Fashion firms shop for Western brands

10:38, November 09, 2009      

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After decades of Made-in-China garments, China's fashion industry is eager to move on from being just a mass manufacturer of clothes. It wants to own Western brands and to sell them to China's 1.3 billion consumers.

The right to sell brands of several international fashion labels locally, such as Aquascutum and Pierre Cardin, has been recently acquired by Chinese clothing makers and sellers.

And the list of Western brands up for sale is only expected to get longer as retailers continue to reel under the weight of a global recession.

"Acquisition opportunities do increase a lot out there, but investment risks also increase when many of these acquisition targets are struggling to survive," said Ryan Tsang, a senior director of rating agency Standard & Poor's.

Hong Kong-listed China Dongxiang, which acquired ownership of Italy's Kappa brand at Chinese mainland and Macao markets in 2006, is on the hunt again for new targets in the US market, said a source familiar with the situation.

"Indeed, now we have too much money, but where is the best investment opportunity? There are many opportunities, but I only want to make a reasonable investment," Dennis Qin, chief executive of Dongxiang, said at a recent conference.

"It's not necessary to be a sportswear brand. We're also interested to look for opportunities in those brands that are not purely about sports but related to sports, for example, Ralph Lauren," said Qin, referring to the US clothing brand known for its Polo logo.

But Qin added there are no formal talks under way.

Interest in top brands

Dongxiang is not alone. China Investment Corp (CIC), the $200 billion sovereign fund, is showing interest in some top brands in the West, according to earlier Chinese media reports. CIC declined to comment.

YGM Trading, a Hong Kong garments seller, said this month that it agreed to buy the Asian intellectual property rights to Aquascutum, one of Britain's historic luxury fashion brands, for about $22 million.

YGM initially wanted to buy the whole business of Aquascutum but later decided to only take the Asia part due to concerns about staff pension and high production costs of Aquascutum globally, said Shirley Chan, a YGM managing director.

"It is a good time for Chinese firms to buy prestigious and well-established brands overseas and to introduce the brand back to the Chinese mainland market, instead of building their own brands, which is too time-consuming," Chan said.

Rising incomes

Thanks to a $586 billion stimulus package and record lending by the country's State-owned banks, China is likely to hit the government's target of 8 percent growth this year.

This stimulus has helped sustain the rise in incomes of Chinese shoppers, who are increasingly viewed as a rich seam of profit for luxury and fashion brands.

Bruce Rockowitz, president of global consumer goods exporter Li & Fung, suggested that cash-rich Chinese enterprises should focus more on acquisition opportunities in domestic markets rather than on buying and managing Western brands outside the home market.

"I think most Chinese companies don't have a strong enough management setup yet to oversee these sorts of American companies. There is a huge cultural difference, huge mentality difference," Rockowitz said.

Li & Fung's customers include US retail giants Wal-Mart Stores Inc and Target Corp.

"If I was Chinese, I would look at all the opportunities in China. And I would take Western brands and bring them in to China and not the other way around," Rockowitz said.

Source:China Daily/Agencies
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