My lunch with François-Henri Pinault at Paris’s boutique Hotel Lancaster begins and ends with embarrassment - first mine, then his. Here’s how it started: I stuck my hand out to shake his, but ended up spearing him in his side; he was moving in for an air-kiss. I felt like an idiot. He laughed.

Pinault is the chief executive of PPR, the French behemoth which owns Gucci Group, the luxury conglomerate. He is not very well known outside the business world, and, until recently, had been deliberately underexposed, to avoid comparison with his father, the entrepreneur François Pinault. Pinault pere is a legendary figure in French business, having dropped out of high school and built his company on a willingness to reinvent it whenever the opportunity arose.

In 2005, Pinault pere handed over the reins of Artemis (the family holding company, which owns just over 40 per cent of PPR), to his oldest son. And now, after two years, Pinault fils is starting to emerge from his father’s long shadow. The business is performing well. In March, PPR - which also owns entertainment retailer Fnac, Conforma furniture stores and catalogue giant Redcats - posted a net profit for 2006 of €685m, a 28 per cent rise on the previous year - and then, last month, used a chunk of its cash to buy a majority stake in sportswear giant Puma. Meanwhile, Pinault has appeared on French television, pushing his plan for improving the country’s economy by decreasing the tax levied on companies, taking the savings and giving the cash back to employees via a salary rise - which would presumably spur consumption.

But the news that propelled Pinault off the business pages and into the gossip columns is the announcement that he and his girlfriend, the actor Salma Hayek, are now engaged and having a baby. As a result, when Pinault takes his place at the head of the grand staircase in New York’s Metropolitan Museum of Art this Monday, as co-host of the annual Costume Institute Gala, the party of the year in New York, the level of scrutiny will be intense. Indeed, some say the event, which is underwritten by Gucci Group’s Balenciaga, will be worthy of some of the catty fashionistas featured in the hit television show Ugly Betty, which Hayek has both executive produced and starred in.

For now, however, Pinault is happy to sit back and choose the wine. ”Red or white?” he asks. We go back and forth, and then he orders Chateau Ducru-Beaucaillou 1999. ”It’s my favourite wine,” he says, ”aside from mine, of course.” (Financiere Pinault also owns Chateau Latour.) Did he, I wonder, ever think of not going into the family business? ”Oh, yes. I interviewed at lots of places: Colgate-Palmolive, Procter & Gamble, Price Waterhouse,” says Pinault, examining his escabeche. ”My father’s company was quite different at the time. It was only doing FFr5bn a year in turnover, and the main businesses were lumber and a building merchant network. But I realised that at a place like P&G, you are always assistant to the this, or regional chief of that, but at my father’s company, I would be able to assume full responsibility for a balance sheet, and that was what I wanted.”

Pinault tweaked his first name, which is officially Francois Jean Henri, to Francois-Henri (Francois-Jean doesn’t sound as good), and took a job at the lumber company in 1987. By 1997, he was chairman of Fnac.

It wasn’t all vertical ascension, however; at the same time as Pinault took the reins at Fnac, his father - worried about his own health and the idea that his son was not yet ready to assume control - set up the Pinault Trustees, a group of business leaders who would be in charge of deciding who would take over PPR if something happened.

Once a year for the next seven years, Pinault had lunch with each member of the group individually, and at the end of each year they all met for a big dinner. ”My father would go around the table asking each of them what they thought of me.” Pinault spears a mussel. ”It was a little awkward.”

Yet when the handover from father to son eventually took place, it was Pinault pere’s decision alone. ”I asked him: ’Are you sure?’ We had a strange dinner because he was worried about me worrying about him. But my father’s view is it does not take two to make a decision,” says Pinault.

Indeed, Pinault’s first acts as head of Artemis were to let the legendary design team of Tom Ford and Domenico de Sole go, and then to appoint himself chief executive of PPR. ”I wanted a more hands-on operational role,” he says.

It is not necessarily a coincidence that the reins passed to Pinault at the same time as PPR was transformed into a luxury business. In 1998, it became a white knight in the Gucci versus LVMH (Moet Hennessy Louis Vuitton) fight, spending €7.2bn to buy the group (which, as well as Gucci, includes Yves Saint Laurent, Balenciaga, Alexander McQueen and Stella McCartney, among others), and selling off other businesses such as the furniture maker Guilbert and the electric equipment distributor Rexel to fund the purchase.

