State of the Luxury Goods Market in 2014

TRENDS AND INSIGHTS IN THE GLOBAL LUXURY GOODS MARKET2014

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M&A

PASSPORT: LUXURY GOODS DATA UPDATE 2014

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OVERVIEW OF PASSPORT


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6

Key Points: What Every Player Wants to Know


What’s the global growth trend?

?

Where’s “the next China?”

?

Where’s the value??



7

Luxury Goods Sales in Excess of US$317 Billion and Growing…


Continued growth Strength from emerging economies

China Spending rising steeply despite government clampdown

Japan A weaker yen bolstering Japan’s penchant for luxury

Affordable luxury Still breaking new ground especially in developed markets

Expanding middle class

Expanding B and C class in emerging economies fuelling a new culture of luxury aspiration



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2008 9 10 11 12 13 14 15 16 17 2018

% Y

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Global Luxury Sales (US$ billion) and Growth 2008-2018

US$ billion Year-on-Year % Growth

Luxury Goods Power On..




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Category

2013US$

million (current)

2014US$

million (current)

Y-o-Y real

growth 2013-2014

2018US$ million

(current)

CAGR 2013-2018

Designer Apparel (Ready-to-Wear)

132,935 136,785 2.9% 154,299 3.0%

Luxury Jewellery and Timepieces

62,218 65,042 4.5% 78,693 4.8%

Luxury Accessories 51,251 53,488 4.4% 64,652 4.8%

Fine Wines/Champagne and Spirits

29,508 30,600 3.7% 35,931 4.0%

Super Premium Beauty and Personal Care

28,007 28,959 3.4% 33,377 3.6%

Luxury Cigars 5.516 5,635 2.2% 6,077 2.0%

Luxury Travel Goods 4,576 4,754 3.9% 5,512 3.8%

Luxury Writing Instruments and Stationery

2,124 2,160 1.7% 2,376 2.3%

Luxury Electronic Gadgets 1,022 1,043 2.0% 1,236 3.9%

Hard Luxury and Accessories Lead Global Growth



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11

Emerging Markets Will Continue to Drive Growth

NEW INSIGHTS: EMERGING MARKETS

0%

10%

20%

30%

40%

50%

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70%

80%

90%

100%

% v

alu

e sh

are

Luxury Sales Developed vs Emerging Markets 2008 - 2018

Developed Emerging

Much of this impressive growth has come from the emerging markets. Where thanks to continued urbanisation, economic development and the overall love of luxury which has brought a large proportion of new consumers into the luxury market.



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Asia Pacific to Become Regional Leader




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Luxury Sales Fuelled by Expanding Middle Class




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China Overtakes France and Italy Despite Government Clampdown


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2013 2018

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Luxury Goods Top Five MarketsValue Share 2013/2018

US Japan China France Italy ROW

2012 2016 2020

Population in (‘000) above US$150,000 gross income

US 17,947 24,847 33,856

China 2,081.6 3,635.1 5,396

Japan 3,579.9 3,460.3 3,375

Germany 2,201.4 2,561.3 2,930

Australia 1,316.8 1,877.5 2,438.4

France 1,746.6 2,050.4 2,393.8

UK 1,514.8 1,819.9 2,192.8

Brazil 897.6 1,345.9 1,839.8

Russia 667.9 1,090.3 1,548.8

Italy 1,260.7 1,356.0 1,465.3

Canada 923.3 1,089.6 1,278.0

India 515.1 826.6 1,224.4



15

China Set be Number Two in World for Luxury Goods…


China has overtaken France and Italy to become number three in the world. Government crackdown on luxury gifting has led to a slight slowdown in demand but growth potential remains positive.

China's projected 72% value growth by 2018 means China will overtake Japan to become the worlds second largest luxury goods market. China is also forecast to have the second largest population with annual gross income over US$150,000 by 2020 behind the US.



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…China’s New Discerning Consumer Leads Brand to Go WestNEW INSIGHTS: EMERGING MARKETS



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Brazil’s Regional Battle Ground


Brazil’s luxury goods market has been underperforming, given the size of its economy and major brands are yet to extended their presence beyond the three main cities of Rio de Janeiro, Brasilia and São Paulo.



