BrandWatch by Michel Gutsatz

Moutai - the first Chinese luxury brand?

2012-01-29T19:18:00+01:00

A controversy arose a few weeks ago in the Chinese media over "China's National Liquor", the Maotai (a white alcohol obtained by the distillation of sorghum). Produced since the Han dynasty, gaining great popularity in the course of the 18th and 19th centuries, this alcohol is now produced by several companies; two of which were featured in a recent Hurun Report:

Kweichow Moutai and Wuliangye are ranked No. 4 and No. 7 respectively in terms of value among luxury global brands (World's Most Valuable Luxury Brands 2012)
Kweichow Moutai holds 5th place in a list of gifts most offered by wealthy Chinese (among which are Chanel and Apple) Top Ten Gifts for the Chinese Luxury Consumer 2012.

The price of a bottle of Flying Moutai (their best seller) is now around € 200 – as compared to € 4 ten years ago - and some bottles even fetch a price of several thousand Euros. We are therefore looking at an undeniable shift towards the up-market bracket – of a product where quantities remain limited (see graph), allowing the brands in question to realize a net margin of 28% to 45%.
The controversy was very well recapitulated during the TV show, below - raising the question that was echoed by all the media: "Is Moutai a vector of corruption?"

The Hurun report clearly illustrates the role that Moutai (like all luxury brands) plays in the Chinese tradition of gifting presents but the reaction to the classification was strong: an official from Shanghai (China Daily, 14 January) even went so far as to propose a ban on serving Moutai at official banquets. Jing Daily quoted the official response of the brand:

"While most brands would be thrilled to be included in such a list, yesterday Maotai spokesman Ye Yuanhong (叶远鸿) categorically disavowed his brand’s inclusion, telling Chinese media, “In regards to being included in Hurun’s luxury brand list, Maotai has never claimed itself eligible to be considered a luxury brand. We don’t know anything about Hurun’s list, and wish to distance ourselves from it ".
Here we find two of the debates that are stirring up opinions in Chinese society, especially amongst its ruling class - whose main objective is to maintain a sort of social harmony and therefore to prevent inequalities from growing too much:

One can indulge in luxury, but not in a manner that is (too) conspicuous
One should fight actively against corruption

Yet, the fact remains that Moutai and Wuliangye possess all the ingredients that could make them true luxury brands (like our Cognac or Champagne) – however they lack, like all Chinese luxury brands, a key element: the skills in luxury brand management (creating a brand DNA / recruiting proper talent / distribution strategies, etc.).

Beware: Rising inequality!

2012-01-01T11:16:00+01:00

One of the Mega-Trends that The Scriptorium Company has been calling attention to for a long time is growing inequality and its impact on the behaviour of populations / consumers. Inequality leads to a feeling of injustice (especially in Europe), it destabilizes the social fabric (China is a prime example) and highlights the increasing polarization of the market (towards low-cost and "überpremium"). A study by the OECD published this month has just reinforced this analysis: "Divided We Stand. Why Inequalities Keep Rising" (the full report is available here).

The results of this study are crucial to understand recent developments all over the world:

In all OECD countries, the incomes of the richest 10% are today nine times higher than the incomes of the poorest 10%. But what is most interesting is the analysis of the change over the last 30 years:

Inequality started to increase in the Anglo-Saxon countries: "It first started to increase in the late 1970s and early 1980s in some English-speaking countries, notably the United Kingdom and the United States, but also in Israel".
It then spread across the world: "From the late 1980s, the increase in income inequality became more widespread".
But since the 2000s it has spread to the "egalitarian" countries of Europe: "The latest trends in the 2000s showed a widening gap between rich and poor not only in some of the already high-inequality countries like Israel and the United States, but also – for the first time – in traditionally low-inequality countries, such as Germany, Denmark, and Sweden (and other Nordic countries), where inequality grew more than anywhere else in the 2000s".

We therefore see that inequality has risen sharply in many countries and that it has very negative consequences on social conventions:

the feeling of having "no future" is growing among the younger generation - this contributing to an escalation in violence.
many segments of the population - especially suburban - feel excluded from the benefits of globalization and reject it as being the source of their exclusion.
the increase in the number of protestations - such as the movements by dissenters in many countries - reflects the sense of injustice towards the "victors" (those whose incomes have risen sharply).
the increase in the number of revolts and revolutions that marked the year 2011 also attests to the disparities in these countries which also are highly inequitable.

