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Latin America: Land of Big Opportunities

By Prachi Singh

4 Aug 2016

Fashion

With the 2016 Summer Olympics Games just around the corner the Latin American market is under the looking glass, creating new opportunities for fashion businesses both domestic and from abroad. FashionUnited takes a closer look at fashion companies to watch in Latin America.

Changing dynamics of the Latin American fashion retail

After the economic slowdown negatively impacting the fashion industry in both North America and Europe, Latin America and the Caribbean are slowly emerging as potential growth markets driven by increasing domestic demand, economic growth and purchase power. No wonder investment possibilities in Latin countries such as Brazil, Mexico, Argentina, Colombia, Venezuela, Chile, Peru, Ecuador, Dominican Republic and Uruguay are abundant.

The popularity of the American lifestyle and the strong influence of the United States on culture and consumption in Latin America first wooed fashion names like Tommy Hilfiger and Nike to launch retail operations in Mexico and Brazil. Later in the 90’s Spanish fashion verticals like Inditex and Mango changed the way people in Latin America shopped, pushing domestic fashion retailers to focus on product quality and offering.

Domestic fashion and footwear labels get a boost

While well-known global fashion companies began establishing a strong presence in the Latin American market, local fashion brands have also been able to create a solid foothold elsewhere. These include Brazilian shoe brands Melissa and Havaianas, which are now some of the biggest Latin American brands in the world.

Let’s dive into the world of the most important and internationally active brands that originate from Latin America.

Alpargatas

Fact-file

Company: Alpargatas. Became world leader by fashionising the humble flip-flop.

Founded: 1907

Headquarters: São Paulo, Brazil

CEO: Marcio Luiz Simoes Utsch

Brands: Havaianas, Topper and holds a 60 percent stake in Osklen

Manufactures shoes for: Dupé, Rainha, Mizuno, Timberland and Sete Léguas

Turnover: 1.2 billion dollars or 4.1 billion real (2015)

Retail footprint: 686 stores and products sold in 106 countries

Way back in 1883 two immigrant Argentines, Juan Echegaray, who hailed from Spain's Basque region, and Robert Fraser, a Scotsman whose family was in the textile business, formed a partnership to manufacture low-cost footwear. In 1907, the company set up a unit in Sao Paulo, Brazil. It produced Alpargatas Roda (espadrilles) and Encerado Locomotiva (boat shoes) in its plant based in the Mooca District, in São Paulo.

Today São Paulo Alpargatas Company S.A. is known worldwide for a whole different type of shoe, namely the colorful flip-flop branded under the name Havaianas. According to the 2015 best companies in Brazil survey listed on Istoé Dinheiro corporate guide, Alpargatas is among the largest companies in Brazil and placed at number 169 of 1000 companies based on revenue. Among the best evaluated companies, Alpargatas received two trophies for Corporate Governance and Clothing, Textile and Footwear.

The mother company of Havaianas currently boasts an operating income of 652 million reals (198 million US dollars) and is about to open doors to five new stores in Miami, Los Angeles, New York, New Jersey and Las Vegas. Meanwhile the company is pushing European distribution of its Havaianas sandals at well-known department store chains like Selfridges, Galeries Lafayette, KaDeWe and El Corte Inglés. This year Alpargatas expects to report an increase of 20 percent on last year's revenues of 4.1 billion reals (1.2 billion US dollars) and aims to expand retail presence of Havaianas and its other footwear brands in 80 international markets.

But it’s not only blue skies in Brazil. Last year the company slashed product prices to boost domestic demand amid stiff competition. With new launches and competitively priced product styles under the Havaianas label the company is now trying to get consumers back.

Analysts consider Alpargatas a safe investment thanks to its cost-cutting strategy and solid international expansion. Alpargatas’ initiatives to increase sales of other brands under its portfolio including Rainha, Topper and the licensed Japanese Mizuno label seem to be paying off as well. J&F Investimentos SA, which manages investments for Brazil's billionaire Batista family, recently acquired a controlling stake in Alpargatas.

For the Olympics season, Havaianas has created a series of Rio-inspired flip-flops. Brand marketing opportunity at the forthcoming Rio 2016, where Havaianas will enjoy an official presence, can further boost its international recognition and possibly exceed the number of 12 million pairs of slippers the company sold last year.

Grendene

Fact-file

Company: Grendene. One of the world’s largest footwear manufacturers.

Founded: 1971

Headquarters: Brazil

CEO: Rudimar Dall’Onder

Brands: Melissa, Zizou, Ipanema, Grendha, Zaxy, Rider, Cartago, Grendene Kids.

Turnover: 804.9 million dollars or 2,630 million real (2015)

Retail footprint: 60,000 international sales points and 65,000 in Brazil

Grendene was founded in 1971, also in Brazil, and today is one of the world’s largest footwear producers. Although the company name might not immediately ring a bell, you will surely have heard of brand names like Melissa, Ipanema, Cartago and maybe of Grendha, Zaxy, Rider, Pega Forte and Zizou as well. The company has integrated its operation completely and owns six production locations and 11 footwear factories with a combined production capacity of 250 million pairs of shoes per year.

Named after its founders, twin brothers Alexandre and Pedro Grendene Bartelle, Grendene is known for its shoes made of PVC and EVA and endorsed by the likes of supermodel Gisele Bundchen. She joined hands with the label in 2002 to launch her own line of affordable flip-flops called Ipanema Gisele Bundchen. The line became a hit in Brazil as well as abroad and proved to be major competition for the Havaianas brand.