Unlike his father, Pinault has grown up in luxury, and at lunch, in a navy Gucci suit, navy Charvet tie and crisp white shirt, he looks the part. ”There’s a strength to being able to look at products through a customer’s eyes, but it is also dangerous,” he says. ”We learned this when we bought Gucci, because Gucci is seen one way in France, and a completely different way in Italy. We were amazed when we found out the size of the brand; it had been a bit dismissed before in Paris, because it wasn’t Hermes.”

Pinault says he will stick with the strategy his father created. ”There are more rich people in the world, in many different areas, so the business is much less cyclical than it was 10 years ago. I believe the market could more than double. We are entering what I think is an age of irrationality and return to fantasy - and luxury is a part of that. We are at the beginning of a social trend, change in values that could go on for years - the age of rationalisation, after all, lasted for more than a century.

”The question we all have to resolve is how big can these brands grow? I don’t know the answer. But my feeling is we stretch them horizontally, into different product categories, rather than vertically, into different price points, which is risky.

”In the meantime, why would I sell any assets? Without an acquisition to make, what would I do with all the cash? There’s so much potential for internal growth in luxury that, unless an opportunity presents itself, I’m not going after anything.”

This is a tacit dismissal of rumours that Pinault plans to dispose of local retailers such as Fnac, which is highly reliant on the French economy, and buy companies such as Hermes and Chanel, with hand-rubbing anticipation of another battle like the one over Gucci. ”I’d never buy something, even if it’s a great brand, that is a competitor to something I already own; that’s insane,” he says. ”Having to choose between brands is what destroys value.”

The brands are not the only thing Pinault is preserving; the internal structure his father created is also unchanged. ”We make three-year plans,” he says. ”Every April, my executives come to me with strategic priorities. The following month, we discuss the most crucial phase: execution. Then, if we approve that, we put figures behind it, and in June and July we consolidate it all and present it to the PPR board members.

”We have written rules that apply to who makes what decision - what can be done by the company, what needs to be approved and so on. Each company then works the same way, on a smaller scale.” This sheds some light on a recent disastrous Alexander McQueen fashion show, where everyone was dragged out to the outskirts of Paris and made to sit in the dark the whole time. This was clearly McQueen’s area of freedom. ”Well,” shrugs Pinault, ”how can you judge someone if you don’t give them any responsibility? Why would I change it?”

Because sons who come into family businesses often feel a need to assert themselves, I say. Pinault looks at me quizzically. At this point, I realise he has finished the three small pieces of sole that made up his main course, without my even noticing he had picked up a fork. He just got on with it - which seems a bit of a theme.

”For me, what this structure means is that the most important thing is the people I hire,” Pinault says. ”It’s a structure built on trust. This is something I learned when I was at Fnac. The first thing I should have done was be more aggressive about changing the management team, but I was too soft; I thought, well, they’re not so good, I will do it myself. That’s never the right thing to think. At the same time, my father was very unpopular because of some executive changes he had made in anticipation of where the group was going. It’s very tough to do that. But it’s the right thing.”

Pinault finishes his double espresso, doesn’t touch the petits fours (he also doesn’t touch the bread or wine), and reaches for the bill. But I have to pay, I explain. A look of horror comes over his face. ”But I chose a very expensive wine,” he says. I had suspected this - that he was doing it to be nice, so I could taste a great wine - but in fancy French restaurants the woman never gets the menu with the prices, so I didn’t know. ”It’s OK,” I say. Pinault looks a little sick. ”This is very weird for me,” he says.

Later, Pinault’s communications director calls me to apologise again, and to explain that it was all his fault, as he forgot to tell Francois-Henri that the FT had to pay, and that Francois-Henri feels like an idiot. I laugh.

It occurs to me a fabulous bottle of wine, only partially drunk, is as good a definition of luxury as any I’ve ever heard.

La Table du Lancaster
Hotel Lancaster, Paris

1 x fraicheur aux fraises des bois d’Andalousie et vinaigre balsamique

1 x cueillette de legumes du moment, jus herbace

2 x escabeche de coquillages et encornets aux cerises ratatinees

1 x filet de sole au parfum de yusu

1 x double expresso

1 x Badoit

1 x Chateau Ducru-Beaucaillou 1999

Total: €368.50