The OECD report asserts that the year 2012 will be a year filled with perils when various forms of social flare-ups will run shoulder to shoulder with the most unexpected upheavals.

A bad Renault commercial!

2011-12-18T17:00:00+01:00

When I saw the new commercial for the Renault Mégane I confess I found myself at a loss: Why was the vendor speaking in pidgin Franco-German?
I just read, a little belatedly, a column dated 29 October in Monde Magazine which explained that Renault was parodying an Opel commercial "to vaunt the quality of its Mégane ... And it works ...". According to the article, Renault is happy to have created "a message that can speak effectively of quality, a task that is extremely difficult", and prides itself that one week after its launch the video was watched by 700,000 surfers on YouTube.

I find all this rather upsetting - for two main reasons:

Choosing Opel as a "benchmark" of German quality is a mistake: Opel, a subsidiary of General Motors, is a brand that is not faring well. The mere fact that Opel was forced to create a commercial in German to remind consumers that it is a German brand, and therefore of impeccable quality, speaks volumes about its complete lack of image. Today, the only German brands associated with German quality are Audi, BMW and Mercedes (and Volkswagen to a lesser extent) and they do not need ads in German to convince their clients (and others) of it. Renault's choice of Opel speaks volumes about the disarray of the brand.
The tone of the Renault commercial - with jokes somewhat xenophobic and typically French - is unworthy of an international brand. Evidently, a huge success on the internet was to be expected - going by the number of times a video is viewed. But this success is by no means the confirmation that Renault is building an image of quality: it is merely the measure of interest that internet users have in something that gives them a good laugh.

For several years now Renault has been in quest of its brand DNA. There were a succession of slogans: 1986 - Des voitures à vivre (Cars to live for); 1991 - Vive la vie en Renault (Live life in a Renault); 2000 - Créateur d'automobiles (Creator of automobiles). It was the era of the Avantime and the VelSatis, a time when Renault believed it was creating haute couture in cars. And now, Renault: la qualité version française (Renault: quality, French version). In fact, Renault no longer has real brand substance, and so places itself at the mercy of the first ad agency that comes along that convinces it that such a film can endow it with an aura of "quality". My advice would be to take a closer look at the work that Chrysler is doing to infuse meaning into the "Made in Detroit" label (see my post of March 20), or at the protracted effort made by Audi which has managed, in 20 years, to give real substance to a once-moribund brand. But then, Audi is a German brand ...

La Trocade - Emotion at the heart of Contemporary Art

2011-12-11T21:49:00+01:00

by Virginie Michelet

There were three thousand of them, on 25 and 26 November, who thronged to see the 85 contemporary works of art presented at a temporary gallery in the centre of Marseille. Since when has an exhibition of young contemporary artists aroused such excitement? Ever since Emmanuelle Saint Denis, founder of Mouv'art, and her accomplices of Marseille Off 2013 decided to organize the first "Trocade" in France. What is a trocade (something similar to a sudden racing of the pulse, the instant attraction that whispers in the ear of a fan)? Imagine that you absolutely want one of the art-works on display (and yes, it is in the realm of the possible because quality was the order of the day, quality for which the sponsor, Gerard Traquandi, was one of the guarantors). So you want it. So you spend five Euros on a block of post-its and you write down what you could barter in exchange for the work of art you so desire on some of the stickies. Then you let yourself dream.

It's true, I was there. I saw the post-its: "your table against my mother-in-law for a weekend or ... lessons in Italian", "150 sq.meter house in Saint ... + garden + kitchen garden + a lifelong live-in relationship", "I offer Polynesian shamanic massages and/or Kundalini yoga", "one week in my apartment in Venice near the Grand Canal", "lunch daily for six months or more, negotiable", "an exhibition in my gallery "... and many, many more.

