Corporate Design for Boutique Brands

Mishra’s rise in the fashion world has been due to the embroidery of handmade artisans. His latest effort is a ready-to-wear line that was acquired earlier this year by Reliance Brands Ltd (RBL), a subsidiary of oil-to-telecom giant Reliance Industries Ltd. The brand is born out of a 60:40 partnership agreement. The brand so far named between RBL and Mishra will have Mishra as its creative director. It will primarily market accessories, footwear, home, beauty and jewelery collections to international buyers in foreign fashion capitals such as Paris, Milan, New York and London.

“Over the years there have been several conversations regarding investing in our brand. We are excited to begin this new journey with Reliance Brands to grow a global ready-to-wear brand from India in which I have found the right partner,” said Mishra, who calls the partnership “democratic luxury”. The partnership is only the latest in a series of aggressive moves by RBL, which has bought or tied up with half a dozen Indian couturiers in just 2021.

RBL isn’t the only company interested in boutique fashion brands. Aditya Birla Fashion and Retail Limited (ABFRL), part of the business conglomerate Aditya Birla Group, has been equally aggressive. Over time, it has built a collection of ‘artisan brands’ and partnerships, which include renowned designer brands such as Shantanu & Nikhil, Sabyasachi and Tarun Tahiliani.

Hot Couture, Cold Number

Big corporates have always been interested in global luxury brands. Many built impressive international portfolios through long-term licensing deals, only to realize that wealthy and discerning Indian customers still prefer to shop abroad when it comes to Western luxury brands. Heavy taxing India was never really the destination of choice for international luxury shopping. But corporates also learned that affluent Indian ethnics tend to splurge on luxury designer brands, especially during big fat Indian weddings. Without this kind of ethnic wear in the kitty, they were losing out.

In its annual report for 2020-21, ABFRL notes: “Over the last 4-5 years, the Indian diaspora has been driving the Indian ethnic wear market to increase Indian pride and confidence within products of Indian origin, which is expected to reach have hope. 1.70 trillion by market size by 2023 925 billion in 2018. Apart from the impetus on the overall premiumization of the category, this boost can also be attributed to the recession-proof wedding wear market, the rise of ethnic wear for special occasions, traditional festivals and even work wear. consumption can also be increased.

Ergo, ABFRL acquires arguably India’s most iconic designer Sabyasachi Mukherjee in early 2021 398 crores. The Kumar Mangalam Birla-led firm had also acquired Shantanu and Nikhil’s apparel brand Finesy. 60 crores in addition to expenditure 67 crore for 33.5% stake in Tarun Tahiliani’s luxury couture business. In January, the company acquired a 51% stake (for 90 crore) in Masaba Gupta’s House of Masaba Lifestyle Pvt Ltd, the entity that carries on her apparel, non-apparel, beauty and personal care and accessories business under the brand ‘Masaba’.

RBL, however, has managed to get many more brands in its kitty in a short span of time. It acquired Satya Paul when it bought El Caterton Asia’s 40% stake in Genesis Luxury in 2017. Last year alone, RBL bought or tied up with around half a dozen Indian couturiers.

In October last year, Reliance Retail Ventures Limited (RRVL) – RBL’s holding company – acquired a majority stake in fashion designer Ritu Kumar’s Ritika Pvt Ltd. The size of the deal was not disclosed, but RRVL acquired a little over 52%. of the company A few days before that deal, RBL agreed to buy a 40% stake in MM Styles Pvt Ltd, owned by Bollywood’s favorite Manish Malhotra. Beyond the plain vanilla takeover, RBL has also taken the strategic route. It teamed up with designer Anamika Khanna to create AK-OK in a 60:40 joint venture to own and develop the brand. This week, RRVL also acquired majority stake in fashion brand Abraham & Thakor.

This is not the first time that RBL or ABFRL have gone shopping. RBL’s long list of acquisitions began with international brands. By the time the pandemic hit, it had a major list of 21 foreign labels which it had licensed in addition to the 34 brands it brought into the country and operated either as joint ventures or long-term master franchise agreements. Today, it has 47 brands in its portfolio including Burberry, Bally, Ermanegildo Zegna, Pottery Barn and Jimmy Choo.

The market seems a bit nostalgic in this season of designer mergers and acquisitions, as evidenced by the red ink of the balance sheet. For example, RBL recorded a net loss of 211.2 crore in 2020-21 as against the loss of 176.88 crore in 2019-20, according to the company’s filing to the Registrar of Companies. Company’s net income declined by 26.29% 796.14 crore from 1,080.11 crore in 2019-20.

The sales figures for ABFRL in 2020-21 were 5,249 crore, 40% less than 2019-20. EBITDA for 2020-21 was 628 crores, which is almost half as compared to the previous year. Net loss widens for the company from 736 crores 165 crore in 2019-20.

