ALTAGAMMA 2008 WORLDWIDE MARKETS MONITOR

Transcription

1 ALTAGAMMA 2008 WORLDWIDE MARKETS MONITOR Claudia D Arpizio Milano, 21 ottobre 2008

2 Today we are going to present three different luxury market segments High End Furniture Luxury Yachts Personal Luxury Goods 2

3 Foreword on methodology and sources Methodology Sources Confidence on 2008 data Price segment based market evaluation Bottom-up control panel comprised of about 40 players Company annual reports, market reports, press releases 2008: press release, interviews Price segment based market evaluation Bottom-up control panel comprised of about 50 international players Company annual reports, market reports, press releases 2008: press release, interviews Bottom-up brand based market evaluation Build up of retail turnover by brand More than 220 brands analyzed in details Annual reports, analyst reports, press releases 2008: quarterly results of listed luxury companies Interviews 3

4 High End Furniture Market: structural long term growth with a likely stop in 2009 High End Furniture Luxury Yachts Personal Luxury Goods 4

5 and 2008: other two years of solid growth for high end furniture market High End Furniture Market, B 20B ,7 12,0 12,4 CAGR % 12,9 13,9 CAGR % 15,7 17,3 +10% 18,7 +8% CAGR: 7% 5 +13% +2% +3% +4% +8% E 5

6 High end segment is gaining market share: brandization is ongoing Total Furniture Market (B ) 100% 308,7 317,5 325,8 YoY Growth ,9% YoY Growth E +2,6% ,0 300,3 307,1 +2,5% +2,1% High-End segment 0 15, ,3 18,7 2008E +9,8% +8,0% % High End Segment 5,1% 5,4% 5,7% 6

7 Europe is the largest market followed by USA, Asia-Pacific and Middle East are catching up High End Furniture Market - 20B 3,4 15 5,8 20% 1,2 7% 17,3 10 6,9 33% Mainly Middle East 5 40% 0 Europe Americas Asia-Pacific RoW Total YoY '06-'07 Growth CAGR '01-'07 3% 3% 10% 13% 5% 6% 6% 9% 7% 7% 7

8 Living & Bedroom covers 50% of the market, but smaller segments are growing faster 10% Market growth by product segment, 8 Kitchen 2,0 B Outdoor 1,8 B CAGR '01-' Living Lighting2,3 B & Bedroom 8,7 B Bathroom 2,5 B 2 2B % YoY '06-'07 Growth 8

9 Design, design, design... for amateurs and aspirational consumers (finally!) LIVING & BEDROOM (B ) CAGR 05-07: 11% 8,7 8,1 7, growth +7% Very fragmented segment (~70 players) Main markets are still Europe and USA (~70% of total), with USA slackening and Russia fast growing Upholster production more and more shifting to Asia Pacific Client purchasing lead by interest in Design and Brand; fast growing emerging segment of aspirational consumers to mirror the apparel customer segmentation Real estate trend still drives the growth path, but personal based consumption plays an important role 9

10 Increasing importance of bathrooms, technology enriches the proposition 2,0 BATHROOM (B )* CAGR 05-07: 11% growth +12% 2,2 2, *High end production of big industrial players is included in the analysis Few players really dedicated to luxury bathrooms: niche players in USA and category leaders in Italy Growing importance of design with consequent increase of prices Technology in the bathroom (waterproof TVs, mirror internet enabled,...) together with luxury furniture with an high level of customization (contract segment) Designing for life (dedicated spaces, sauna, jacuzzi,...) Water efficiency is an hot issue following the increasing worldwide attention to ecology and climate changes Correlated with kitchen and real estate trends (contract segment) 10

11 Larger, eco and high-tech kitchens 1,6 KITCHEN (B ) CAGR 05-07: 12% 1,8 2, growth +12% Very concentrated segment with Italian companies gaining market share and challenging German leaders Central role of ecology and technology (propelled by domotics): Increasing use of eco-compatible materials Saving energy efficiency and appliances remote control Multifunctional solutions: lighting-cowl filtering the air, air conditioner cowl,... International trends: Night kitchen as formal receiving room: use of semi-precious materials Cooking show-restaurant: kitchen, open to the living room, where the chef is the main actor 11

12 Outdoor living is becoming more and more sophisticated OUTDOOR (B ) CAGR 05-07: 14% growth +13% 1,4 1,6 1, Fragmented market going through a consolidation phase. No real international leaders Main market USA followed by Europe From Outdoor to Over-door... inside-out living spaces that seem like the interior with massive fireplaces, heated flooring, custom kitchens and artwork Growing use of vibrant color and plush details Testing of new expensive materials borrowed by automotive or aeronautics (ex. carbon) 12