I was really touched by the testimony of some of the people I met by chance: "I let myself be dragged here by my friend; I'm not keen on art because it bores me. But this is different. For someone with a life that is rather orderly, like myself, being here all of a sudden is like clearing the cobwebs from my head", "What I really like is that everyone is talking to each other ... ". After spending two hours to compose just two post-its, someone came up to me, with great hesitation, "I've stuck my offers on top of the others near the two paintings that I adore, do you think I stand a chance of being accepted?". For it is the artists, of course, who will choose the most tempting offer. "The instant attraction works both ways", Emmanuelle Saint-Denis says to me.
As for me, I looked at all these people who were admiring the compositions, gauging them in the light of their offers, their desires, scribbling on a post-it, then tearing it up and choosing another, and finally pasting it on the wall, nonchalantly, or carefully, or eagerly, like a game, or a joke, or picturing that they are meeting the artist, talking with him or her, winning the bid hands down in this novel kind of auction that is a far cry from the system through which we navigate through fair wind or foul... Seeing everyone so liberated, so happy, amused and enthusiastic, I couldn't help thinking that they were like a bunch of overgrown children playing at pinning their hopes on a wall, like pilgrims to Jerusalem, who place their slips of paper in the interstices of a famous wall of a far different kind.   And all at once, there was no longer a question of intellectual judgment, of strolling through a space too big, too empty, that dictates what one should think. It was all about fun and simplicity. Was it because no one talked about money anymore? Was it because, suddenly, the visitors felt involved, active, creative? I came out of this Trocade with my heart shaken, with the certainty that I had just heard one of those almost inaudible signals that, by force of converging, become stronger, make the old systems tremble and create the paradigms of the future.
Virginie Michelet
vm@virginiemichelet.com

CampaignForSafeCosmetics vs. J&J = 1 - 0

2011-12-04T20:17:00+01:00

Johnson & Johnson has had to, in just 15 days, capitulate to the activist association, Campaign for Safe Cosmetics.
In March 2009, the CSC published a report, "No More Toxic Tub", denouncing (among hundreds of other products in the market) the use of two potential carcinogens (quaternium-15 and 1,4-dioxane) by J&J in its baby shampoo. Quaternium-15 is a preservative that releases formaldehyde and 1,4-dioxane is a by-product of a chemical reaction used to render products more gentle on the skin. Despite letters and successive meetings with the brand, no answer was forthcoming.

Last October, the Campaign for Safe Cosmetics - which allied with the American Nurses Association and doctors' associations for the circumstance - released a new report entirely dedicated to J&J - "Baby's Tub is Still Toxic". The contents of the report sheds new light on J&J's practices: among 13 Baby Shampoo products bought in 13 different countries, it was found that Quaternium-15 is only used in five countries (USA / Canada / Australia / China / Indonesia) - while it is replaced by other preservatives in eight other countries (Japan / Netherlands / South Africa / Sweden / UK / Denmark / Norway / Finland). J&J follows the same procedure for its Johnson's Natural range marketed in the United States. The report therefore rightly stresses J&J's "double standards" policy that persists in using a potentially dangerous ingredient in countries where they are not explicitly prohibited by regulations. The Campaign for Safe Cosmetics therefore asked J&J to bring all its formulations into line with those used in Europe.
On November 16, Johnson & Johnson announced (refuting the risk in question) that after removing all phthalates, they would, within two years, stop using Quaternium-15 and all the ingredients that release formaldehyde, and work towards eliminating 1,4-dioxane.
This story is fascinating because of what it reveals:

An activist group can, in the space of two years (or 15 days if we refer to these recent developments), with the help of other associations and in-depth research work, get a brand to reformulate its products.
Brands use different formulas for different countries: today, campaigns conducted by activist groups that call this practice into question, will necessarily have an international impact and highlight these "double standards".
Without saying so explicitly, European norms (or even individual countries - formaldehyde is banned in Japan and Sweden) override American "liberty": beauty and hygiene brands will have to systematically reformulate on a global scale by adhering to the strictest standards.
Indeed, what could justify the coexistence of two brands like J&J and Johnson's Natural (the only thing natural is the name) on the same shelves in future? Especially since the Campaign for Safe Cosmetics association is now denouncing the "greenwashing" of some so-called 'natural' brands...

A Walk Around Place Vendôme - Chaumet

2011-11-27T22:44:00+01:00

Debra Healy ends today her walk around Place Vendôme and Rue de la Paix by having us visit Chaumet. Her sense of history and of jewelry creation, her knowledge of jewelry techniques makes her doubtful about the Chaumet "re-creation". Is the brand visionnary or is it nothing but a marketing-led brand?

