Acquisitions Fast Becoming the Buzzword for 2013
The Swatch Group acquired luxury jewellery brand Harry Winston in January 2013. Several global players operating across personal accessories and eyewear have also intensified acquisition efforts in early 2013, targeting specific markets rather than globally recognisable brands.
Global accessories revenues for PPR, one of the largest luxury players, were heavily reliant on bags and luggage in 2012. Boucheron and Girard-Perregaux were the only two jewellery or watch brands with notable sales in the calendar year. The company has started to address this situation as it acquired Hong Kong’s jewellery brand Qeelin in December 2012. Focused on two markets, in the form of China and Hong Kong, the luxury jewellery brand is likely to be followed by more jewellery and watch brands entering PPR’s portfolio in 2013. Another regional player acquired in January 2013 was Christopher Kane, catering to apparel and bags in the UK.
Apart from a focus on new categories, PPR’s strategy in 2013 thus far shows an acceptance of newly established brands which have a proven consumer base, albeit with limited geographical presence. This is in contrast to many global luxury brands such as Louis Vuitton, Gucci and Cartier, which utilise their history extensively for marketing purposes. PPR’s interest in jewellery, complemented by an affinity for regional players, has also seen it being linked with the possible acquisition of Pomellato, the leading jewellery player in Italy.
Hermès International SCA
Continuing the recent trend of luxury players consolidating their supply chains, Hermès acquired French tannery d’Annonay in January 2013. The acquisition is likely to aid long-term profitability for Hermès, a brand which registered global sales growth of 23% in 2011/2012. This exceptional growth eclipses an ongoing ownership battle with LVMH, an episode which could soon have some clarity, with a court decision pending mid-2013. As such, all acquisition activity Hermès sees in 2013 reflects its continued intent to resist a takeover.
Aurum Holdings Ltd
Aurum Holdings, which leads jewellery sales in the UK, was acquired by US private equity firm Apollo Global Management in December 2012. Aurum operates Goldsmiths, Mappin & Webb and Watches of Switzerland, all well-recognised retail chains in the UK. Commanding such brand appeal, Aurum is expected to complement another jewellery company under Apollo’s management, Claire’s Stores. Although it is unlikely that Goldsmiths and Mappin & Webb will expand to new markets, the presence of Claire’s in the same ownership umbrella may serve to change the former’s competitive strategy for costume jewellery.
In January 2013, Fossil acquired a significant proportion of its distribution operations in Latin America. The development comprised taking over from its biggest third-party distributor, Bentrani Watches. The strategic move signals a possible period of focus on Latin America, a region whose contribution to Fossil sales was much lower than that of North America, Western Europe or Asia Pacific in 2012. The acquisition, which follows recent efforts to increase self-operated outlet presence in India, may lead to a similar outlet-driven approach to sales growth.
Essilor International SA
Acquiring and partnering with regional players is a key part of Essilor’s global strategy, and helped it maintain its spectacle lens leadership over 2006-2012. However, purchases made to date in 2013 showcase a focus on the company’s biggest markets. In January, it acquired French eyewear services company Interactif Visuel Système (IVS) and spectacle lens manufacturer X-Cel Optical in the US.
In addition, Essilor is currently in negotiations for its Transitions Optical brand, a joint venture it operates with PPG Industries. Any agreement, which will be finalised within 2013, could help the company’s global business, as well as affect global competition in the photochromic lenses category.
Summing up expectations for 2013
Early signs from personal accessories and eyewear players operating across price platforms point towards a calendar year with heightened acquisition activity. The economic slowdown, primarily in Western Europe and Asia Pacific, has prompted manufacturers to adopt an acquisition strategy tailored to individual target markets. As such, the influence of regional players in these regions is likely to marginally decrease over 2013.