Alpargatas' growth potential under Roberto Funari’s leadership
Roberto Funari was appointed CEO of the Brazilian footwear company in January 2019 to lead Alpargata’s new era. Just over a year later, the executive with 32 years of experience in companies such as Imperial Brands and Reckitt Benckiser had to face the unprecedented pandemic.
Alpargatas emerged successful and renewed, investing in the Rothy's brand just recently. FashionNetwork.com talked to the executive during his first trip to Europe after Covid-19 about the firm's strategies, future challenges and the growth potential of the business, whose main market continues to be Brazil due to the success of Havaianas, followed by the United States with its entry into the capital of Rothy's, then Italy, the United Kingdom, France and Spain.
FashionNetwork.com: How could global conflict, the supply chain crisis or global inflation affect Alpargatas' business?
Roberto Funari: There are many external factors affecting business and the companies that have been successful so far are those that have managed to minimize the impact on their business. There are still risks and restrictions because of Covid-19 that cause logistical complications. But in Rothy's and Havaianas case, these issues are relatively under control because we have a vertically integrated supply chain and we have been able to manage the logistical challenge, just as we have been able to adapt to the aftermath of Covid-19 in different parts of the world.
The biggest impact has been inflation on industry costs, as well as its effect on consumer prices. Over the last three years, the company has established a revenue growth management plan, in which we have used data analytics to establish the price, consumer and point-of-sale we should have. This allows us to fine-tune pricing without losing sales volume. We also carefully worked on our price positioning to be able to cater to all types of budgets and consumers, in addition to the ability to increase prices in new collections. In Brazil inflation is very high, above 11%, while in Europe it's around 4-6%, so we have had to increase prices while expanding our product range.
FNW: How would you assess your performance since your appointment at the head of Alpargatas at the beginning of 2019, succeeding the company's long-time CEO Márcio Luiz Simões Utsch?
Roberto Funari: Alpargatas embarked on a new phase in 2019 and since then, our strategy has been based on three axes. The first was to focus on Havaianas’ global expansion, which already has a presence in more than 130 markets and is very well positioned. We are the leading flip-flop company, even though we only represent 3% of the market. We see huge growth potential for our products, especially as a fashion accessory. We want to expand beyond sandals and are open to other footwear categories.
Our second move was to divest all brands and businesses that did not align with our vision. Thus, we sold our sportswear brands, our textile businesses in Argentina and our shares in the Osklen brand. And at the end of last year, we acquired a 49.9% stake in digitally native brand Rothy's, which is based in San Francisco and employs innovative technology to manufacture products from recycled bottles. We have also invested in company capacity and, in May of last year, we bought a digital transformation company with 250 data and software development specialists, so that our company now has 450 dedicated technology employees in Brazil.
FNW: You joined the company right before the pandemic, where does the Alpargatas business stand after the impact of this period?
R.F: Havaianas recorded an overall growth of 50% over the last three years. During Covid-19, it also became a brand that could be worn at home, associated with positive memories of summer and vacations. We closed the last fiscal year 30% above the data recorded in 2019 (in 2021, it recorded a turnover of 3,913 million Brazilian reais, about €656 million), so the pandemic has helped us to accelerate our growth. International business used to represent 27% of the overall total and now accounts for 32%. We broke the sales record of 31 million pairs outside Brazil for the first time. The digital transformation was geared toward driving our online sales, a channel that now accounts for 14% of revenues and which we expect to grow thanks to the acquisition of Rothy's, whose business is primarily digital.
Since Covid-19, we have tripled sales on all our products other than sandals, so we are significantly expanding our product offering. And in the area of sustainability, we have invested heavily in circularity and in the implementation of our collection and recycling program in about 300 stores, which will be rolled out in Europe for the first time this summer. We also plan to launch the first products from Havaianas recycling.
FNW: How did you deal with the crisis in Brazil, a country that responded differently to the health crisis than the European markets?
R.F: We are vertically integrated. In Brazil, we have five main factories. During Covid-19, we implemented safety measures and protocols, so we obtained authorization to maintain activity and did not interrupt our operations at any time. In terms of sourcing, we did not encounter any problems, but we obviously suffered the impact of most international stores being closed.
FNW: What strategies are you going to apply to develop Havaianas together with Rothy's?