Chaumet traces its origins to 1780. It was founded by Marie-Etienne Nitot who along with his son Francois- Regnault Nitot became the official jewelers to Napoleon I during the Consulate and the Empire.

Emerald and diamond necklace and earrings by Francois-Regnault Nitot
commissioned by Napoleon for his second wife Marie-Louise

Nitot et Fils were succeeded by Jean-Baptiste Fossin and his son Jules. In 1848 Jules Fossin set up a London branch with a person named Morel. Morel's daughter married Joseph Chaumet in 1875. In 1885 Joseph Chaumet assumed the management of the firm and changed its name. In 1907 he moved to 12 Place Vendôme.

In the early 20th century Chaumet was best known for their tiaras, and exquisite jewels.

Chaumet diamond tiara 1911

Right, a design for a jeweled tunic by Chaumet
Left a design for the Maharani of Indore 1911

Art Deco ruby and diamond jewels 1930

In 1987 Chaumet had liabilities in excess of £200 million resulting from fraud and other illegal activities. The brothers Pierre and Claude Chaumet were convicted of bankruptcy fraud and sent to prison. Chaumet was bought in 1987 by Investcorp, a Bahrain based Investment Bank.The company and the brand were perceived as too traditional and too elitist. After the stigma of fraud the brand needed crisis management. Their decision was to depart radically form the past. Assuming "Chaumet will always be Chaumet" no matter what we make.
The firm was sold again in 1999 to LVMH - which in a sense pursued the same strategy.
This brand has opulent digs on Place Vendôme with a museum and a resident historian!
Chaumet is the only heritage jewelry brand of over 100 years in the LVMH portfolio. The brand concentrates on massive market penetration in the Middle East, Asia, Eastern Europe and Russia where traditional jewelry connoisseurship is less highly evolved, and there is no tainted association form the scandals of the 1980's. They are also focusing on the lucrative business of luxury watches.

"Celebrating its 200th year as a luxury watchmaker, Chaumet tapped into its heritage for its new creations, which feature references to the French jewelry house symbol, the bee, and its first muse and patron, French Empress Joséphine. The Attrape-moi…si tu m’aimes (Catch me if you love me) collection features 32 unique variations of an opal bee set against a honeycomb-patterned enamel dial. The Joséphine range, meanwhile, includes delicate watches in a teardrop shape inspired by the chérusque, a lace collar characteristic of Empire-style dresses, while another comes complete with a diamond tiara overlaid on the case. To mark the anniversary, Chaumet is opening its historic salons on Place Vendôme to the general public for an exhibition of exceptional timepieces".WWD July 5, 2011

B is for Bonaparte and now it is the bee which is the adopted emblem of Chaumet because of the patronage of Napoleon's first and second wives the Empress Joséphine and the Empress Marie Louise de Habsburg-Lorraine.

Some of the other designs are rather chaotic and disconnected.

LVMH is a massive merchandising, marketing, and retail machine. Fearlessly purveying luxury products throughout the world. In the annals of jewelry history it is interesting to note the significant change of the multi-brand ownership which affects how all design decisions are made. LVMH owns Chaumet, Fred, De Beers (license), Bulgari, and the fine jewelry developed for their associated luxury group, Dior (couture), and Louis Vuitton (luggage). There appears to be some similarities unifying all of the jewelry in the within the LVMH group. This may be due to shared senior management, designers, sources in the supply chain, and manufacturing.

On the left Vuitton - on the right Chaumet....

If we put side by side some recent creations by the LVMH brands - can you identify which brand is which? They all could belong to the same brand. Chaumet have effectively dummed-down their entire heritage, and turned it into cartoons, bee & crown.

In the Chaumet windows the poor lighting makes fine diamonds look like rhinestones.

Chaumet has the most amazing archives, they are so full of authentic inspiration, this rich reservoir has barely begun to be tapped. Why does Chaumet have a historian and does not have a Creative Director?

Integrating channels as seen by P&G

2011-11-20T21:10:00+01:00

In a survey presented last week at the WWD CEO Summit in New York, the CEO of retailers questioned said that "seamless, easy cross-channel integration was the key game changer today and would continue for the next few years" .