Behemoth & Boutique

Regardless of the business logic, the current wave of consolidation in Indian Hot Couture is also warranted by the brutal market realities. Designers are increasingly being forced to “corporatize” and migrate to the formal economy as the COVID pandemic hacks their cash lifeline. Several designers Mint spoke to admitted that they get paid in cash for big-ticket events and weddings. The pandemic and recession have reduced the “take home margin” for designers and this formality of procurement is increasing pressure on them to corporatise.

Navroj Mahudawala, managing director of Mumbai-based Candle Partners, an investment banking and advisory services firm, said a major chunk of luxury apparel purchases, especially in the apparel sector, are tied to weddings. Due to the turmoil in the business of marriage, the expenses of the customers have been banned. “While margins are shrinking for many designers, losses in the last two years have aggravated the scenario. The popularity of brands like Manyavar and Fabindia Apparel (and their price points) has also made a difference.”

Bimal Sharma, Head of Retail, Advisory and Transaction Services, CBRE South Asia, said that in the current business landscape, brands and retailers alike are rethinking their business strategies: not only to meet the growing demand of customers but also Also to increase profitability.

This is the right time for designers to capitalize on the brand value they create. Brand consolidation is one such step to promote reach and marketability. In most cases, ace designers will continue to operate independently from the larger conglomerate, but they can now grow at a much faster pace, thanks to strong financial backing. On their part, large groups have acquired not only a brand name but also a talent for growth. In fact, such brands may, in future, cater to large luxury customers globally, Sharma said.

up trend

The wave of consolidation is also good news for independent retail outlets, whose biggest problem is supply, not demand.

Abhishek (Monty) Agarwal, founder of Purple Style Labs, which runs the pop-up shop of multi-brand distribution website Pernia, said as more and more designers organize, it makes for a smooth supply of stock. “That’s what a distributor like us wants at the end of the day because our industry doesn’t have a demand problem. There are supply issues. We have enough buyers but not enough products,” said Agarwal. In 2020, Purple Style Labs acquired resort wear label Wendell Rodrigues.

“It’s certainly great for the industry’s long-term outlook and if we compare what’s happening here in the West in the 1980s, you’ll see a lot of similarities,” he said.

Agarwal is referring to the two largest corporate fashion houses Pinault-Printamps-Redoute (PPR), now known as Kering Group, and LVMH Mot Hennessy Louis Vuitton, a French holding multinational corporation headquartered in Paris. The brands that are now owned by these businesses were originally run by self-promoting families. These existed as relatively small regional brands until they were brought under a larger corporate umbrella.

In the late 1990s and early 2000s, these groups ensured that any brand that was not capable of multiplying on its own could become part of the house and grow. It all started when PPR took a 42% stake in Gucci Group NV. It then took over brands such as Bottega Veneta, Balenciaga, and established partnerships with brands such as Alexander McQueen and Stella McCartney in the early 2000s. It later bought out Yves Saint Laurent (now known as Saint Laurent Paris), YSL Beauty and Sergio Rossi.

In 1984 the Christian Dior-owned Boussac Group was bought by LVMH’s Bernard Arnault, together with a group of investors. The company owns brands like LV, Marc Jacobs, Givenchy, Kenzo, Berluti and Fendi.

This brings us to another unique puzzle. Boutique designer shops became what they are today mostly because they didn’t have to compromise when it came to their creative freedom. Now that many are becoming part of Reliance or Birla Group ventures, will they eventually become mill owners?

Agarwal of Purple Style Labs said this is a misconception pushed by skeptics. “It doesn’t work that way. A buyer is not a fool,” he said, citing the example of Pernia’s pop-up shop. It’s been three and a half years since the company bought the shop and today, they have grown it 50 times. Used to be.

Aggarwal said that if a brand wants to develop itself as Ralph Lauren or Tommy Hilfiger, then obviously they have to adopt more collectible styles. But they don’t have to be ‘mass’ if they want to follow the journey of luxury brands like Chanel, Louis Vuitton or Hermes. “It is not forced on them. Maybe, big corporates think the same way for one of their brands. Not necessarily for others,” said Agarwal.

Business houses believe that it is not always the value that defines how big they are, but also the potential of the brand. RBL president Darshan Mehta has a business term for it: patient money.

“Globally and otherwise, I call failed marriages. There have been successful marriages and I don’t think there’s a general geographic blueprint to it. Fashion is something that requires patient money. Really, whatever. To sum it up, it will patiently need money for want of a better word. And that’s what we bring to the table,” Mehta had earlier told Mint in an interview. The fact that we’re not a fund… it’s not just patient money, it’s strategic money too because it’s a business that we really understand,” he said.

CBRE’s Sharma said he saw great potential for this acquired talent to create more mainstream brands targeting the upper-middle class – similar to the notable Western brands popular in India today.

“I expect many such consolidations in the future, owing to the benefits and advantages enjoyed by the first movers,” he said.