HONG KONG -- Samsonite International sees bright prospects for expansion, particularly in Southeast Asia, CEO Ramesh Tainwala said in a recent interview with The Nikkei. The head of the leading luggage maker talked about how his company plans to grow in the region and around the world, diversifying its brands and revenue sources along the way.
Q: You make almost 40% of your sales in Asia. Could you talk about your strategy for the region?
A: Our business strategy in Asia is not different from that in other parts of the world, like America or Europe or Latin America. We are focusing on growing our company from being a single brand. We were primarily Samsonite, but now we are trying to grow into a multibrand and category business. In the past, 95% of revenue was coming from Samsonite and the luggage business, but in the next five years, other products such as business bags, computer bags, handbags and ladies bags can contribute 50%.
This strategy was implemented five years back, and 25% of our revenue is already coming from products besides luggage. Within the next five years, it is one of our key objectives to grow that into 50% of our business.
Q: What are your criteria for carrying out mergers and acquisitions?
A: When we acquire a brand, it must have a very clear DNA, clear story and clear strength of its own.
For example, we bought Lipault, a very feminine brand. Because the personality of Samsonite is so masculine, we cannot naturally appeal to women. Lipault is a very strong brand, but only in France. We felt that if we were to acquire a business like that, we could use the network of Samsonite -- more than 100 countries and 16,000 points of sale. We felt we could use the machine of Samsonite to nurture Lipault on a global basis.
Our business is a bit like an orchestra. If we are going to add a new musician, we must know what it will do to the rest of the musicians, because we already have five or six brands with us. We do not want to buy a brand just for the sake of it.
Q: Do you have any M&A deals in the pipeline?
A: We don't know if we want to add a new musician. It all depends on who comes to you, or sometimes what you want to do. There are some categories not represented in our business today, for example everyday-use handbags. Not fashion handbags like Prada or Gucci, but like Coach and Kate Spade. We feel there are a lot of interesting opportunities, but we do not have anything going on right now.
We have already defined ourselves as a machine. We design, develop and source products in many different countries, and then we bring them to many different countries, and sell them through many channels. The same machine and model can be used to handle more brands and businesses.
Q: The Samsonite Red line has been quite successful in Asia. Why?
A: I will say two things. Basically, our business is about our products. If you can create a product that consumers love, then it is a success. We have a very good design team for Samsonite Red in South Korea.
The second reason is marketing. We were lucky, in a way: Korean soap operas and fashion have become very popular in Asia. Samsonite Red, Korean-designed bags, started to become very popular in many other Asian countries.
Q: Is China's anti-corruption campaign affecting your business?
A: Our business in China is in very good shape.
In the second half of last year and beginning of this year, with the new party leaders, there was a little bit of uncertainty in the luxury market -- 20-25% growth came down to almost flat. People are becoming more hesitant to buy new products because they are not sure what it all means. But I must say our product is not luxurious. It is not like a watch or jewelry. I don't think people who buy Samsonite do so as a gift -- people buy luggage to use it.
Chinese are still traveling. Their incomes are increasing and they want to go and see the world. They want to explore new countries, new food. And there are more than 1.4 billion Chinese, so they can travel a lot.
Channels are also changing. In the past, most Chinese went shopping in department stores, but now more and more are shopping on the Internet. Our e-commerce sales last quarter increased almost 15%, whereas department store sales are flat.
Q: The middle class is also growing in Southeast Asia.
A: The emerging countries in Southeast Asia have great prospects, primarily driven by Indonesia and the Philippines. They are the two biggest countries and the fastest-growing markets in the whole world. The Philippines is the No. 1 growth market for us. They all speak English, they travel abroad and their income level is increasing. Their governance has improved, and that makes people more confident to spend. That's helping our business a lot.
Indonesia is doing very well. It would be one of our top three markets in terms of growth rate. Our business in the last three years has been growing 25% on average. Indonesia is a big country and has lots of young, educated people who want to travel. I will say there is no reason why Indonesia will not be one of the largest markets in Asia, after China, Japan and India.
Unlike other companies, we are not centrally governed. Our business is very locally managed and locally strategized. So our business in Indonesia could be very different from our business in Japan, because the person making decisions in Indonesia is an Indonesian.
Samsonite has no head office -- I am a CEO but I have no head office. I just have a room everywhere I go. Our business is not top-down. Our business in Japan is headed by Japanese and 100% of employees are Japanese. Our business in China is run by Chinese, 100% Chinese. We never move people from one country to another. So it is only myself -- I am an Indian and work everywhere.
Interviewed by Nikkei staff writer Yasuo Awai