P&G is clearly asking itself the same question: how do we access our customers / consumers and dialogue with them when we sell in supermarkets?

In a previous post on 16 January 2010, I presented two initiatives taken by P&G, which already followed this reasoning:

The opening of an e-commerce website that regrouped a number of their brands (Olay / Pampers / Tide, among others ..).
The use of pop-up stores in Canada, the "Look Fab Studios".

This effort has been pursued over a year with a new initiative: "Have You Tried This Yet?".

P&G based itself on the premise that many product launches could go unnoticed and that 42% of new products were tested (by consumers) within the 6 months of their launch. It therefore had to abandon traditional approaches and break out of distribution by finding new ways of dialoguing with consumers. The campaign "Have You Tried This Yet?" was launched in two stages:

Late 2010 early 2011 - with the opening of pop-up stores, in New York and Miami among others, giving consumers a chance to discover 15 to 20 new products-of-the-year from P&G, spaces for counselling, makeup and care as well as samples and reduction coupons. The results followed: P&G announced that some retailers saw sales of the products in question increase by 10%.

Late 2011 - the focus is now on social media and the Internet: the website pgtryit.com welcomes comments from clients (written or video) and features bloggers or celebrities.

Of course this is far from the sophistication of Lancôme's integrated strategies (which I described in my post of 12 February 2011), or Estée Lauder in China - but the goal is the same: to establish a dialogue with consumers, put them in touch with new products, offer services and advice (previously provided exclusively by specialist retailers like Sephora in beauty) and reductions - all of this outside the walls of hypermarkets and supermarkets.

Retail / Internet integration - the new challenge

2011-11-13T20:48:00+01:00

The players in mass-market retail are now conducting exciting experiments with a view to integrating sales through their stores and on-line. Retailers have to cope with two factors they had not anticipated:

The strong growth of e-commerce - and its relative tardiness: for instance, e-commerce represents less than 2% of Walmart sales in the U. S.
Direct competition from "pure players" such as Amazon and eBay
- Amazon, now the largest on-line store (with an annual growth rate of about 30%!), is a direct competitor, with an offer that extends even to fresh products.
- eBay has just launched a unique m-commerce initiative: showcases displaying products flanked by QR-codes have just been inaugurated in New York. The CEO of eBay says: "Retail and e-commerce are becoming one. Consumers don't make a distinction between the two".

It is worth keeping track of the initiatives taken by Walmart and Tesco:

Walmart has just opened two pop-up stores in Californian shopping malls (100m2 and 300m2). These temporary boutiques have been opened under the walmart.com banner: here consumers may either collect the orders they placed on the Internet, or discover a range of products with high added-value (toys, communication devices, computers, video games ..) and order them on the spot.
Tesco is experimenting with a virtual store in the Korean metro: entire walls are covered with images of products with their prices and QR-codes, allowing consumers to shop virtually and be delivered the same day (for orders reaching before 7:00 p.m.). The results of this initiative far exceeded Tesco's expectations as shown in the following video:

Two lessons can be learnt from these various examples:

A distributor can thus grow without creating new traditional bricks-and-mortar outlets: not hypermarkets but virtual walls or pop-up stores.
What drives these initiatives is not e-commerce but m-commerce: the ubiquity of mobile phones and the extensive use that consumers make of these tools is a real point of contact between brands and their clients.

A Walk Around Place Vendôme - Mauboussin

2011-10-22T23:55:00+02:00

Debra Healy pursues her promenade Place Vendôme and Rue de la Paix - she moves to Mauboussin. She introduces us to the history of this ancient brand and this makes us understand its present positioning: it used to be a mass jewelry retailer with some high jewelry pieces. During its first century of existence Mauboussin copied all styles. It only introduced a very personal style during a very short period of time: 1925 - 1960. We therefore understand the current choices made by the brand - a return to its origins: making jewelry popular...

Mauboussin traces it's history to 1827 to a Monsieur Rocher who was succeeded by his collaborator Monsieur Noury In 1869. Georges Mauboussin, a nephew, joined the firm in 1898. The business became known as B. Noury, G. Mauboussin. They sold jewelry in the prevailing styles - which means they had no style of their own.

