran of Unilever, believes in consumer-goods-style management of his company's brand portfolio, with different roles assigned to each brand. Management sees Yves Saint Laurent, Bottega Veneta and the Gucci brand itself as fundamental drivers of growth. Meanwhile, Boucheron, Gucci Group Watches and YSL Beauté play the role of providing access to new market segments. Finally, brands such as Sergio Rossi and Balenciaga hold the potential for long-term growth.

Not coincidentally, Polet also is a believer in developing creative talent and distributing it across all the brands. Hence, the core Gucci brand has lent its expertise in fashion, leather goods and accessories to some of the company's smaller brands in an effort to help them build market share.

To effectively take advantage of their size, multibrand companies must set differentiated goals for their brands' profit, growth, innovation, competitive and even talent performances. And, of course, they must allocate resources in a way that accomplishes those goals. All those steps will ultimately distinguish them from the monobrands—not only in terms of structure but, more important, success.

Darrell Rigby is a partner with Bain & Co. in Boston. Claudia D'Arpizio is a Bain partner based in Milan. Either can be reached by calling the home office at (617) 572-2000 or by visitingwww.bain.com.