A NEW ERA FOR INNERWEAR
Byline: Robert Murphy / With contributions from Katherine Weisman, Paris / Caroline Cambridge / Louisa Zargani, Milan / Karyn Monget, New York
PARIS — International lingerie executives have mixed objectives for the upcoming Salon International de la Lingerie, but most agree the trade show, running here from Jan. 28-31, remains the premier event of its kind in Europe.
Executives are widely split between those who consider the show an important tool to maintain existing accounts, but not necessarily to write new orders, and those who view the SIL as a chance to seduce hoards of new clients.
On the other hand, most concur that the lingerie industry is entering a new age in which the strength of a company’s brand image and the creation of new, more comfortable product — not just the sheer size of a company — will play a key role in paving the road to increased sales.
The shift comes after a decade where the segment was defined by acquisitions and consolidations, which many manufacturers, but not investment types, largely predict has come to an end — at least for now.
“Firstly, most of the attractive lingerie firms have already been acquired by larger groups,” said Patrice Kretz, president and owner of Chantelle, one of France’s few remaining family-owned lingerie makers. “Secondly, the independent firms that remain have largely made the necessary managerial and structural changes required to increase profitability and have emerged in good financial shape for the future.”
But bankers and some manufacturers disagree, and feel the field is still ripe for acquisitions, partnerships or other forms of consolidation.
“Lingerie is a very interesting sector. It is fashion, but very industrial at the same time because of the technical nature of the goods,” said Damien Bachelot, co-president of Aforge Finance, a mergers and acquisitions firm based here.
It’s the production and sourcing end of the business that will force companies to forge partnerships or other deals to try to achieve economies of scale or to garner a more powerful base to expand distribution, he said.
Either way, executives said the competition has become fiercer, forcing companies to be even more innovative in attacking the market. For sales growth, there is renewed interest in Europe, the home market for many of lingerie’s important players. In addition, makers said a resilient Asian economy could yield strong sales for the first half of 2000 if lingerie vendors proceed with a coherent strategy that boosts brand recognition and increases distribution without diminishing creativity.
“The market is confident in lingerie now,” said Jehan Quettier, head of the Federation de la Maille, which organizes the SIL. “Demand is up, and women are buying more and more lingerie. It’s a healthy atmosphere for expansion.”
Many manufacturers predict emerging economies in southern European countries like Spain, Greece and Portugal will also play a role in boosting sales over the next few years. “Those markets have reaped the benefits of Europe’s integrated economy, but remain widely undeveloped or behind other European markets. For that reason, they represent great growth potential for us,” said Shama Hiridjee, who owns France’s Princesse Tam Tam, a junior lingerie, nightwear and swimwear label, with her sister, Loumia Hiridjee. Doris Armellini, product manager at Hanro, said the Swiss-based firm also believes in the strength of Spain and Greece.
“Southern European markets are strong because women there are opening up to lingerie in general,” she explained. “It’s a new trend in those countries.”
Apart from Germany, which late this year has been wracked with fiscal hardship, European countries have notched up steady growth. Even France, whose unemployment has hovered near 13 percent for years, has regained confidence as jobs are created and the stock market sets new records. Executives noted that Britain, France and Italy are shaping up as the healthiest markets.
“We are very positive going into the SIL,” said Hiridjee. “At present, it’s the only European [lingerie] salon that really matters, and we expect to write a lot of new orders.”
Some executives contend the show is essentially an opportunity to boost visibility.
For example, Rosita Casagrande, export manager at Italy’s Cotonella, said the Paris event is important because it helps reinforce ties with established clients.
“The show is a window for us, but we don’t go there because we think we will make new contacts or new orders,” she said. “We sell at a later date.”
“SIL draws buyers from all over the world, and we go not in the hope of contacting new clients, but to meet up with established clients that we may not have seen in a while,” said Francesco Macchi, managing director of Delmar SpA, the company that produces Ritratti.
“It’s an occasion for human contacts,” said Macchi, adding that the company does not sell much at the show.
“I know the French have many agents and actually sell at the exhibition, but we are structured in a different way,” said Macchi, adding that the majority of the company’s orders are taken in Italy after the SIL.
Many Italian houses said that although benefits of showing at the SIL are not immediate, the event helps establish a name on the international scene.
“You can approach and sell in any country, but you can’t expect to do it quickly because people are cautious today,” said Lucia Corbellini, export manager of Argentovino, produced by Gruppo Arte in Bologna, which also puts out two other innerwear lines, Baci Rubati and Azuleia. “It’s not enough to see the product, people want to observe the company in the long run.” Corbellini said the company hopes to make a lasting impression at the SIL by renting a large 1,080-square-foot stand and having it custom decorated by architects.
“This is a means to compete with big and established names,” she said.
Tony Thwaites, marketing and public relations manager of Eveden, which owns Britain’s Rigby & Peller brand, as well as Fantasie and Freya, commented that while some European companies write huge orders at the event, for his firm it’s largely an opportunity to make contacts with potential clients who often write at a later date.