13 Beyond lighting: objects for well-being LIGHTING (B ) CAGR 05-07: 12% growth +13% 1,8 2,0 2, Fragmented market: around players mainly European......but in a phase of concentration High importance of the brand and continuous innovation of design Architects more and more influencers in purchasing process Energy saving trend (ex. increasing use of LED) Lights become real sculptures/ furniture complements that add art to houses Fashion brands entering the segment 13

14 2009: a difficult year with several question marks... High End furniture market growth forecast (2009) 20B ,3 18,7 What will happen in 2009? Consumer consumption slowing down Stagnant Real Estate market Economical crisis of major markets -5% -8% % = -3% Financial market stabilization Eco incentives and regulation E 2009F base scenario Political factors can limit 2009 slow down 2009F optimistic scenario 14

15 ...while long term potential is assured by structural drivers Mature markets: beyond the consolidation - Brandization at full potential -Ecological/sustainable driven tendencies to stimulate the market and revitalize personal consumption -Urban areas re-qualification: chance to export Design and Well being/living to the community/urban social scale Emerging markets: from a centralized approach to a consumer centric habit -Real estate continuing to fuel the growth and generate innovative solutions -Retailing plays a key role for educating consumers and normalize the trend 15

16 Luxury Yachts: a resilient market to economical cycles High End Furniture Luxury Yachts Personal Luxury Goods 16

17 Luxury Yachts market more than doubled in the last 8 years, important growth in 2008 Luxury Yachts Market ( B, E) 12B CAGR: 12% ,2 5,2 6,2 6,3 7,0 7,8 8,8 9,5 10,3 9% 8% 2 24% 19% 2% 11% 11% 13% E 17

18 Luxury Yachts market can be segmented by price range 12B ,3 3,4 1,2 1,5 4, (33%) (12%) (14%) (41%) Segments Description Over 15M 7M - 15M 3,5M - 7M 750k - 3,5M 18

19 Super luxury segment (price over 15M ) over performing Luxury yachts market growth by price segment 20% 15 Super Luxury Over 15M From 3,5M to 7M CAGR Entry From 750k to 3,5M From 7M to 15M % 08E-07 Growth 19

20 Significant long term potential of yachts market mainly driven by HNWI growth 15B Luxury Yachts Market by average price, B over 15M 7M - 15M 3,5M - 7M 750k- 3,5M 13,0 9,5 4,9 3,0 1,7 1,1 1,9 1,3 4,1 4, CAGR % +15% +13% +4% Drivers Growth of HNWI - top income individual - turnover among HNWI - emerging markets GDP and market trends - low price segment more exposed to economic cycles Growth of new large boat berth availability - new recreational infrastructures (Luxury Resort) Development of new luxury charters and services Local taxation, regulations and financial instruments availability for yachts buying/ leasing 20

21 Future growth will be fuelled by emerging markets and super-luxury segment! Luxury Yacht Market (B ) Luxury Yacht Market 2010 (B ) 100% 4,8 2,8 1,9 9,5 100% +10% +8% +21% +12% 80 1,3 1,0 0,7 3, % +13% +24% +18% ,5 0,6 0,4 0,4 0,3 0,3 1,1 1, % +12% +10% +8% +26% +25% +15% +13% over 15M 20 2,3 1,0 0,7 4, % +2% +13% +4% 7M - 15M 3,5M - 7M 750k- 3,5M 0 EU USA RoW Total 0 EU USA RoW Total 21

22 Personal Luxury Goods: very good, 2008 safe, probably the worst year in a long row High End Furniture Luxury Yachts Personal Luxury Goods 22

23 On a nutshell: good, 2008 safe! Worldwide Luxury Goods Market trend ( E) 200B CAGR % CAGR ,8% CAGR E 7% +6,5% % CAGR: 7% 0 11% 10% 5% 14% 17% 3% 0% -5% 5% 9% E 23

24 High level of exogenous turbulence asks for a detailed analysis US$ 1,25 +3,5 US Sub Prime Credit Crunch +2,9 +1,4 US$ 1, US$ Peak 1,59 +3,2 + 1 Stock markets crash +1,4-0,4 US$ 1, ,0 +6,5% +3% Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2008E QoQ growth 8,6% 9,5% 7,7% 2,7% 8,7% 2,6% 3,5% -1% 24

