May 12, 2013
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The Kering (PPR) game plan for a Puma relaunch

May 12, 2013

It is a daunting task facing the new CEO of Puma, Björn Gulden, who formally assumes his duties on July 1 at the brand's headquarters in Herzogenaurach, Germany. In fact, he has already taken the plunge. Jean-François Palus, Deputy CEO of Kering (formerly PPR) and in charge of the group's Sport & Lifestyle division, says that Gulden is already assisting him part-time and will work practically full time as a consultant starting in June.

Jean-François Palus presenting the new jersey to Girondins de Bordeaux in Cap Ferret, France. (photo Dominique Lelann)

For Kering, developing a new strategy for the sports brand is a daunting but urgent matter that needs to be addressed in order for the sports brand to reverse its trends in sales, which for the first quarter 2013 had dropped 2.3% compared to the previous year. Quarterly results for Puma will be released May 14.

The brand has already somewhat embraced this new strategy before the arrival of its new CEO. And Björn Gulden's acceptance of such a strategy was understandably a condition for him to join Puma. "We are obviously on the same wavelength," said Jean-François Palus, who spoke with us during the presentation of the new jersey for the Girondins de Bordeaux, the city's soccer club, on May 9 in Cap Ferret, France. The event was proof of the Kering brand's commitment to the sector of sport performance, definitely a minor part of its business but one which is supposed to serve as a base for the brand to regain its stature.

This focus is a step back from almost everything related to lifestyle, the sector which had been the powerhouse behind Puma's success for decades. And the new direction has spurred intense reflection at Kering. However, Jean-François Palus emphasized that "specific actions are being intensely discussed with the brand managements. Kering is identifying the key issues. The brands are developing their own key topics themselves. And in July we will have a meeting to finalize the overall strategy to be rolled out in the action plan."

He elaborated further: "We have identified several points where we can take action, such as brand, product, communication and organization. Since last November, we have been working on diagnosing the situation and proposing solutions. This will help save Björn time."

Jean-François Palus also noted that the new CEO is very familiar with Puma. "He has an in-depth knowledge of the products in many contexts, having been with Adidas and Deichmann [German footwear distributor]. He has an expert view that is very multicultural."

Usain Bolt (photo: Puma)

And he is not the only one who will be joining Puma in the coming months. The company is expecting a new head of operations (logistics, supply chain, etc.), although Jean-François Palus is not mentioning any names. There are also plans to recruit a chief marketing officer after the resignation of Antonio Bertone in 2012. The brand also wants to hire a head designer for all its lines.

Puma will clearly be traversing a period of absolute upheaval in the coming months. Parallel to the arrival of a new team are plans to review the brand's organization. While it is too early to announce a long list of decisions, some efforts have already been implemented, such as the closure of a design center in Australia two weeks ago. The two remaining ones are located in Boston and at the headquarters in "Herzo." Currently sourcing is handled in the same manner for the footwear and textile divisions. "One could imagine different operational modes for this issue," said Jean-François Palus.

In order to differentiate sport performance and lifestyle more clearly, Puma is revamping its store concept. A new model has been in a test phase in Osaka since January. The idea is to clearly separate the two segments, says Kering's second in command. "In Osaka, for example, lifestyle is on the ground floor and sport performance is upstairs."

The Paris store on Boulevard Sebastopol will also undergo a rewrite. "We need to change the store philosophy at Puma," said Jean-François Palus. "So far, Puma did retail as if it were wholesale. But it should take a more retail approach, such as in merchandising. A strategic group is working on this issue at Kering. We also collaborated with a consultant."

Initially, the takeaways will be applied to the brand's current stores. "We definitely have to lock in the concept before opening new stores," said Jean-François Palus. But the deputy CEO of Kering goes even further: "At some point, it is possible to imagine some stores that are exclusively lifestyle, others that are only performance and some that are a mix of both," he said. "Exclusive performance stores in Europe and the United States will more likely be created by transforming existing stores."

It is through such retail initiatives, as well as with advertising and products that Puma intends to find or regain a real credibility in sport performance. This sector now represents between 35 and 40% of Puma's business, which the brand intends to position at the top end of its range.

"The goal is not necessarily to build up sport performance at the expense of lifestyle but to ensure that the image of sport performance boosts Puma lifestyle," said Jean-François Palus. Along these lines, the company has initiated a number of actions in product innovations as well as in its sponsorships and communication.

One example of cutting-edge product development is Puma's February release of a new running shoe, the Mobium Elite. The shoe technology was inspired by a cat's paw and expands and contracts to adapt to the movement of the runner's foot.

For the Kering deputy CEO, this kind of innovation will enable Puma to regain legitimacy in sport performance. "The goal is not to change the model all the time like a fast fashion brand, but to design a performance shoe that we then evolve. Athletes are loyal to a product if it works for them. It is up to us to offer them improvements."

Jean-François Palus admits that Puma does not have the research and development resources of Adidas or Nike, but the brand has developed external collaborations. "We are working on footwear soles with Michelin," he said. "For Mobium, we worked with a scientist in Japan on animal physiology, etc. Of course, we have our internal lab."

In apparel, Puma also launched performance clothing items in February with integrated athletic tape and enhanced compression, earning the brand an ISPO Gold Award.

Puma also launched its Puma CELL labeling in February, a system that helps consumers identify products best suited to their sport’s needs. The label information indicates temperature control, speed, etc. Puma intends to maximize the credibility of its performance products through such initiatives. But there are still many unknowns. A new advertising campaign called The Nature of Performance accompanied the launch of a number of innovations at the beginning of the year. The campaign showcases all the technical aspects of a given product as well as athletes in motion.

Kering intends to use this type of advertising to develop its promotional message in the media. "We will reinvest in buying ad space," said Jean-François Palus. To the point that they will abandon the Puma Social concept because it is too lifestyle?

The Kering brand has also initiated sponsorship negotiations, wanting to focus on soccer and athletics. "We are stopping rugby," said Jean François Palus. "It's too expensive in Europe and impossible to monetize." However, Puma will uphold its commitment to the Montpellier rugby club, already under its wing.

The brand will also cancel sailing sponsorships but will fulfill its contract with the America's Cup that expires at the end of 2013.

Kering's idea is not to increase Puma's sponsoring budget but rather give it a different focus. For example, Puma has strengthened its partnership with Usain Bolt, even if the sums involved have surged since the Olympic Games in London. "The next important sports event is the 14th IAAF World Championships in Athletics in Moscow next August," said Jean-François Palus.

In this difficult period, the brand also has a lot to be happy about — first and foremost the Champions League soccer final at Wembley stadium in Great Britain on May 25 between Borussia Dortmund, whose sponsor is Puma, and Bayern Munich, sponsored by none other than Adidas!

In France, Puma is sponsoring the Girondins de Bordeaux and the Rennes soccer team owned by Artemis, part of the Pinault family's portfolio, Kering’s major shareholder.

The brand is also thinking about who it might sponsor in the United States to increase its visibility there. "For example, a basketball team is not possible since the NBA only counts as one actor. But sponsoring one athlete would be an option."

Obviously, Kering wants to initiate a new era at Puma. And the success or failure of the brand's Sport & Lifestyle sector is crucial to the French group Kering as the involvement of the Kering's deputy CEO and Francois-Henri Pinault's right-hand man in this whole story clearly proves.

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