Oct 8, 2012
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PPR: "We do strategy, the brands operate autonomously"

Oct 8, 2012

Gucci and Puma are undoubtedly better known in the world than PPR. However, the parent of both brands and essentially owner is intent on conspicuously depicting itself as the true leader of the group and the force that unites its brands, shapes their strategies and supports each one of them.

This was the biggest takeaway from the Thursday morning press conference PPR organized for journalists with top management and group managing director Jean-François Palus. And no doubt, a message was also being sent to its own PPR in-house members. "The transformation that is occurring at PPR the last few months is not a simple change in scope but a real change to the company culture and mission," said François-Henri Pinault, group CEO, in his introductory remarks.

The Balenciaga store on Rue Saint-Honoré benefited from the help of PPR real estate services.

The group has grown through its retail activities with Redcats and Fnac – meanwhile up for sale – and has been changing its image through acquisitions that only initially might seem opportunistic. However, "PPR's current approach is not strictly financial," said the CEO. "PPR has always had an entrepreneurial culture. We are in the process of developing into a global player in the apparel and accessories industries. The decision to invest in luxury and sport and lifestyle was taken because they are sectors of significance for the entire world and whose products are fairly consistent from one country to another. These are global sectors in which the necessity to adapt products over time is very low."

François-Henri Pinault does not view himself simply as manager of a group but as an entrepreneur seeking to develop a global group. "This is a true vision," he explained. "With a real strategy."

Jean-François Palus (Stéphane Gladieu for PPR)

Jean-François Palus believes that the group's two business poles make it more integrated today than a few years ago and more consistent. "We are in charge of seventeen brands with 28,000 employees. All our brands create products and distribute them. Of course, the production system has been fine-tuned, with luxury mainly in Europe and lifestyle in Asia. Similarly, they sometimes rely on different distribution systems, wholesale and/or retail. But they all have the goal to enrich their brand territory and grow."

To support the brands, the group points to the PPR Effect. "We are a more integrated, corporate group," said Jean-François Palus. "We get much more involved in the business of the brands and in supporting them."

In order to be there for the brands and manage them, the parent company has acquired more robust tools and wants people to know about it. "We have strengthened the group's real estate service, e-business, human resources, etc. The company's central office now has 200 people working in its various corporate services. The mission of the executive committee has evolved. The heads of the primary brands also have cross-corporate missions within the group," said the PPR group managing director.

The group headed by François-Henri Pinault has also created PPR America, based in New York, and PPR Asia Pacific, based in Hong Kong. These two entities have their own experts in real estate, tax matters, human resources, etc. "The goal is to support brands, provide a service platform on all continents," explained Jean-François Palus. "It is undoubtedly more effective to intervene on the ground on certain issues for situations that are geographically and culturally closer to home."

Examples of group synergies abound in terms of sharing processes and costs. By pooling express shipping activity, Gucci cut costs 15%, Brioni saved 50% and other brands saved 30%. Volcom put together a shoe collection, thanks to the expertise of equipment manufacturer Puma. Balenciaga was desperate about its lack of a store on rue Saint-Honoré in Paris. The corporate real estate service helped the brand to overhaul a gas station. "In areas such as commercial real estate, we are developing business exchanges," said PPR.

If a brand were to attempt something like entering China now, the first step would be to learn from the group's more established brands and avoid going it alone. The central office also plays a role in upstream business processes, such as managing distribution for luxury brands from the warehouse located in Switzerland (166,000 square meters, 14.7 million packages shipped last year) or those workshops in Italy that rely on sponsorship.

But PPR clarifies that synergies are out of the question for design or in product materials. "For example, the leather used by a particular brand is not the same and it is especially important that it not be so," said Jean-François Palus. Another central phenomenon is the PPR home office's focus on sustainability, an issue relevant for all the group's brands.

PPR used the Thursday morning press conference to send out a strong message, both in terms of information on the group's strategy but also on the guidelines that PPR has decided to put into play. As Jean-François Palus emphasized in his concluding remarks: "The owner of a trademark is not the CEO, it is PPR, the brands being autonomous in their operations."

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