burberry beauty licensing pros of buying back

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Burberry Beauty Licensing Pros of Buying Back Licensing

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Page 1: Burberry Beauty Licensing Pros of buying back

Burberry Beauty LicensingPros of Buying Back Licensing

Page 2: Burberry Beauty Licensing Pros of buying back

Previous License

• Acquired by Interparfums in 1993 (fragrance)

• Burberry accounts for roughly 50% of Interparfums’ net sales

• Worked together to launch “Burberry Body”

Distribution Model

• Includes sales to department stores, multiband specialty accounts, travel retail and franchisees who operate 70 stores

Challenges• “Fashion and beauty are different

industries” • Difficult, costly and perhaps a

management distraction to bring beauty in-house, especially during global slowdown

• New departments to oversee: Product development, logistics, manufacturing.

Facts & Figures

• Cost of ending perfume contract £200M

• 2013 sales figures for Interparfums included £130.3m worth of Burberry sales

BackgroundBackground

Page 3: Burberry Beauty Licensing Pros of buying back

Pros of Burberry Buying Back License

1. Increased revenues and profit margin2. Control in terms of Marketing3. Control in terms of Distribution

4. Beauty as growth platform for the future5. Gaining of new competencies

Page 4: Burberry Beauty Licensing Pros of buying back

1. Increased Revenues

• Burberry optimistic it can beat Interparfums and speed up growth of perfume business, a category that drives 9% of Burberry’s revenues (9% = £210B/ year).

It succeeded in its first year - As of 1st March 2013, Burberry grew global sales by 29.3% to £213.8m compared to 165.4m the year before after the buy back of the beauty and fragrance license.

• Potential to expand beyond perfumes into cosmetics, gaining a share of global fragrance and cosmetics industry (potential to reach £106B in 2016)

• Beauty, in its first year of operation (2014), contributed wholesale revenue of ₤144.1m and wholesale profit of ₤10.8m

• Beauty drove 7% of revenue, a 30% growth over the previous year (2012)

• Beauty contributed roughly 30% of total Wholesale growth in 2013

• Beauty grew to represent 9% of sales, growing double-digits each year since category integration

Page 5: Burberry Beauty Licensing Pros of buying back

• Complete ownership of the business allows company to fully integrate beauty into international marketing machine.

• Greater brand control for how product is positioned and marketing message.

• Connect each category as strongly as possible under one unified umbrella, thus leveraging to help the brand sell other products. :

o Example: In 2014 to accompany the launch of My Burberry fragrance, the brand also unveiled a trench-inspired makeup collection, developed in conjunction with makeup artist Wendy Rowe.

o Example: When company launched Brit Rhythm, mens fragrance 09/2013, the accompanying capsule collection of leather jackets & other fashion items sold out.

o Example: For launch of Mr. Burberry [April 2016], a grooming line will also be sold globally; it will include such things as beard oil, moisturizer, deodorant, shower gel, and aftershave.

2. Control in terms of Marketing

Page 6: Burberry Beauty Licensing Pros of buying back

2. Control in terms of Marketing

Page 7: Burberry Beauty Licensing Pros of buying back

• To be more directly involved with distribution plan.

o “We [are] working with distributors to elevate the look and also to elevate the existing points of sales” - John Smith, COO, 09/2014

• Burberry is likely to be pulled off the shelves of the supermarkets and put in more upmarket department stores.

• New POS: o Burberry Beauty Box stores. Launched in December 2013 in Covent Garden, Burberry’s

first Beauty Box acts as a sort of testing ground for “everything from the shoulder up,” selling makeup, fragrance and nail polish, as well as personalised gift boxes and certain accessories, such as scarves (Services include the Burberry Beauty Box Bar (the gifting hub of the store), monogramming for My Burberry, Beauty styling, Make-up Master Class, Fragrance discovery).

o Burberry is following up on its launch on Sephora.com in August 2015 with 40 bricks-and-mortar Sephora stores across the globe, with a total of 100 expected by middle of 2016.

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3. Control in terms of Distribution

Page 8: Burberry Beauty Licensing Pros of buying back

3. Control in terms of Distribution

Page 9: Burberry Beauty Licensing Pros of buying back

4. Beauty as growth platform for the future• Burberry has ambitions to expand into cosmetics industry (by 2016, global

fragrance and cosmetics industry = £106b). Wants to capitalize on this and centralize operations by making everything in-house.

• "It's about the halo effect beauty is bringing to the business" - CEO Angela Ahrendts. The broad consumer exposure Burberry will get from expanding the reach of entry-level products like perfume and lipsticks will bring more attention to the brand as a whole.

• “One consistent brand expression, leveraged across all categories, will underpin future growth in the beauty division and our existing core business. ”

Page 10: Burberry Beauty Licensing Pros of buying back

5. Gaining of New Competencies• Will gain new competencies in supply chain, sourcing, and product

development.

Page 11: Burberry Beauty Licensing Pros of buying back

Results

2013 2014

478.3

2012

+3.2%

-1.2%

628.0

472.7

+32.9%

2015

648.1

+10.7%

Burberry Wholesales Revenue ( ’12-’15, £ mm) Results• Under the global declining luxury

environment, buying back of beauty business enabled Burberry gain 32.9% growth from 2013 to 2014

• From 2014 to 2015, despite the slow down of China market and unfavorable exchange rate, Burberry succeed in growing at 3.2% continuously, thanks to the fast growing beauty business

Source: Burberry Annual Report

Page 12: Burberry Beauty Licensing Pros of buying back

Accessories

Mens

743

Beatuy

2014

558

2,251

2,456

816

684

521

Womens

Childrens/Other

2015

893

Burberry Wholesales/Retail Revenue ( ’14-’15, £ mm)

Results

Growth Rate

9.4%0.9%

22.1%

7.1%

8.6%

9.4%

Total

Results• Among all segments, beauty

sector reached the fastest growth speed for following reasons:

– The booming industry trend in beauty sector

– The successful launch of business initiatives, such as My Burberry, the iconic womens fragrance in 2014

– The co-marketing campaign featured Burberry’s Heritage trench coats, reinforcing the brand image

Source: Burberry Annual Report

Page 13: Burberry Beauty Licensing Pros of buying back

New Business Initiatives

My Burberry: women fragrance Iconic Burberry marketing: reinforce brand image