In 1925 Mauboussin exhibited in the Exposition Internationale des Arts Décoratifs where they won a Grand Prix. By this time they were developing a distinctive style of their own. Mauboussin attracted clients amongst wealthy Europeans, Indians prince, American millionaires, and Hollywood film stars.

Mauboussin bracelet, chalcedony, agate, rose quartz, mother of pearl and diamonds 1927

George Mauboussin's son Pierre Mauboussin understood the power of the silver screen. He bejeweled some of Hollywood's leading ladies. This was prescient: he required a credit for the jewelry to be assigned to the photograph.

Actress Clare Luce wears Mauboussin Jewelry left.

Her emerald and diamond necklace right

In the fall of 1929 Mauboussin opened a new salon in New York city, as it turned out it was very inauspicious timing.The stock market crashed on October 29, 1929. The great depression followed, and business suffered. The Parisian firm was left with a large inventory in America, they were anxious to withdraw with minimum losses. Mauboussin reached an agreement with the American firm Trabert & Hoeffer which would assume the name Trabert & Hoeffer-Mauboussin.
Trabert & Hoeffer-Mauboussin produced some of the most dazzling American jewelry of the 1930's and 1940's. The associated trademark continued until the 1950's. Mauboussin went on to open a store on Place Vendôme in 1946.

Marlene Dietrich's Trabert & Hoeffer-Mauboussin emerald and diamond bracelet.

Trabert & Hoeffer-Mauboussin Bird Brooch, signed Mauboussin Paris, 1968,

bracelet, citrine amethyst turquoise, gold, sapphires, rubies, emeralds,

and diamonds set in yellow gold. and diamonds.

Mid 1930's

In 2002 Mauboussin was sold to the Swiss financier, Dominique Fremont. He hired Alain Némarq as CEO. Michel Gutsatz wrote a very insightful article about Mauboussin's new direction here.

The Mauboussin jewelry today is no longer even made in France according to Alain Némarq in a recent article entitled "Mauboussin le joaillier Iconoclaste" in the magazine 'Dreams:joaillerie,Été 2011': it is made in China. The jewelry can no longer claim "Mauboussin whose creations bear the charm and refinement of Parisian art". One of the distiguishing features of this brand was its "French-ness". The recent styles are commercial, and look like the gem-set silver jewelry on offer in mass market retailers in America. The TV shopping channel QVC also uses the name "Rose de France" for the pale-pinkish heat-treated amethyst seen in the ring on the right. Do you think the designs of Mauboussin's jewelry and watches reflect the brands essence and heritage?

Mauboussin window Place Vendôme Paris.

Pendant and rings set with blue topaz, amethyst, citrine, and pale amethyst

( Rose de France) set in 18k white gold.

"Avoid sharp points and edges in jewelry", this was the first rule I was taught in jewelry design class.

This necklace reminds me of a ninja throwing star.

Tokyo French jeweler's diamond giveaway draws long lines
Tuesday, June 2, 2009

"Lines curled around for blocks in Tokyo's Ginza district Monday for 5,000 tiny but free diamonds French jeweler Mauboussin was giving away in an attention-getting drive.
'The value of a diamond doesn't go down. And you never get tired of a diamond,' said Noriko Suzumaru, a 39-year-old housewife who jumped on a train from Kawasaki to stand in line after learning about the giveaway.
Suzumaru was among a crowd of bargain-hunters lined up for the 0.1 carat diamonds Mauboussin was offering to its first 5,000 customers. The gems are valued at about ¥5,000.
Mauboussin, founded 181 years ago in France, is encouraging people to get their free diamond made into rings and pendants at its store. But that will come at a cost, starting at about ¥50,000.
Mauboussin's flagship Japan store opened in Ginza in February.
But the store had often been empty because its name, though associated with international celebrities, isn't widely recognized among Japanese.
Many still don't even know how to correctly pronounce the name of the store."
From the Associated Press

Several months ago I was contacted by Marguerite de Cherval the author of two books about Mauboussin. She had been hired to produce an exhibition tentatively titled "Mauboussin 100 Years of Service to Women". She wanted to find out where the beautiful vintage Mauboussin Jewelry was that I had photographed for my books "Hollywood Jewels", and "American Jewelry : Glamour and Tradition".