Aliza Reger, chief executive of family-owned Janet Reger lingerie of Britain, said that order taking at the SIL is unpredictable, but believes that the company will benefit from fresh interest from again-buoyant Asian countries.
There are several American newcomers to the SIL that are betting on the venue for heavy exposure and sales, such as Sara Lee Intimate Apparel’s Bali line.
“It will be an exploratory move,” said Charles L. Nesbit, president of Sara Lee Intimate Apparel. “We think it will help us get closer to our existing customers, as well as garner new customers for us in Europe. We have received queries regarding the Bali brand from a number of countries. Given that our business outside the U.S.A. is in its infancy, it is difficult to assess the market trends in specific countries.”
Sara Lee’s Playtex and Wonderbra brands are marketed by Sara Lee’s Playtex Europe division and those brands will show their European product range at the show, not the U.S. product range, Nesbit said. The Barely There collection will not be shown since demand exceeds current production capacity and the European Sara Lee companies are developing their own seamless product lines, Nesbit noted.
Manhattanbra, from New York-based trading and sales firm G22, will also show at SIL for the first time.
“We show in Lyon, [which was] very successful for us, with $200,000 in bra sales and an additional $300,000 in orders for our Aquabra liquid-filled pads. We think we can easily do $1 million sales in Paris,” said Dieter Kemp, president of G22.
Kemp feels that key countries will be Germany, Spain and Japan, which he described as “coming out of an economic dip.”
While many executives said they had not seen any key indicators pointing to a new round of acquisitions, some agreed that it is essential to be open to partnerships in today’s economic climate as a means to speed up growth, distribution and visibility.
Lingerie firms continue to adjust to the new market atmosphere created over the last decade as a host of companies, particularly in France, has been snapped up by larger groups out to boost European market share. Established brands such as Lou, Lejaby or Rien and newcomer Izka have all been bought by American titans like Sara Lee, VF Corp. and Warnaco.
But as the smoke clears, many lingerie companies wonder whether the giants have achieved what they set out to accomplish. VF Diffusion, for example, has replaced the acquired Carina and Siltex lines with the Vassarette and Bestform collections for the U.S., which enjoy the same price and styling positioning.
While manufacturers agree that mergers can provide valuable manufacturing and distribution synergies, many voice concerns that such operations may negatively affect the acquired company’s creativity and the strength of its image.
“Presently, the market has stabilized in terms of buyouts,” said Quettier. “Now, companies are concentrating on burnishing their image and the quality of their products. Groups that have acquired several brands have the most work ahead because they have to forge a unified voice across several brands.”
“The key to growth is innovation,” agreed Jan Rosenberg, Western European sales director at Triumph, a family-owned firm based in Munich. “The wave of acquisitions has peaked because most large groups have not reaped the benefits they expected.” Rosenberg added that lingerie market share is up because women consider underwear as being a more important purchase priority. Triumph, Rosenberg said, has poured its energy into developing softer, more comfortable products that are “still feminine and sexy.”
“We’re really excited about sales prospects at the SIL,” Rosenberg said.
Francesco Macchi, managing director of Delmar SpA, the northern Italy-based company that produces Ritratti, said there have been “enormous changes” over the past 10 years, in France in particular, where there are today only five to seven medium-sized, independent companies.
Princesse Tam Tam is among the remaining family-operated French companies. But Hiridjee doesn’t see Princesse Tam Tam as takeover prey because the company has established a vertical strategy by not only manufacturing its own products but also building a distribution chain of Princesse Tam Tam stores.
Apart from its 55 doors in France, Princesse Tam Tam has one store each in Rome, Antwerp, Belgium and the French-owned Indian Ocean island of Reunion. Hiridjee said the brand, which is also stocked in upscale department stores here like The Bon Marche and Le Printemps as well as Saks Fifth Avenue in the U.S. and Harrods in Britain, plans to open new stores, especially in Spain and Greece.
“We’re in good shape and I don’t consider us ripe for takeover,” said Hiridjee.
But she admitted that being a distributor as well as a manufacturer makes Princesse Tam Tam a prime acquisition target.
“Look at a group like LVMH; they are really interested in acquiring distribution chains,” she said. “But we feel that we have the resources to remain independent.”
Observers note that it’s precisely small-to-medium-sized niche players, such as Princesse Tam Tam, that are interesting takeover candidates. They are at critical points in their development, and a merger, acquisition or other form of venture can provide the firm in question with the necessary capital to expand going forward, even if the potential takeover target is in sound financial shape.
The buyers are out there shopping. Aforge Finance’s Bachelot confirmed that his firm is working on several lingerie deals. This is confirmed by Sara Lee’s Nesbit, who said: “It is fair to say that Sara Lee Corp. is always looking at opportunities worldwide to enhance its existing brand portfolio.”