25 How exogenous events influenced the luxury goods market Facts Impacts on Luxury Goods Strong Hectic exchange rates fluctuations Sub-prime credit crunch -Decrease in consumer confidence -Erosion of discretionary spending of low-middle classes in US -Rebound on consumer confidence in Europe and Japan Instability of worldwide economy -BRICs growing -Western economies stagnating -Financial crisis -Stock markets crash - Financial crisis impact on real economy (Recession?) 1. Real market growth affected by exchange rates 2. Tag price increase which did not turn into higher average prices 3. Entry-to-luxury brands less resilient to exogenous turbulence 4. Retail (mainly new stores) growing more than wholesale (risk adverse) 5. Boom of on-line shopping: different consumers and lower psychological barriers 6. Emerging markets providing a buffer of growth to luxury players 7. Strong slow-down expected for last quarter of

26 1. Real market growth affected by exchange rates Average exchange rates /$ 1,25 1,31 1,35 1,37 1,45 1,37 1,50 1,56 1,50 1,35 9,8 8,7-4, ,7-4,5 1,3 estimate -0,3 1, ,4 +6,5% At current exch. rate +3% +12% At constant exch. rate +6% +6,5% -2,5% +5,5% -3% +5% -3% +1% -0% H K 2H K 1H K 2H K 2008E Currency effect Currency effect 26 Currency effect Currency effect

27 2. Tag price increase which did not turn into higher average prices Mature markets: focus on entry items of aspirational brands (in particular Japan) Emerging markets: massive compulsive shopping of luxury goods Increase in tag prices in $ and Yen Emerging markets: super - luxury segment Mature markets: absolute luxury more resilient to exogenous turbulence % % +12% +6,5% 2006 Volumes Prices K Exchange rate 27

28 3. Entry-to-luxury brands less resilient to exogenous turbulence The 3 A of Luxury Trend by segment Market giants keep their growth pace Star brands in the fashion segment Aspirational consumer base not stable Absolute 10% 8 Aspirational Aspirational CAGR Accessible Absolute Accessible % Exchange rate effect Sub-prime crisis affecting mid-low end luxury consumers Resilient segment even in stagnating markets Hard Luxury and High- End RtW Emerging markets Growth 28

29 4. Retail (mainly new stores) growing more than wholesale (risk adverse) vs 2006 Retail growth analysis (Index:2006=100) % 5 55% 109 New openings: - China - Second tier locations Europe and USA Like for like: Last years opening brought at full speed 2006 Like for like growth Perimeter growth vs 2006 Growth by channel (B ) % +9% +5,5% 79% 20% 21% 2006 Retail 29 Wholesale

30 5. Boom of on-line shopping: different consumers and lower psychological barriers 3B Luxury Goods On-line shopping by area and by channel, B growth +40% 2,5 China 5% Japan 10% 2,5 2 1,5 Europe 20% Retail 40% 1 USA 65% Wholesale 60% by area by channel Can I call you back? I m shopping 30

31 6. Emerging markets providing a buffer of growth to luxury players RUSSIA CHINA INDIA BRAZIL Population 145 M people 1.3 B people 1.1 B people 190 M people HNWI ( 07) Luxury goods market ( 07) % tot market 3,6 B 2,1% 4,5 B 2,7% 0,6 B 0,4% 1,3 B 0,8% Expected growth 20% for the next 5 years 30% for the next 5 years 25% for the next 5 years 35% for the next 5 years 31

32 7. Strong slow-down expected for last quarter of 2008 Luxury Goods Market growth by quarter (2008, QoQ growth) Based on listed companies results Bain estimates 8,7% Total year+3% 2,6% 3,5% Build-up of 2008 growth 1Q 2Q 3Q -1% 4Q 1,8% 0,6% 0,8% -0,2% Listen, everybody feels a little depressed around this time of year! 32

33 Asia Pacific keeps growing, US and Europe solid in real terms, Japan hardly suffering Worldwide Luxury Goods Market by Area YoY 07 vs 06 YoY 08E vs 07 Rest of World Asia-Pacific 170B 4% 11% 175B 5% 12% +10% +9% +14% +15% Japan 13% 12% -2% -7% Americas 34% 33% +4% +0% Europe 38% 38% +10% +5% 2008E 33

34 Europe remains the first market and drives growth thanks to Eastern Countries 58 EUROPEAN MARKET CAGR 98-08E +6% % +5% CAGR 06-08E 7,5% K exch.rate E 11% 6% In : - Record year for growth in absolute terms - Strong impact of emerging markets (local consumption + tourist flows) - Jewellery (+14,5%) and Shoes (+15%) driving growth In 2008: - Strong killed tourist flows from USA and Japan - Local consumption of mature markets slowing down, growth mainly driven by Eastern Europe 34

