Luxury, Retail, FMCG and Media News & Trends: Aug Week 1
Luxury, Retail, FMCG and Media News: Aug Week 1
Luxury, Retail and FMCG News
1. Market: E-Commerce Part of China’s Strategy to Boost Domestic Consumption
China is turning to the services sector, including eldercare, childcare, education, and e-commerce, to stimulate domestic consumption. The State Council has issued 20 directives to guide local authorities and ministries to enhance service consumption. Economic indicators show that China’s recovery is hampered by a sluggish property market and employment issues, prompting the government to shift its stimulus focus from infrastructure to consumer-driven growth. Measures include:
- Tax reductions for families
- Increased financial support for small service businesses.
- Cultural initiatives and festivals
- The attraction of foreign food and beverage (F&B) businesses.
Read the full article about China’s focus on domestic consumption.
2. Trends
i. K-Wave Drives Growth in Popularity of Korean F&B in Hong Kong
The growing global popularity of K-pop and K-dramas is driving an increasing demand for Korean restaurants in Hong Kong. Several Korean F&B operators have recently entered the Hong Kong market, significantly contributing to the local retail sector. Notable new entries include Joongang Haejang and Seoul Recipe. These openings reflect a broader trend, with Korean F&B concepts accounting for a significant percentage of new retail entries in Hong Kong this year. Given Hong Kong consumers’ strong interest in Korean cuisine, many are also willing to pay premium prices for quality dining experiences.
Takeaway: Hong Kong’s proximity to Seoul and favourable market dynamics make it a strategic location for Korean businesses aiming to penetrate the broader Asian market. This trend is expected to continue, driven by the cultural appeal of Korean entertainment and the evolving tastes of Hong Kong diners.
Read the full paid article about Korean F&Bs’ interest in Hong Kong.
ii. HNWIs Spend More on Travel and Jewellery
A Forbes survey of 250 high-net-worth individuals (HNWIs) indicates that luxury spending among HNWIs is set to increase in 2024. Key insights revealed that:
- The average spending on travel and jewellery is expected to rise significantly.
- Ultra-high-net-worth individuals (those with over $30 million in investible assets) are inclined to boost their luxury spending, favouring brands offering unique experiences.
- Most HNWI value knowledge about premium brands and buy luxury items and experiences as rewards for personal milestones. They primarily obtain luxury information from stores, followed by events, social media, brand websites, and virtual reality.
- Women are more comfortable with online luxury shopping and are more influenced by social media than men, who prioritise luxury vehicles as status symbols.
- Influencer partnerships are losing appeal, with brands preferring collaborations with like-minded companies.
Takeaway: The findings emphasised the importance of exclusive products, experiences, perks, sustainable practices, and authenticity.
Read the full article about Forbes’ survey of HNWI.
3. Business Moves
i. Kirin Increases Offer Price for Fancl Tender to Secure Agreement
KIRIN Holdings increased its tender offer for the skincare brand Fancl by 4.1% to 2,800 yen per share and extended the deadline to August 28. Despite a decline in Japanese stocks, Fancl shares traded higher than the previous offer, suggesting market anticipation of a better bid. Kirin’s adjustment is likely a response to investor concerns about the initial offer undervaluing Fancl and to ensure the deal goes through. A Hong Kong-based hedge fund, My.Alpha Management HK Advisors, recently increased its stake in Fancl, and the disclosure might prompt other investors to oppose the current bid price.
Takeaway: The move reflects Kirin’s attempt to diversify away from its core beverage business.
Read the full article about Kirin’s offer for Fancl.
ii. L’Oreal to Buy 10% Share in Swiss Skincare Firm Galderma
L’Oréal is set to acquire a 10% stake in Swiss skincare firm Galderma from a group of major shareholders to capitalise on the booming injectable cosmetics market. The acquisition, valued at 1.6 billion Swiss francs, is a small but significant investment for L’Oréal, which plans to fund it through available cash and credit lines. The companies also signed a memorandum of understanding to collaborate on research and development, which could lead to jointly developed products in the future.
