Japanese passion for brands spurs acquisitions

Japan's widely-reported passion for luxury brands has developed into a series of mergers with and acquisitions of foreign brands. In May 2005 apparel maker Onward Kashiyama Co. acquired British fashion group Joseph for 17 billion yen (£838.000). Only one month later, the company acquired the management rights of Italian shoemaker Iris, which sells luxury brands like Chloe and Marc Jacobs.

"By having several names that can be sold as our core brands, we will enhance our international competitiveness and expand the company's market share abroad," Onward Kashiyama president Shigeru Uemura told Japanese paper The Daily Yomiuri. Originally Japanese firms had licensing agreements with foreign brands, reports the paper. However, problems can occur under this type of arrangement. "When the profit (generated through licensing agreement) increases, the company owning the brand often starts considering setting up its own affiliate firm in Japan," an employee at a major trading house told the paper.

This is not always the case, of course, but brand owners can refuse to renew contracts, as was the case with Adidas-Salomon, who did not extend its contract with sportswear maker Descente Ltd in 1998. For Descente this was a major blow, as profit from the sportswear giant accounted for 40 percent of total sales.

Mergers and acquisitions have provided the Japanese with a solution for securing medium and long-term profits. In 2001, Sumitomo Corp and the US accessories company Coach Inc joined forces and established Coach Japan Inc. Within four years, sales had quadrupled. In July 2005, Sumitomo sold its stake in Coach Japan for 14 billion yen.

"As the Japanese economy recovers, consumers are expected to spend their surplus funds on brand items, such as clothes. To satisfy Japanese consumers, who prefer 'the real thing' more companies will probably acquire brands with track records in the future," said Kensuke Kojima, president of Kojima Fashion Marketing Co.