35 Americas is entering into tougher periods 55 AMERICAN MARKET CAGR 98-08E +5% % +0% CAGR 06-08E 2% 35 K exch.rate E 14% 7% In : - Record year for growth in real terms - Sub-prime credit crunch affecting accessible segment (+2%) - Leather (+10,5%) and Hard luxury (+9%) driving growth, while apparel suffering (+2%) - Brazil blossoming market (1,35 B, +35%) In 2008: - First year of stagnation after post-sept 11 crisis - Strong impact of super : big impact of tourism from area but strong reduction of local consumption

36 Japan: the only market in luxury recession JAPANESE MARKET CAGR 98-08E +5% CAGR 06-08E -4% 22-2% 22-7% K exch.rate E 8% -7,5% In : - Second year of stop affected by weak Yen and decreasing consumer confidence - Fragrances (+2,5%) and Shoes (+2%) the positively growing categories: lowering of average ticket for luxury goods - Absolute luxury brands are more resilient to market crisis In 2008: - Real recession: private consumption crisis is deepening due to echoes of international financial and economical crisis Question mark on new generations attitude towards fashion and luxury

37 Asia Pacific Luxury market fuelled worldwide luxury goods growth ASIA PACIFIC MARKET CAGR 98-08E +9,5% CAGR 06-08E 14% % % K exch.rate E 15% 15,5% In and 2008: - Solid growth confirms past trends and consolidates market dynamics also thanks to China explosion - Perimeter driven growth: about new stores openings in All categories experience hectic growth: Apparel (+16%), Hard Luxury (+15%), but Leather and Accessories (+20%) driving growth - Accessible segment winning: luxury-knockers enlarging luxury brands consumer base - Local consumption not yet at full potential: much room for further growth for luxury players 37

38 The emerging China is already the first market in Asia Pacific, followed by Korea and Hong Kong Asia Pacific Luxury Market by country (2008, B ) China 5,9 South Korea 4,9 India 0,8 Thailand 0,9 Hong Kong 3,6 Macau 0,6 Taiwan 2,7 Singapore 2,2 38

39 Excellent performance for hard luxury and accessories Worldwide Luxury Market by Category YoY 07 vs 06 YoY 08E vs 07 Art de la table 170B 4% 175B 4% - 3% -2% Hard Luxury 20% 21% +10% +7% Accessories 21% 22% +11% +5% Perfume and Cosmetics 23% 23% +4% +3% Apparel 29% 28% +6% +0% 2008E 39

40 Europe is the market for womenswear even if increasingly competitive WOMENSWEAR CAGR 98-08E +4,5% 22 23,5 23,6 +6% +0,5% CAGR % K exch.rate % 2008 E In : - Growing in line with overall market - Europe makes the bulk of the growth (+1 B) while Asia (+17,6%) and Rest of the World (+14,9%) are the fast growing - Aspirational and absolute brands are best in class (+9,9% and +8,5%) - First lines over performing (+ 8%): fast fashion players stealing share to second and third lines In 2008: - Strong stop: other luxury categories stealing share of 40 discretionary wallet

41 Menswear is starting to slow down its growth pace MENSWEAR CAGR 98-08E +6% 22 23,5 23,5 +6% +0% CAGR % K exch.rate % 2008 E In : - Growth slow down with respect to previous years (+6% vs. +9% growth) - Strong growth concentration by area: overperformance in Europe (+14%) and Asia (+19%), stop in Japan (-4%) and first signals of stagnation in USA (+1%) - Aspirational brands are winning (+13%) - First and second lines over-performing (+ 9%), sports lines suffering (0%) mainly for exchange rate effect In 2008: - First year of stop after a long growing period, also due to currencies fluctuations 41

42 Cheaper is chic in Japan while Europe and USA ask for more precious leather products 17 LEATHER GOODS CAGR 98-08E +10% K exch.rate ,5% +4% CAGR % 16% 2008 E In : - Double digit growth in all areas but Japan (+1%) - In Japan: stagnating volumes but decreasing average prices (accessible players + entry items of aspirational brands) - In Europe and USA absolute brands are winning - Booming category in emerging markets: Asia (+21%) and Russia (+20%) - All segments are growing well, but Absolute leather brands are gaining share (+12%) In 2008: - Leather keeps growing, even if at a lower pace: accessorization process seem to be resilient to turbulent times!