Could a proposed Mauboussin exhibition be a first step in an effort to reconnect and re-evaluate their own heritage, and design capital?

I have always thought a brand should fulfill a set of promises. One expects it to deliver unique identifiable products that are differentiated. Consumers also want to be in the club of the cogniscenti with a well communicated story of the brand's origins and identity. When a brand is healthy it is evocative and informative communicating its essences though it products and services. It accumulates goodwill and symbolic value that evokes an emotional response and builds consumer loyalty.

In Mauboussin's radical departure from its heritage and design history I feel that few of these promises are delivered.

Li & Fung - From brokerage to brands

2011-10-16T23:38:00+02:00

We have just learned of two successive acquisitions of European luxury brands by Fung Brands Limited - an investment fund (attached to Fung Capital Europe) owned by Victor and William Fung:

The acquisition of a 80% share in Delvaux, the Belgian leather goods manufacturer, through DLX Holdings, an ad-hoc subsidiary. Founded in 1829 in Brussels, since 1883 Delvaux has been an appointed supplier to the Court of Belgium. The brand has three production facilities in Brussels, in Bourg-Argental (France) and Ho Chi Minh City (Vietnam). The company operates 10 stores of it own, and has 220 employees with an annual sales turnover of 17 million Euros.
The acquisition of 90% of Robert Clergerie through a subsidiary, RC Holdings. The brand has around 200 employees, independently manages a network of 20 stores all over the world and has a manufacturing workshop and a development centre in Romans. Its annual turnover represents over 20 million Euros.

It seems to me that this is the right moment to decipher the strategy of the Li & Fung group. I suggest we take a closer look at 6 key factors:

The arrival of Victor and William Fung at the head of a Chinese brokerage family group in 1989. Realizing that the role of broker was doomed to disappear, they completely transformed the company by making it a key player in international sourcing. In the words of Victor Fung: "Through a network of 80 sourcing offices around the world, Li & Fung sources high-volume, time-sensitive consumer goods – such as garments, fashion accessories, furnishings, gifts, handicrafts, home products, promotional merchandises, toys, sporting goods, and travel goods – on behalf of customers worldwide. Li & Fung provides its customers with the convenience of a one-stop shop with a value-added package starting from product design and development, through raw material and factory sourcing, production planning and management, quality assurance and export documentation, to shipping consolidation. And, instead of owning production facilities, Li & Fung manages over 10,000 quality-conscious, cost-effective producers who deliver on short deadlines for its customers". He adds, "We call ourselves an “information company”, relying on a far-flung network of suppliers to do the work". (Competing in the flat world: the Li & Fung Experience, July 2008). They thus subcontract for Tommy Hilfiger, KarstadtQuelle, Liz Claiborne, Walmart, Helly Hansen, Timberland, Mexx, Toys "R" Us, and others.
This strategy, initially applied to fashion and toys, was developed from 2009 onwards to include Beauty: the acquisition of the Jackel Group in 2010 allowed them to become full-service providers for brands wishing to develop their own brands or private beauty labels.
In a second phase Li & Fung created a distribution company - mainly for the U.S. market. They were thus able to offer the distribution of their products to their clients (for whom they design and manufacture products), banking on their logistical expertise. Distribution is essentially in the form of licenses. They established a foothold in the retail market by acquiring distribution rights for Toys "R" Us in Southeast Asia - and setting up the brand's boutiques.
Li & Fung took the third step by acquiring brand licences - this allowed them to develop comprehensive know-how, from creation / development to distribution.
With their expertise in distribution they created an independent structure - Trinity - specializing in men's fashion, that obtained distribution licences for several high-end and luxury brands. For each of them, Trinity developed networks of boutiques: they now have 409in China. They then set up a joint venture with Salvatore Ferragamo, which they distribute in Korea, Singapore, Malaysia and Thailand. They thus acquired a real expertise in retail.
The final step was the acquisition of luxury brands - either through Trinity (Cerrutti 1881) or the Fung Brands Limited fund. The know-how that they lacked - brand management - is within their reach, especially since they are surrounded by leaders from the luxury sector.

Li & Fung has therefore become a global Chinese group in a few years, having all the expertise needed to develop brands - from mass market to luxury, from fashion to beauty. They are now incontestably a major player that one should watch closely!