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News, Business

Kering ends Safilo's Gucci licence, agrees to another

09/10/2014
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French luxury conglomerate Kering, formerly PPR, is redefining its 20-year partnership with Italian eyewear company Safilo following its latest decision to take most of its eyewear business in-house.After assessing the growth prospects of the eyewear market and the business potential of its brands in this category, Kering has initiated a move aimed at building in-house eyewear expertise for its brands."The global eyewear market for frames and sunglasses is significant and growing double-digit in the premium high-end segment," Kering stated.The current size of its brands' business is roughly €350 million and makes Kering one of the top five players in this industry, according to the company. Nine out of 11 Kering brands active in the eyewear category are managed through licence agreements with five different partners, generating consolidated royalties of approximately €50 million. Kering's partnership with Safilo includes eyewear licences for Gucci, Bottega Veneta, Saint Laurent and Alexander McQueen.

As part of the move, Kering and Safilo will terminate the current Gucci licence agreement two years in advance, i.e. by 31 December 2016. Safilo will receive a compensation of €90 million, to be paid in three installments between 2014 and 2018.

The two companies have also agreed to put in place a product partnership agreement for four years, commencing in January 2017, renewable upon mutual agreement. The agreement covers product development, manufacturing and supply of Gucci eyewear products by Safilo, and is subject to the signing of long-form agreements by the end of the year.

Safilo Group chief executive officer Luisa Delgado said: "We are satisfied with furthering our partnership in a way that leverages the heart of Safilo's strengths in eyewear product excellence. We have a unique tradition in the market as strategic partner for those brands that consider eyewear as strategic category. Through that agreement we confirm our capabilities as trusted partner."

Kering Group managing director Jean-François Palus said: "We are satisfied to count on Safilo as a partner because their know-how in product development and manufacturing is important for the quality and craftsmanship that we want more than ever for our eyewear business."

Under the new business model, Kering - together with its brands - will fully control the eyewear value chain, from design to product development and supply chain, and from branding and marketing to sales. All brands will continue to control separately their creative process under the leadership of their respective Creative Director.

Led by Kering Eyewear 's chief executive officer, Mr Roberto Vedovotto, the new dedicated eyewear unit will specialise in luxury, high-end and sports eyewear. Mr Vedovotto - the former CEO of Safilo - and his team will be co-shareholders of that new entity.

Kering believes the move will enable it to fully capture the growth potential of its brands in the category. It will also lead to significant value-creation opportunities, notably through the implementation of both revenue and distribution synergies, the company said.

The growth drivers will comprise:

• gradual full activation of the brand portfolio in both luxury and sport and lifestyle;

• best talents within both the brands and the Kering Eyewear entity for internal design, product development and sales force;

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• full control over a network of external manufacturing suppliers; and

• enhanced distribution across all channels with specific focus on Kering brands' directly-operated-stores network.

Mr Vedovotto commented: "Eyewear is a strategic category for Kering brands. Through this project, Kering aims at helping them fulfill their full growth potential in this business segment while leveraging the unique appeal of each of them."

Kering owns a portfolio of brands, including Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, Balenciaga, Brioni, Christopher Kane, McQ, Stella McCartney, Tomas Maier, Sergio Rossi, Boucheron, Dodo, Girard-Perregaux, JeanRichard, Pomellato, Qeelin, Puma, Volcom, Cobra, Electric and Tretorn.

Present in more than 120 countries, the group generated revenues of €9.7 billion in 2013 and had more than 35,000 employees at year end.

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