Takeaway: About half of Galderma’s revenue comes from injectables, a market expected to grow significantly in the next decade. This move will give L’Oreal a foothold in the lucrative wrinkle-reducing injectables products market, which includes fillers and neuromodulators like Botox, for the first time.
Read the full article about L’Oreal’s acquisition of Galderma’s shares.
iii. Snickers Maker Mars Considers Buying Kellanova
Mars, the family-owned food giant known for brands like M&M’s and Snickers, is considering acquiring Kellanova, maker of Cheez-It and Pringles. The potential acquisition, valued at around $27 billion, could be one of the largest deals in the packaged food industry. Since Kellanova’s separation from WK Kellogg last October, its stock has risen by 20%, though it still trades lower compared to competitors like Hershey and Mondelez. However, there is no guarantee that Mars will finalise a deal with Kellanova, as other bidders might emerge, and negotiations remain confidential.
Takeaway: The food sector has seen significant deal-making activity as companies aim to scale up amidst rising inflation and weight-loss drugs weighing on consumer demands. However, many deals have been smaller than the substantial Heinz-Kraft merger due to increasing antitrust concerns over consumer prices and market choices. Mars’s potential acquisition would test regulatory tolerance for further consolidation in the sector.
Read the full article about Mars’s interest in Kellanova.
iv. JNBY Acquires Men’s Sportswear Brand OMG and its Children’s Brand
JNBY acquired emerging sportswear brand OMG and its children’s brand onmygame.
- Established in 2018, OMG focuses on two main product lines: sports functionality and lifestyle. It received a significant angel investment in January 2022 from Plum Ventures.
- Onmygame was launched on Tmall in 2022. Its 2023 sales exceeded 57 million RMB, a 640% increase from the previous year, and it is projected to reach 120 million RMB in Tmall sales this year.
JNBY’s primary interest appears to be in the children’s brand onmygame.
Takeaway: This move is strategic given JNBY’s prior challenges with its own children’s casual wear brand, jnby by JNBY, which faced controversy due to inappropriate designs. The acquisition of onmygame will complement jnby by JNBY by filling in its gap in the children’s sportswear market.
Read the full article about JNBY’s acquisition of OMG.
v. Freshippo Tests Waters with Lazada Launch
In early August, Freshippo, a leading Chinese grocery brand, launched its private-label products on Lazada, a major e-commerce platform in Southeast Asia. This marks Hema’s second venture into international markets, following its entry into the US market in April. The brand is starting with Singapore, which has a significant Chinese population and some cultural similarities to China. Freshippo has tailored its product offerings to match the local preferences for spicy, high-calorie, and ready-to-eat foods.
Takeaway: Freshippo’s move market reflects a broader trend of Chinese companies entering Singapore to use the nation as a strategic entry point to the Southeast Asian market.
Read the full article about Freshippo’s launch on Lazada.
vi. C.P. Company Opens China Flagship and Prepares for Expansion
C.P. Company opened its first flagship store in Shanghai at the popular luxury Rèel department store on Nanjing Road. The Shanghai store marks the beginning of the brand’s plans to open additional locations in Beijing, Shenzhen, Hangzhou, and Changchun throughout the year in partnership with a local firm. The brand, which has a rich history of innovation in garment dyeing and Italian sportswear, is confident in its long-term expansion strategy in China. Founded in 1971 by Massimo Osti, C.P. Company is now owned by Chinese company Tristate Holdings Ltd.
Takeaway: C.P. Company’s strategic expansion into China reflects the brand’s confidence in the potential of the Chinese luxury market.
Read the full article about C.P. Company’s entry into China.
5. E-Commerce Moves
i. Zalando to Launch Tech Hub in China
German online fashion retailer Zalando announced the opening of a new tech site in Shenzhen, China. The move aims to leverage local Chinese expertise in social commerce to enhance its European e-commerce operations. Despite this move, Zalando clarified that it does not plan to expand its marketplace into the Chinese market at this time. The company remains focused on its core European market and has recently made strategic efforts like shifting towards higher-priced brands and sportswear to compete with low-cost rivals. Notable partnerships include launching Lululemon, Hoka, and On Running. These brands are experiencing strong growth in China, driven by a rising interest in health and wellness activities post-pandemic.