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Brazil’s Import Tariffs Are a Bigger Barrier Than a Weaker Economy


Topshop, London US$61

Topshop, São Paulo US$94

Gucci, New York US$2,438

Gucci, São Paulo US$4,370

Brazil’s economic slowdown teamed with ultra-high import tariffs and luxury tax is creating a major barrier for international luxury brands and consumers, despite rapid urbanisation, a fast-growing middle class and greater access to consumer credit.



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Beyond China, Brazil is one of the most promising growth markets for luxury goods thank to a surging middle class. It’s population with annual gross income over US$150,000 will grow by 46% to reach 1.4 million people by 2018.

Brazil’s Favourable Demographics Will Help Drive Growth




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Brazilians in their late 30s to early 40s had the highest average gross income in 2013. Unlike many of the mature luxury markets such as France and Italy, the very top earners in Brazil fall into the 40-44 age group. These also made up 18% of all Brazilians earning above US$150,000 in 2013.

Brazil Luxury a Young Man’s Game




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2013 witnessed an important shift in the BRIC economies raising questions as to whether they are becoming less important to the global luxury goods industry

Are the BRICs Still Important to the Luxury Goods Growth Story?


• Despite impressive growth rates these countries only account for around 4% of total luxury goods spend . Which is is set to increase to 5% in constant value terms by 2018



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Some Sub-Saharan African economies are becoming more attractive to investors thanks to strong growing consumer markets. These economies are however still very much classed as “frontier” markets and will not overtake the BRIC’s any time soon.

Sub-Saharan Africa Next Luxury Hotspot?


Sub-Saharan Africa is the second fastest growing region after Asia

Pacific and home to five of the top 10 fastest growing markets



23

An African Strategy Offers Long-term Investment Promise




24

Sparkling Future for Nigeria’s Luxury Market?


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Peru China Nigeria Chile Poland

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Champagne: Top Five Global Growth Markets in Constant Value Terms 2007-12

Champagne: Top Five Global Growth Markets in Total Volume Terms 2007-2012

Country% volume growth

2007-12% volume CAGR

2007-12

Absolute volume growth (mn litres)

2007/12

Peru 502 43 0.1

China 146 20 0.9

Poland 146 20 0.2

Nigeria 130 18 0.4

Australia 99 14 2.0

Between 2007-2012, Nigeria was the third fastest growing market in the world for total value sales of champagne.


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26

Developed Luxury Goods Markets Should Not be Overlooked

NEW INSIGHTS: DEVELOPED MARKETS

World’s Top Five Luxury Goods Markets by Value Share 2013

US

Japan

China

France

Italy

ROW



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Developed Markets Help Drive Growth in Affordable Luxury



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Could Japan’s Renewed Growth Rival China’s Impressive Trajectory?NEW INSIGHTS: DEVELOPED MARKETS

China still on course to overtake Japan but investment could start to cool

Luxury brands plan to upgrade stores and increase Japanese footprint

Luxury brands confident enough to raise prices - increase profitability

Increase in foreign luxury spend from Asia -favourable exchange rates

Increase in domestic luxury spend - Japanese cannot afford to shop abroad

Weaker yen - 20% to the US$ in 2013



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BRIC Travellers Boost Luxury Sales in Developed Markets


BRICs: Top Five Developed Market

Destinations by Expenditure 2012

• US• France• Germany• Italy• Portugal

Brazil

• Spain• Italy• Germany• France • UK

Russia

• Singapore• US• Switzerland• UK• Hong Kong

India

• Hong Kong• US• South Korea• Singapore• Japan

China

0 3 6 9 12 15

France

Spain

Hong Kong

China

US

US$ billion

Leading Countries for Incoming Tourism Receipts on Shopping 2012

0 3 6 9 12 15

Taiwan

Vietnam

Kenya

India

China

% CAGR 2012-2017

Leading Countries by % CAGR in Outbound Tourism Expenditure on

Shopping 2012-2017



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BRIC Travellers Boost Luxury Sales in Developed Markets


