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Capital Investment Is Involved In The Fashion Industry Supply Chain Acquisition Boom

2022/11/24 18:36:00 0

Supply Chain

As the growth of global fashion luxury market slows down, the capital market is gradually becoming calm and cautious. The more the choice is made in the uncertain market environment, the more obvious the capital direction of building long-term value barrier and stability.

In the past few months, from Pomellato, Fendi, Prada, and LVMH, a luxury goods group, have successively pocketed supply chain enterprises such as goldsmiths, knitwear and leather. Compared with the horizontal expansion of market share through investment and acquisition of fragrance and cosmetics and new fashion brands, what kind of energy radiation will be produced by vertical acquisition of upstream supply chain enterprises? What signals can China's fashion textile industry smell with 170 million jobs and a long history of national handicraft skills?

The more upstream, the more we should hold the course of stability and long-term value.

For the current fashion industry investment and acquisition market, In comparison, it is more conducive to expand the market share and population coverage of brands such as fragrance and cosmetics, small crowd tide brand, etc. in addition, the investment and acquisition of face supply chain enterprises may be more conducive to mastering more initiative and long-term stability. Through the inheritance of national crafts, it also retains precious cultural heritage for mankind.

This is especially true in the current situation of rising production costs under the pressure of global inflation and the continuous pressure on the supply chain under the epidemic situation and energy crisis.

Yang Yalan, the investment manager of Qingshan capital, said that the investment of luxury group or brand is also divided into several different purposes. She said: "one is for profit, such as investing in niche brands, fragrance and cosmetics, etc., more for the purpose of quickly occupying the market and expanding market share; the other is for the forward or backward expansion of business, For example, invest in the upstream and downstream companies of the industrial chain to ensure the safety or scarcity of raw materials supply, reduce the cost of the supply chain, improve efficiency, and ultimately better serve the products, so that the brand has more ability to respond to market changes. In this way, luxury groups can be more flexible and have more initiative from design to production, which is a typical vertical integration. "

Sun pan, partner of PWC consulting services, also said: "From the perspective of differentiated value, luxury groups or brands invest in niche brands, fragrance and cosmetics, tourism retail and other targets, which increase the scope of the group and brand by horizontal merger and acquisition, increase the scale of the group and brand under the premise of reasonable management and operation, and can" enjoy "the investment income and dividend quickly; On the contrary, the upstream vertical M & a mode, which goes deep into the supply chain, constructs long-term product competition barriers through innovation and technological innovation. " Sun pan added that it had to be admitted that the overall process of the latter would be much longer than that of the former.

Looking at the investment and acquisition cases in the global fashion industry in the past few months, it is revealing such a long-term but more valuable capital market direction.

Long, but more long-term value

Capital wind direction

Not long ago, Pomellato, an Italian jewelry brand of Kaiyun group, announced that it would acquire a minority stake in Costanzo & rizzetto, a goldsmith company in Valenza, Italy. Chief executive Sabina Belli said that through the investment acquisition, Pomellato focused on the production process strength of the Costanzo & rizzetto team to enhance the brand's productivity, and emphasized Pomellato's goldsmith craft and Italian tradition.

Just one month after the acquisition of Pomellato, Italy's luxury brand fendi and Italian fashion brand golden goose, which is famous for its sports shoes design, have also collected local small and medium-sized supply chain enterprises, which also reveals the Italian manufacturing pattern which has always been marked by handicraft inheritance, Another important sign of evolution is being conveyed - more and more investment in supporting small and medium-sized supply chain enterprises and protecting their processes and technologies.

As Fendi's first M & a deal, maglificio Matisse, a luxury brand knitwear supplier whose majority stake was acquired by Fendi last month, has been working with Fendi for more than 15 years, combining traditional hand-made knitwear with innovative technology. Serge brunschwig, Fendi's chairman and chief executive officer, said: "the acquisition marks another step forward in Fendi's commitment to support the Italian manufacturing and supply chain, as well as opening a leather factory in Tuscany and a shoe factory in MARKAY."

Golden goose, an Italian fashion brand with civilized design of sports shoes, also acquired Italian fashion team, the main sports shoe supplier of the brand, at the beginning of last month. Financial details have not yet been disclosed and the deal is expected to be completed in the fourth quarter of this year. Silvio campara, chief executive of the brand, said: "golden goose's handicraft tradition is reflected in the warmth of handmade products. We want our partners to share our authenticity, quality, and values."

In addition, there are 43.7% shares of leather manufacturer superior S.p.A, which Prada acquired in September this year; Earlier this year, Brunello cucinelli acquired 43% of cariaggi lanficio spa, a cashmere supplier with whom the brand has long cooperated; Prada and Zegna last year jointly acquired a majority stake in filati Biagioli Modesto spa, a supplier of cashmere and precious yarns

LVMH, a luxury goods group, was established in 2015 as a m é tier d'art department. Its main task is to help the group establish and maintain its ability to purchase rare materials, as well as relevant education and training.
In September, it acquired minority stakes in Italian leather supplier Heng Long and leather clothing manufacturer robans. Previously, it acquired RIBA guix à, a Spanish tannery, and in 2019 it took a stake in masoni, another Saint cross tannery in suano.

