Finding the Asian Hermès is no easy task. Swinand likens it to the technology boom of the late 1990s,Christian Louboutin Wedges when start-ups were common but many failed as soon as they had begun. “The trick is to find the Google,” he says. Even Anthony Bolton, the renowned UK stockpicker who now manages a China fund, says Chinese demand for western brands is so insatiable it is hard to spot local rivals.
“I have been searching to find the Chinese luxury brands of tomorrow, but so far with little success,” he says. “That said, I’m sure they will emerge at some point in the future.”
Some investors are watching consumer behaviour for tips. James Morse, chief executive of Squarestone Brasil, a property company that invests in Brazilian shopping malls, says the country’s own designers, including Carlos Miele,Christian Louboutin Boots Cris Barros and Osklen, appeal to rich consumers who want designer labels at a cheaper price.
The designers also appeal to locals who prefer a national flavour to their luxury. “If I were buying a T-shirt, I’d look at Osklen as it has a feel I wouldn’t get in a luxury brand in Europe,” says Morse. “The style of the formal range is very Brazilian.”
Wealthy consumers in Nigeria are also opting for local designers who have an African influence in their work.
“Nigerian women in general are more comfortable wearing Nigerian clothing. Increasingly, the first choice for the well-dressed and wealthy Nigerian woman would be to wear leading Nigerian brands,” says Nimi Akinkugbe, regional director of Barclays Wealth in west Africa. “Before now, they tended to wear European brands.”
Swinand points out that brands with a local flavour can often use this as a marketing tool. In China, he predicts, “there’ll be a sense of national pride or even local pride regionally –Christian Louboutin shoes just like in the US there are brands that play better in California than in New York”.
Others are waiting for emerging-market designers to make share offerings. While Prada hopes to raise up to $2.6bn in its Hong Kong initial public offering, Chow Tai Fook Jewellery, a local designer, is also planning a $3bn-$4bn IPO in Hong Kong next year. Powerland launched an IPO in Germany in April.
However, some believe it makes more sense to look for opportunities just below the luxury level. According to a report from Credit Suisse, the investment bank, wealthy consumers in emerging markets often prefer international brands for discretionary goods such as cars and fashion, but are happy to buy local brands for essential goods such as food.
This trend has convinced Kirkham, manager of JPMorgan’s consumer fund, to buy local brands such as Want Want – the food manufacturer behind Hot-Kid, a popular brand – and Vinda, a household paper manufacturer, for his portfolio.
Kirkham also suggests Liming Shoes as one Chinese-branded company that is doing a good job of lending an air of elitism to its footwear brand, which is the third most popular in China, behind Nike and Adidas. The company has resisted flooding the market and kept prices reasonably high – although they are still three-quarters of the price of western brands.
Such local enterprises, the fund manager believes, have better growth prospects than their western rivals as they sell to emerging-market consumers, whose wealth is growing at a faster rate than in the sluggish west, where international luxury companies still have the bulk of their sales.
“When I can find a reasonably priced local brand with longevity, I get a faster growth rate as it’s a pure play,” explains Kirkham. “I wish I could find more, as the consumption story is so powerful.”
Nevertheless, analysts agree that western luxury brands have nothing to worry about from emerging-market brands – yet.
Brazilian shoppers still happily pay premiums of as much as 100 per cent for this season’s Louis Vuitton rather than buy the same item abroad for half the price, to be sure of getting the bag they want, according to Morse.
And Michael O’Sullivan, head of UK research at Credit Suisse Private Banking, says locals are often mistrustful of domestic brands, with international brands sometimes akin to a currency. Louis Vuitton handbags may be used as business sweeteners, for example, with any gift made including the authenticity certificate to prove it is not a fake.
“The vast majority of all luxury goods sold remain western brands,” says Kirkham. “It takes years and years to build a brand. Realistically, I don’t see the emergence of any strong local brands any time soon.”
“I have been searching to find the Chinese luxury brands of tomorrow, but so far with little success,” he says. “That said, I’m sure they will emerge at some point in the future.”
Some investors are watching consumer behaviour for tips. James Morse, chief executive of Squarestone Brasil, a property company that invests in Brazilian shopping malls, says the country’s own designers, including Carlos Miele,Christian Louboutin Boots Cris Barros and Osklen, appeal to rich consumers who want designer labels at a cheaper price.
The designers also appeal to locals who prefer a national flavour to their luxury. “If I were buying a T-shirt, I’d look at Osklen as it has a feel I wouldn’t get in a luxury brand in Europe,” says Morse. “The style of the formal range is very Brazilian.”
Wealthy consumers in Nigeria are also opting for local designers who have an African influence in their work.
“Nigerian women in general are more comfortable wearing Nigerian clothing. Increasingly, the first choice for the well-dressed and wealthy Nigerian woman would be to wear leading Nigerian brands,” says Nimi Akinkugbe, regional director of Barclays Wealth in west Africa. “Before now, they tended to wear European brands.”
Swinand points out that brands with a local flavour can often use this as a marketing tool. In China, he predicts, “there’ll be a sense of national pride or even local pride regionally –Christian Louboutin shoes just like in the US there are brands that play better in California than in New York”.
Others are waiting for emerging-market designers to make share offerings. While Prada hopes to raise up to $2.6bn in its Hong Kong initial public offering, Chow Tai Fook Jewellery, a local designer, is also planning a $3bn-$4bn IPO in Hong Kong next year. Powerland launched an IPO in Germany in April.
However, some believe it makes more sense to look for opportunities just below the luxury level. According to a report from Credit Suisse, the investment bank, wealthy consumers in emerging markets often prefer international brands for discretionary goods such as cars and fashion, but are happy to buy local brands for essential goods such as food.
This trend has convinced Kirkham, manager of JPMorgan’s consumer fund, to buy local brands such as Want Want – the food manufacturer behind Hot-Kid, a popular brand – and Vinda, a household paper manufacturer, for his portfolio.
Kirkham also suggests Liming Shoes as one Chinese-branded company that is doing a good job of lending an air of elitism to its footwear brand, which is the third most popular in China, behind Nike and Adidas. The company has resisted flooding the market and kept prices reasonably high – although they are still three-quarters of the price of western brands.
Such local enterprises, the fund manager believes, have better growth prospects than their western rivals as they sell to emerging-market consumers, whose wealth is growing at a faster rate than in the sluggish west, where international luxury companies still have the bulk of their sales.
“When I can find a reasonably priced local brand with longevity, I get a faster growth rate as it’s a pure play,” explains Kirkham. “I wish I could find more, as the consumption story is so powerful.”
Nevertheless, analysts agree that western luxury brands have nothing to worry about from emerging-market brands – yet.
Brazilian shoppers still happily pay premiums of as much as 100 per cent for this season’s Louis Vuitton rather than buy the same item abroad for half the price, to be sure of getting the bag they want, according to Morse.
And Michael O’Sullivan, head of UK research at Credit Suisse Private Banking, says locals are often mistrustful of domestic brands, with international brands sometimes akin to a currency. Louis Vuitton handbags may be used as business sweeteners, for example, with any gift made including the authenticity certificate to prove it is not a fake.
“The vast majority of all luxury goods sold remain western brands,” says Kirkham. “It takes years and years to build a brand. Realistically, I don’t see the emergence of any strong local brands any time soon.”
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