Read the full article about CP Company’s flagship store in Shanghai.
ii. Influencers’ Go-To Digital Retailer Sees Growing Value of Physical Stores
Revolve Group Inc., a fashion retailer that thrived during the pandemic through online influencer marketing, is shifting its strategy by opening physical stores. The brand will start with a successful pop-up in Aspen, Colorado, before opening a subsequent permanent store in the same location. The company, which markets to Millennials and Generation Z through social media influencers and exclusive events, is exploring further store locations in luxury destinations. While this pivot to brick-and-mortar is seen as a necessary evolution, analysts have mixed opinions on its efficacy, with some cautioning that the transition must be fully committed to succeed.
Takeaway: The company’s ability to merge physical and digital retail spaces is viewed as a natural progression in the evolving market landscape. This move addresses changing retail trends, where consumers increasingly prefer in-person shopping experiences and want to try on clothes in person before buying. However, concerns remain about whether the company can successfully integrate physical retail into its brand without losing its core identity.
Read the full article about Revolve Group’s brand strategy.
6. People: Adidas, Under Armour, Haglöfs, AEO and Gymshark
Adidas: Martin Shankland, Adidas’ executive board member for global operations, is stepping down after 27 years. His responsibilities will be redistributed among other senior executives. This change is part of a series of leadership transitions that began in late 2022 with the appointment of CEO Bjørn Gulden. Shankland’s departure occurs amidst Adidas’ strong financial performance.
Under Armour: Under Armour’s Chief Consumer Officer Jim Dausch is leaving the company, while Eric Liedtke, a 26-year Adidas veteran and former brand president, is joining as Executive Vice President of Brand Strategy. This transition aligns with Kevin Plank’s return as CEO. Liedtke will oversee global brand and marketing initiatives and lead zero-plastic regenerative fashion brand Unless Collective, which Under Armour is acquiring. During his tenure at Adidas, Liedtke was pivotal in orchestrating a significant company turnaround through a five-year strategic plan that generated over $8 billion in revenue growth. He also spearheaded a successful partnership with Kanye West, resulting in the creation of the popular Yeezy product line.
Haglöfs: Swedish outdoor clothing retailer Haglöfs appointed Andreas Oliver Lorenz as its new Chief Commercial Officer (CCO), effective August 2024. Lorenz has over a decade of leadership experience from Adidas and On. Lorenz will join the senior management team and report directly to interim co-CEOs Daniel Tseung and Tom Pitts.
AEO: American Eagle Outfitters (AEO) appointed Stephanie Pugliese as an independent director to its board, effective August 1, 2024. This addition increases the board to eight directors, seven of whom are independent. Having served as president of the Americas at Under Armour and as CEO and board member of Duluth Holdings, where she led the company through its IPO, Pugliese has extensive leadership experience. Her career also includes senior roles at Lands’ End and Ann Inc. She currently serves on the boards of Fortune Brands Innovations and Cooper’s Hawk Winery and Restaurants, as well as the advisory board of the Women in Retail Leadership Circle.
Gymshark: Gymshark named fitness influencer Whitney Simmons as its first creative director for the Adapt range, known for its “comfy seamless designs.” Simmons, who partnered with Gymshark for eight years and launched five collections, will now collaborate with the brand’s product team on the creative direction and design for the upcoming Adapt Safari line and future Adapt collections. Each season, she will focus on updating, improving, and introducing new styles to the Adapt range.
Read the full article about Shankland’s departure from Adidas.
Read the full article about Under Armour’s leadership changes.
Read the full article about Lorenz’s appointment as CCO.
Read the full article about Pugliese’s appointment as an independent director.
Read the full article about creative director Whitney Simmons.
Marketing and PR News
1. Regulations
i. India to Impose Stricter Advertising Restrictions on Liquor Brands
India, which already bans direct liquor advertising, is set to introduce new regulations prohibiting surrogate advertising and event sponsorships. These ads often mirror the branding of the alcohol they represent. The new rules will impose fines on companies and ban celebrities from endorsing misleading ads. Specifically:
- The new draft regulation bans the promotion of items like soda or music CDs that use “similar labels, designs, patterns, or logos” associated with alcohol products.