Behind the investment and acquisition of supply chain enterprises,
From local culture to defense of local industry

In addition, for luxury groups and brands, it is a long-term route to consolidate the supply chain and protect the value barriers of their own products and brands. Externally, the supply chain enterprises with handicraft manufacturing and inheritance capabilities, it is not difficult to see that it is a way to defend the local industry and culture, and to be committed to the sustainable development of fashion industry.

Sun Pan said that luxury group or brand is not only a company, but also a comprehensive group. From the perspective of economic strength and enterprise management ability, luxury group or brand can give more value to acquired manufacturers and employees.

"On the one hand, the commercialization and planning of production and handicraft technology after innovation and verification will create more employment opportunities; on the other hand, the inheritance of national handicrafts also retains valuable cultural heritage for human society," Sun Pan said.
In addition, she also mentioned that Chanel, with the largest number of handicraft workshops, acquired the first craft workshop in 1985 and later established parafetion to focus on the exploration of handicraft workshops. Her volunteers have 39 workshops. Once a year since 2002 ́ Tiers d'art series enables the traditional handicraft to be recognized and appreciated by later generations. It is worth mentioning that the acquisition of paima, an Italian knitting workshop acquired by Chanel last year, is due to the support of both sides for the sustainable development of environmental protection, which also lays the foundation for the joint research and development of high-tech natural fabrics.

Yang Yalan also believes that from the perspective of corporate social responsibility, this is indeed a social commitment and a way to defend local industries "Such a way, whether in the process of commercial development, to achieve win-win between brands and manufacturers, to bring value to partners and even the industry, or to promote the development of the manufacturing industry, improve the income level of workers, drive more employment opportunities, and promote regional economic development, all have positive significance."
For China's fashion industry, which has a strong manufacturing and textile productivity and a long tradition of national handicraft skills, can the capital trend of global fashion industry bring macro enlightenment to the development and upgrading of China's fashion industry?

How to treat the fashion industry in China

The direction of supply chain investment and acquisition?

Yang Yalan mentioned: "why is China's textile and garment industry, with 170 million people employed, big but not strong?" This title has attracted a lot of attention on the Internet. "From the perspective of the world's industrial chain, in the past few decades, the efforts made by some Chinese textile enterprises are not equal to the returns they have received. They have made great contributions in the value chain, but their returns are not much," Yang said.

She also said that for the current Chinese fashion industry, brands will play one of the most important roles in developing the supply chain of China's textile industry or traditional handicrafts in the most efficient way.

Although for some fashion enterprises, it is still a long way to go to invest and purchase supply chain enterprises and have a comprehensive and coherent industrial chain; The high added value of high-end textile industry is still largely controlled in European and American markets.

But in Yang Yalan's view, "if Chinese enterprises have the conditions or are conscious to take over it, transform it and upgrade it, it will be the advantage and wealth of China's whole fashion industry."

Sun pan pointed out that under the rapid development of China's economy, Chinese young people have unprecedented curiosity and desire to explore local culture and even traditional culture. As the factory of the world, China is bound to be able to produce world brands representing China and with Chinese elements in all walks of life in the future.

How to build small and medium enterprises
Supply chain competitiveness

On the other hand, although most of the companies with sufficient ability to invest in purchasing supply chain enterprises and complete industrial chain are luxury group or brand with a history of 100 years and large market scale, for Chinese small and medium-sized enterprises, or even not limited to Chinese enterprises, they should build product technology and brand value barriers by investing and purchasing supply chain enterprises It is also necessary and not impossible to defend local industries.

As sun Pan said: "the iteration of production technology innovation is the key factor in building the core competitiveness and barriers of a brand. It is the ability that a brand in any stage and scale should continue to build and accumulate."

As to whether the investment strategy is applicable and what type of supply chain enterprises to invest in, it is necessary to consider the comprehensive factors such as the strength and strategy of enterprises. "Strategic fit and the possibility of cooperation after the transaction are the core concerns in M & A transactions," said Sun pan. The size and historical experience of enterprises are double-edged sword. Luxury group will be favored and trusted by manufacturers because of its strong brand awareness, mature management and operation ability. However, it may also be closed due to strong and strict terms and conditions, and differences in the application strategy of production technology and handicraft level in the future, and vice versa for small and medium-sized enterprises. However, for small and medium-sized enterprises, the application and commercialization of production handicraft technology, as well as the synergy with the needs of the targeted customers, are the subjects they must demonstrate and discuss. "

In addition, sun pan also mentioned that China's upstream supply chain has also seen new enterprises like Wanzi, which, through industry service experience, continuously accumulate technology and continue to break through innovation, actively build a global supply chain network and establish overall solutions for medium and high-end fabric supply chain. In addition, she said: "high quality upstream process, flexible supply chain technology and digital efficiency improvement are all layout directions that can be considered."

Yang Yalan also pointed out that it is not only from the size of enterprises and development practice to judge. "Many start-ups around us are financing to integrate the upstream, because upstream is its competitive advantage or barrier. Whether the downstream products or brands are large enough is not a necessary condition."

She also said: "In theory, all small and medium-sized enterprises can't be taken as counter examples. These are all start-up or growth stages, and they are still in the stage of rapidly establishing brand potential, or finding their own product positioning or establishing capital advantages. In the long run, even if it doesn't take too long. Only if you develop well in 5-10 years, in fact, the advantages eventually established must be in the supply chain and channel. ”

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