43 Shoes, shoes, shoes! Record category for the luxury market 7 SHOES CAGR 98-08E +7% CAGR % 7,6 8,2 +12% +8% K exch.rate % 2008 E In : - First category for growth: all areas have positive growth - Both men and women shoes keep their growth pace (+12% for both) - Shoes are becoming the most important accessory in a woman look: we do not compromise on shoes - Absolute brands driving growth (+17%): no impact of cheap and chic trend - Fashion forward brands gaining share In 2008: - Still the king category for growth: shoes are becoming the standalone accessory that differentiates fashion 43 conscious women

44 Watches...still an evergreen category in luxury. Impact of the financial crisis in 2009? 22 WATCHES CAGR 98-08E +8% 26,6 24,4 +11% +9% CAGR % K exch.rate % 2008 E In : - Very solid growth among countries and segments: Asia (+18%) and Absolute segment (+10%) stand out - Category fuelled by emerging markets (both local and tourist purchases): usually watches are the first category to start luxury consumption In 2008: - Watches keep their growth pace - Forecast of slight slow-down in last 2008 quarter, but highest end segment does not seem to be affected at all In 2009:?? 44

45 Jewelry hit the brakes in 2008 after a strong JEWELRY CAGR 98-08E +7,5% CAGR 06-08: 6% 7 7,8 8 +9% +2,5% K exch.rate % 2008 E In : - Growth spread among segments and areas.. but Japan (+2%) - Europe and Asia over-performing (+12% and +15%) - Absolute and pure jewelers are king in the competitive arena (+12%) In 2008: - First signals of slow-down after a golden growth period in USA and Europe - Weakening Christmas holidays expectations 45

46 Fragrances more dynamic in, cosmetics less impacted by weak 2008 Christmas 17 PERFUMES CAGR 98-08E +5% 18 18,4 21 COSMETICS CAGR 98-08E +7% 21,8 22,4 +5% +2,6% +3% +3% K exch.rate 2006 CAGR % 10% Steady growth rates fuelled by good product launches: - High competition - Powerful Advertising 2008 E Category not affected by Japan and US crisis (+3% both countries) In 2008 it is expected to slow down mostly due to a weak Christmas holiday period K exch.rate 2006 CAGR % 10% 2008 E In, category affected by different geographic dynamics than rest of luxury market: - Stagnation in Asia and Japan - US (+4%) over performing, Europe (+2%) In 2008 it is expected to keep its growth path with skin care gaining share over make up 46

47 2009: probably the worst year for luxury goods consumption in a row Luxury goods market growth forecast (2009), B What will happen in 2009? Europe decreasing significantly US and Japan still far from recovery % +2% Emerging markets keep growing USD and Yen recovering on -7% -3% 2008E 47 constant exch. rates current exch. rates For the first time in history currencies fluctuations may have a positive impact on luxury goods market growth

48 Anyway, in perspective, luxury goods market shows strong basics for long term potential! Long term drivers for luxury Increasing personal wealth in all markets, growing HNWI Sustained growth expectations in long term global GDP and emerging markets Strongly increasing tourist flows Growing spend by working women Increasing number of men choosing global luxury brands Continuing democratization, strongly growing aspirational consumer base - saving less - substituting traditional categories within luxury New opportunities may come from changing values and consumption habits Enlarging customer base! 48

49 How to manage in turbulent times: 3 imperatives to prepare for the next phase 1. Stay tuned on your consumers 2. Push for organic growth 3. Inject cost culture

50 1. Stay tuned on your consumers What to do Know your consumers at best Re-think the shopping experience Leverage on loyal customers and brand communities Localize marketing activities Re-allocate marketing budgets to below the line activities Understand what s in for quality What to avoid Fully delegate clients relationship to salespeople Deploy a global product and marketing approach Keep useless complexity in product features Another catalog 50

51 2. Push for organic growth What to do Slow-down retail expansion Strengthen entry price offer, selectively increase other prices Focus on excellence initiatives: CRM, Training, Assortment Mgt Invest in retaining / hiring talent Keep gaining market share What to avoid Increase prices across the entire offer Focus on strategic initiative: Repositioning, acquisitions, etc. The guy that knows about the books isn t here today. I d be more than happy to suggest a bookmark. 51

52 3. Inject cost culture What to do Hunt for profits: G&A, suppliers, working capital... Bring IT to full potential Streamline processes and organization What to avoid Cutting strategic costs: marketing, retail, creativity,... Block investments Aggressively cut personnel Under-spend competitors Of course that s only an estimate. The actual cost will be somewhat more. 52

53 To conclude... Very promising industry with strong long term potential Personal Luxury Goods Market is the sum of interesting but different segments/niches Need to carefully manage 2009 slow-down to prepare for the next step 53