- Advertisements for items like glasses and soda cans enable “brand names to appear in all their ads, creating recall value for consumers.”
The rules are expected to be finalised within a month.
Takeaway: The impending regulatory changes are expected to threaten liquor companies in India, a rapidly growing market with annual revenues estimated at $45 billion. It highlights the need for firms to pivot their marketing strategy quickly.
Read the full article about India’s advertising restrictions.
ii. Apple’s Transition to AI a Mixed Blessing for Google
Google recently lost an antitrust lawsuit filed by the Justice Department, casting a shadow on Apple, which profits from making Google’s search engine the preferred option on Apple devices. This decision may reduce Google’s costs but level its playing field with alternative search engines. For Apple, the ruling will significantly disrupt its revenue stream, given that it earns around $20 billion annually from payments by Google.
Meanwhile, Apple has been shifting away from traditional internet searches, investing heavily in AI technology and integrating advanced AI capabilities into its Siri digital assistant. This move will potentially allow Apple to form new, non-exclusive AI partnerships, including with Google. Apple will need time before these AI initiatives generate substantial revenue.
Takeaway: Over time, Apple’s move could steer consumers towards using AI and Siri more frequently instead of traditional web browsers. If the ruling were to favour a ban on Google’s exclusivity agreements, Google might also face increased competition and provide other search engines with an opportunity to gain a foothold. Nonetheless, Google’s dominance might persist if consumers continue to prefer it. Analysts suggest that the most likely outcome is a middle-ground agreement, akin to Microsoft’s 2001 antitrust case. Regardless, the ruling could impact businesses that rely on browser-dependent marketing strategies like SEO, especially if Apple pivots towards AI-driven search in the long run.
Read the full article about Google’s antitrust lawsuit.
2. Media Developments
i. Meta Offers Multimillion Bucks to Hollywood Stars for AI Voice Projects
Meta is in negotiations with celebrities like Awkwafina, Judi Dench, and Keegan-Michael Key to use their voices in its AI digital assistant, MetaAI. MetaAI will be integrated across Meta’s platforms, including Facebook, Instagram, and Meta Ray-Ban smart glasses. The discussions involve major Hollywood talent agencies, but agreements have not yet been finalised. If successful, Meta could pay millions to these actors. The move is part of Meta’s plan to integrate AI into its social media and messaging apps to stay competitive. It follows previous attempts by Meta to use celebrity-styled AI chatbots.
Takeaway: Leveraging high-profile celebrity voices for AI may enhance user engagement and differentiate Meta’s offerings. However, the long-term value remains to be seen, given that novelty quickly wore off for Meta’s previous bots, which resulted in the company phasing them out. As Meta’s current AI chatbot is already highly utilised due to its prominent placement in Meta’s apps. It also needs to be clarified if adding celebrity voices will significantly enhance the value or appeal of these bots. Beyond ad creation, targeting, and possibly search, the fundamental value of AI chatbots in social media also remains questionable, given that these apps are primarily designed for actual human interaction.
Read the full article about Meta’s AI voice project.
ii. YouTube Experiments with Picture-in-Picture Mid-Roll Ads for Live Streams
YouTube is experimenting with picture-in-picture (PiP) mid-roll ads that allow viewers to continue watching live streams in a small window while ads play. This format displays ads in a small window without fully interrupting the ongoing content, unlike the current full-screen ads that pause the video. Creators can set these ads as default for future streams and have flexible control over ad placement. It will first be available to a limited audience on select devices.
Takeaway: Although potentially less effective for advertisers, this format is better suited for live streams, given that they offer opportunities to engage with the audience without annoying them. At the same time, creators can better monetise their live streams without risking a drop in viewer engagement during ad breaks. In fact, creators using automated mid-roll ads have seen over a 20% increase in ad revenue per hour. As such, the update is also expected to attract more streamers who are open to collaborating with advertisers.
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Image Sources:
- Wall Street Journal
- Social Media Today