R.F: They are highly complementary brands. From a product category standpoint, one is focused on open footwear and the other on closed footwear. Both are positioned between style and comfort, which is something that not many brands are able to combine in the market. Havaianas is affordable, while Rothy's is somewhat more expensive (prices from $130 to $400) and formal. It is currently a direct-to-consumer brand, but we are planning to open it up to business-to-business with wholesalers in the United States. It is also a brand that represents a geographic opportunity; we plan to launch in Europe and Brazil over the next 12 to 18 months.
The first most obvious combination will be through the online channel, with two different interfaces for consumers, but the back office and logistics will be organized in synergy. Going forward, innovation will revolve around the two brands’ respective technologies for developing better products. Havaianas specializes in soles, while Rothy's stands out for its knitting technology and use of recycled materials.
FNW: How do you intend to modify the price positioning of a brand so well known for its accessibility?
R.F: Havaianas is an affordable brand, and we want to preserve this accessibility. However, we have observed over the last two years that the brand has great potential to increase its price positioning. In Europe, our price range is from 20 to 40 euros and we know that there is a big opportunity to go from 50 to 100 euros. We have made collaborations and innovated in terms of products, which help us to elevate our positioning. Regarding sandals, we can start to put more premium products on the market, while maintaining an accessible range. An example of innovation has been the development of "glitter" products, a glitter technology on sandals, which has allowed us to increase their prices up to 30 or 40 euros, and we want to continue working along these lines.
In terms of collaborations, we have partnered more with streetwear brands these past three years but we also maintain close relationships with luxury brands. We like to mix and match this combination of "high" and "low" trends. One of our most relevant partnerships is with Saint Laurent and we are in the process of developing several new ones.
FNW: What is the purpose behind these collaborations? Are they marketing tools or do they represent revenue?
R.F: We see them as brand image building, they are fundamental in creating and building affinity with new audiences. But we also do major collaborations with the entertainment industry, such as our partnership with Netflix, the Naruto series or the Fortnite video game. We approach many types of collaboration, such as supporting the LGBTQI+ community through the "Pride" permanent collection, launched in 2020 and with which we donate 7% of our proceeds. It has been very successful globally. We also create partnerships that address sustainability. A few weeks ago, we launched a collaboration with artists from the favelas in Brazil, and they have become one of our best-selling products. All these partnerships are what make Havaianas a diverse and attractive brand for all types of customers.
FNW: Are you still interested in future brand or technology acquisitions?
R.F: We are going to focus on our international expansion for the moment, on driving Rothy's and boosting Havaianas' growth, especially in other categories and digitally. But we remain open to acquisitions of digital solutions and technologies that we can integrate, as well as in the area of sustainability, where we can explore partnerships or joint ventures.
FNW: What is the company's position on the metaverse?
R.F: The metaverse is the new economy, a new emerging market. We intend to experiment and learn from its early steps, studying how it can become a new source of revenue or a different way of relating to our consumers. We have two big initiatives in the metaverse: NFTs made by a Brazilian artist and our islands within the Fortnite video game, which are quite successful. We plan to launch other innovations in the future.
FNW: What will the future of retail be like and how is Alpargatas preparing for it?
R.F: I think retail will be completely reinvented. There will no longer be these defined lines between physical and digital retail, but these notions will instead be integrated. The way we look at retail now is linked to services, experiences and the challenge of finding new ways to maintain a closer bond with consumers and create affinity. The retail space and physical interaction are fundamental tools for this. On the other hand, it must also be seen as a provider of services and not only a support for the omnichannel strategy, proposing initiatives such as personalization, customization or recycling programs. We are also investing in digital solutions to improve customer data and innovating through formats such as pop-up stores. We will soon present a new original concept in Paris.
The most important thing is to be where your customer is and to offer a solid product proposition. We will continue to invest in this strategy that has worked so well for us, but with the right customer segmentation to optimize sales. In the end, the businesses that will grow the fastest will be those that know their customers best.
FNW: Besides digitalization and sustainability, what is the company's biggest challenge for the future?
R.F: One of its fundamental challenges is recruiting talent and turning the company into one where people want to work in, building employee loyalty, attracting talent both in technology and in retail, creative or manufacturing departments. It is a challenge that must be combined with constant training and guidance in transforming employees.
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