14%annual growth in outbound

shopping spending by Chinese travellers

Introduction of China Union Pay



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Brazilian Tourism Boom Benefiting US Stores



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33

Soft Luxury Houses Move into Hard Luxury

NEW INSIGHTS: KEY CATEGORY TRENDS



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Fashion Brands Ramp Up Exposure Across Full Beauty Remit


Marc Jacobs 2013 Tom Ford 2011 Tom Ford Men 2013

Burberry Michael Kors 2013 Tory Burch 2013



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The Parallel Trajectories of Apparel and Beauty




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Men’s Global Luxury Growth Outpaces Women’s


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DesignerClothing

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Luxury Bags LuxuryJewellery

LuxuryTimepieces

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Global Men’s and Women’s Luxury Categories Retail Value Growth 2008-2013

Men % Growth 2008-13 Women % Growth 2008-13

Men % CAGR 2008-13 Women % CAGR 2008-13

Men

+16%

% CAGR

3.0

Women

+12%

% CAGR

2.0

2008

2013

2008

2013



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Is Luxury Manning Up?


From Mexico City to Beijing, men are putting higher stock in their appearance. This is especially visible in the emerging markets of Asia-Pacific and Latin America where thanks to growth across the young male aspirational consumer, categories like men’s luxury accessories and jewellery are growing faster than women's.


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39

The Rise of Online Retailing

NEW INSIGHTS: E-COMMERCE

Sales of Luxury Goods by E-Commerce 2008-2013

Value share 2008

Value share 2013

Growth 2008-2013

World 4.3% 5.3% 23%

UK 11.3% 13.6% 20%

Germany 8.5% 10.6% 25%

Japan 8.9% 9.9% 11%

France 6.2% 8.9% 43%

Switzerland 6.9% 7.4% 8%

Hong Kong 0.2% 0.5% 130%

China 0.0% 0.4% 191%

Ukraine 0.1% 0.1% 356%

Philippines 0.1% 0.1% 27%

Malaysia 0.1% 0.1% 76%

Dev

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The Rise of Online Retailing and Social Media

NEW INSIGHTS: E-COMMERCE

Developed

Emerging


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42

2013 Saw Flurry of M&A’s Driven by Big Names and Italian TargetsNEW INSIGHTS: M&A

The outlook for 2014 is much the same as 2013, with a number of heavyweight M&A deals in the pipeline

The top acquirers are France based (US$11.2 billion) and top targets are Italian (US$8.2 billion)

LVMH leads at US$10.4 billion with 30 deals since 2010 and 61% of value

There were 26 announced luxury deals in 2013 totalling US$17 billion, with an average premium of 32%


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44

Luxury Goods Hierarchy

PASSPORT: LUXURY GOODS DATABASE UPDATES

MARKET SIZES» 15 years of comparable data = 10

years historic + 5 years forecasts

COMPANY AND BRAND DATA» Company data by global brand

owner and national subsidiary/licensee

Brand shares at industry and category level

ADDITIONAL DATA» Luxury shopping malls

» Luxury department stores» Cigar clubs

» 32 market comparative pricing data

Luxury Goods

Designer Apparel (Ready-to-Wear)

Luxury Cigars

Luxury Accessories

Luxury Jewellery and Timepieces

Fine Wines/Champagne and Spirits

Super Premium Beauty and Personal Care

Luxury Travel Goods

Luxury Writing Instruments and Stationery

Luxury Electronic Gadgets



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Country Coverage: 32 Markets


FR, DE, NL,

CH, ES, SE,

IT, TR, GB

PL, RO,

RU, UK

IN, CN, ID, HK,

MY, PH, SG,

KR, TW, TH, JP

AU

ZA, UAE

MX, AR,

BR

CA, US



46

Strategic Analysis for Greater Insight


Global Briefings

Competitor Analysis Datagraphics

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Date post:	02-Jul-2015
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State of the Luxury Goods Market in 2014

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