SHANGHAI — “Our entire focus right now is very simple: We put the consumer at the center of everything we think about,” said Patrick Zhong, head of global investments for Fosun Group, China’s largest privately owned conglomerate.
“A lot of people talk about how there will be rising consumption in China,” he added. “This could be right, but for us, it is way too generalized. I think the most interesting opportunity for us is the lifestyle change of the Chinese consumer.”
In an interview, Zhong discussed Fosun’s strategy for investing in everything from real estate to fashion brands globally. His office, located on the Bund waterfront in Shanghai, overlooks the construction site of the Bund Finance Center, a megacomplex featuring office space, a shopping mall and a boutique hotel that is partly backed by Fosun Property, the real estate arm of Fosun. It is slated to be completed next year.
When it comes to investing in foreign fashion firms, Zhong said he looks to invest in brands not as “trophy assets,” but rather because he sees potential demand for their products in China’s ever-evolving consumer market and because he sees a partnership where Fosun’s expertise can benefit the brand on the mainland while the brand’s expertise can enrich Fosun’s experience outside Chinese borders.
So far, Fosun has purchased a 35 percent stake in Italian luxury men’s wear manufacturer and retailer Caruso, which it bought last year. It also owns stakes in Greek jeweler Folli Follie Group and U.S. fashion house St. John.
Zhong said the group considered investing in Versace, but ultimately decided not to because “we always want to have this one-on-one relationship with the families who own the brands, and we are not really so much involved with the commercial bidding process. We spend a lot of time to build trust.”
In 2013, Versace said it was looking to sell a 20 percent holding to fund future growth, and in February it sold that stake to Blackstone Group.
Founded in 1992, Fosun’s business scope ranges from pharmaceuticals and real estate to insurance, manufacturing and health care. In 2007, Fosun International, the parent company, listed on the Hong Kong Stock Exchange. Revenues in the year ending Dec. 31 totaled 51.01 billion yuan, or about $8.2 billion, down slightly from 2012 revenues of $8.28 billion. In its 2013 annual report, the company said it is “implementing the Warren Buffett model of development.”
In recent years, Fosun’s overseas investments and acquisitions have become increasingly high profile. In 2013, for example, the group purchased One Chase Manhattan Plaza for $725 million. Before that, it acquired about a 10 percent stake in Club Méditerranée SA, or Club Med. In May, it acquired Alma Lasers, an Israeli medical equipment maker.
Though Zhong did not discuss specifics, particularly on future investments, he outlined why existing investments have been made. With Caruso, for example, he said he sees a need in the Chinese market for more sophisticated men’s wear.
“We think for men’s wear there should be more options, more choices,” he said. “Men’s wear is a big market in China, and people want to have more sophisticated, understated, high-quality products. Consumers are starting to understand what luxury is — that it isn’t about logos or something you show off. We feel this is one area where there is going to be very good growth, but also with this brand itself, we are very patient. We think we need to give time to it.”
Zhong said Fosun helped Caruso secure retail space in Manhattan — the Italian brand plans to open an 11,000-square-foot flagship on East 58th Street this fall. “As we rise and surround ourselves with some of the most influential people and resourceful people, we actually add value outside of China as well, and that is what we want to do,” Zhong said.
Similarly, with the investment in St. John, Zhong said he sees a void in the Chinese market for more sophisticated fashion targeting successful women who need tailored clothes to wear to work or social gatherings. “St. John has a clear segmentation. It has a lot to do with women with certain successes and with a lifestyle with different activities she needs to participate in,” Zhong said.
The executive declined to name any future investments in the fashion arena, but said there will be a focus on women’s ready-to-wear and shoes produced by both high-end and luxury brands.
He said the brands Fosun has invested in “illustrate our interest in the sector. They are kind of the tip of the iceberg. I think we have a long-term commitment to the sector, so I think every year you will see us doing something new.”
Zhong was adamant that Fosun is not just about throwing money at a company. “We are there to help them, but we are not there to tell them what to do. The companies we work with must have a strong DNA to start with. In China, we are there to help. They are strong with the product design, and we will help them to open doors, leverage media, help them doing branding and to bring consumers under the same roof. That is what we do.”
He added that there is no rush to add more fashion brands to Fosun’s portfolio. Instead, Zhong said the group wants to take it slow, ensuring the companies it is working with are successful first before forging ahead with too many other investments.
In terms of the future of luxury in China, Zhong said he thinks women here in particular will eventually have their own unique sense of style rather than wanting to emulate designs popular in Paris or elsewhere in the West. He said if global luxury brands are unable to tap into that change, Chinese brands would likely fill the void. He also said he feels like too many companies are still failing to put the consumer at the center of their businesses.
“I still don’t feel like brands try to go to the next level to understand what this consumer is looking for, to come up with something interesting,” he said. “If they don’t do it, some Chinese creative people will do it. International brands, if they want the China market, need to be very sensitive to how the Chinese man and the Chinese woman live. What is on their minds? What do they do? Where do people meet? It can change pretty quickly.”
Beyond the fashion realm, Zhong neither confirmed nor denied reports that Fosun may buy Forbes Media. Fosun publishes the Chinese edition of the business magazine and Web site. “My answer is that we will continue to work with Forbes in China,” Zhong said. “Whether we are going to play a bigger role or not, we will see.”
On the real estate front, Zhong said the group will continue to look for properties in global hubs with a focus on Europe, the U.S. and Japan. “Those are the key markets outside of China right now,” he said. “There isn’t an obvious concentration [geographically]. In terms of dollar amounts, there is a concentration, but that does not mean we like certain countries better than others. What matters is we find a good business, strong management and a great desire to connect with China.”