Almost 25 million pairs of Bundchen’s jelly sandals are sold each year and accounted for more than 60 percent of Grendene’s annual exports valued around 250 million dollars last year. The company has been focusing on wooing not only the middle-class domestic consumers but also high-income clients with the Melissa brand that has become a fashion-icon because of collaborations with designer Karl Lagerfeld and architect Zaha Hadid.

The company reported a 7.1 percent rise in revenue in the second quarter of fiscal year 2016, with net profit increase of 4.9 percent. Grendene has approximately 60,000 international sales points and 65,000 in Brazil.

Lojas Renner

Fact-file

Company: Lojas Renner, second largest Brazilian department store and clothing company

Founded: 1912

Headquarters: Porto Alegre - Rio Grande do Sul, Brazil

CEO: José Galló

Brands: Renner, Camicado, Youcom

Turnover: 1.8 billion dollars or 6.1 billion real (2015)

Retail footprint: 284 stores, 72 Camicado units and 52 Youcom stores

In 1912 Antônio Jacob Renner founded the A. J. Renner Group, also in Brazil. The factory manufactured and sold wool overcoats. Soon the coats became a wardrobe staple in Gaúcho de Campanha (the pampas area of the state of Rio Grande do Sul) for both traveling salesmen and urban citizens. Lojas Renner opened its first shop in 1922. With the introduction of a broader product mix in 1940 the shop became a department store. In 1965, Lojas Renner S.A. was founded and in 1967 became publicly listed.

Lojas Renner underwent a complete restructuring at the end of 1991. The full line department store model was substituted by the concept of a department store specialising in fashion goods. In 1994 the company ventured out of the state of Rio Grande do Sul, by opening stores in Florianópolis, Joinville and later in Curitiba, Paraná. Followed by openings in São Paulo, Sorocaba and Guarulhos.

In 1998 American retail company J. C. Penney acquired a controlling stake in Lojas Renner. In May 2011, Lojas Renner acquired Camicado, a company in the home decor segment and in 2013 launched Youcom, a new business model focused on the younger generation in a specialised store environment.

Today Lojas Renner operates 284 stores, 72 Camicado units and 52 Youcom stores. A large majority of those stores are located in shopping centres. Renner designs and sells apparel, footwear and underwear, accessories and cosmetics. Lojas Renner organizes its collections according to lifestyles, offering a wide range of clothing which include formal and casual product lines. The brand offers current fashion at accessible prices in order to reach the middle class.

After the Senate voted to suspend President Dilma Rousseff in May 2016 paving way for a new government, shares of Lojas Renner SA rose to the highest in seven weeks after announcing an increased expansion target and the commencement of operations in Uruguay. In its second quarter results announcement, the company said it recorded 8.2 percent growth in net revenue to 1,464.7 million real (449.6 million dollars).

Liverpool

Fact-file

Company: Liverpool, leading department store chain in Mexico

Founded: 1847

Headquarters: Mexico

CEO: Graciano Guichard G

Brands: Liverpool, Fabricas de Francia, Liverpool Duty Free

Turnover: 4.3 billion dollars or 81.2 billion Mexican pesos (2016)

Retail footprint: 113 department stores in Mexico and 25 shopping malls

El Puerto de Liverpool S.A.B. de C.V. or Liverpool was founded in Mexico and is one of the largest department store chains in Latin America. The company now operates 25 shopping malls including Perisur and Galerías Monterrey. There are 113 department stores of which 80 are Liverpool format stores, 29 Faìbricas of France, four Duty Free stores and 91 specialty boutiques.

Liverpool - which was called The Cloth Case at first - was founded by Jean Baptiste Ebrard, a Frenchman who started selling clothes out of suitcases in downtown Mexico City's. In 1872, he started importing merchandise from Europe, which was shipped via Liverpool, England, prompting him to change the company’s name.

In July 2016 the company announced that it reached an agreement to acquire Chilean retailer Ripley in a deal that values the company at 813 billion Chilean pesos (1.2 billion US dollars). The acquisition of Ripley, which has 69 stores in Chile and Peru, is an expensive one but according to analysts the deal offers an opportunity to improve operations and add value for Liverpool.

Arezzo

Fact-file

Company: Arezzo - Leading Brazilian women’s footwear brand

Founded: 1972

Headquarters: Belo Horizonte, Brazil

CEO: Alexandre Café Birman

Brands: Arezzo, Schutz, Anacapri and Alexandre Birman

Turnover: 349.8 million dollars or 1.14 billion Brazilian real

Retail footprint: 488 franchises and 48 owned stores

Founded in 1972 by the brothers Anderson and Jefferson Birman in Belo Horizonte, Brazil, Arezzo enjoys a leading position in the women's footwear, handbags and accessories segment.

The company sells over 10 million pairs of shoes per year, besides handbags and accessories and has a strong portfolio of brands like Arezzo, Schutz, Anacapri and Alexandre Birman under its fold.

The company’s retail network consists of 488 franchises in more than 160 cities in Brazil and 48 owned stores, of which 11 are flagships. Now Arezzo has planned an aggressive retail expansion in the US market and opened a first Los Angeles store of the Schutz brand in April. After gauging response to its debut launch, Arezzo aims to make a nationwide rollout of at least 30 stores in 2017.

Witnessing a slowdown in demand in the Brazilian market, the company is keeping its focus on expansion in foreign locales, after combined export revenue of its four brands rose 67 percent in 2015.

pictures:havaianas,facebook/melissa,schutz,facebook/lojas renner,facebook/liverpool

Alpargatas
Grendene
Latin America
latin american fashion retail
Olympic Games