Valuation of Vlisco’s acquisition
Vlisco Group currently has four brands under its portfolio. Each brand offers its own style and targets different segments of customer. The luxury and internationally recognized brand, Vlisco, appeals to sophisticated women of Africa and other parts of world. Uniwax and GTP are the first and the only kind of nationally oriented brands serving the customers in Ivory Coast and GTP, respectively. The newly launched brand, ‘Woodin’ targets younger consumers of West Africa and offers ready to wear collections.
The company has its production facilities laid in Holland but around 90 percent of its sales originate from African Continent. In terms of Vlisco’s growth potential and new markets, the company has now focused on customer oriented approach and with face to face conversation with their customers and knowing about their preferences has allowed it to expand its markets.
While, the primary demand of the company stems from the African Continent, the market is also expanding its roots to Europe and United States. Furthermore, the group only sells its products to economies that are growing at 5per annum and in such economies, the middle income segment which is driven by urbanization and demographics, is growing big enough to expand the group’s current market. Hence, apart from African and Western Market, Asia is another potential target for the company. However, the company is more focused to continue to exploit the expanding middle income population and increasing disposable income in the continent.
The re-designed marketing strategy of the company has paid off. Furthermore, the collaboration of the company with new designers is a part of new strategy of the company. In order to expand its market to Europe, where it is less known today, the Dutch textile company has announced a series of collaborations with contemporary designers.
As part of its strategy the company is also adding new products to its offering and the range includes scarves and handbags. The products were launched in Milan Fashion Week so as to outreach the new European Market and to build the awareness of the brand there.
The company is also targeting its new markets such as Senegal, Mali and several high-growth countries surrounding Nigeria. Vlisco also sense good growth numbers in USA, amongst both White Americans and people with African Diaspora. Till now the results have been favorable for the company.
As part of its strategy to expand its business horizon, the company is now adopting new means of communicating with the African customers. Apart from face to face discussion with the customers, the company is also being benefited from blogger outreach and social media. Although, the company is not a ready to wear textile manufacturer, but a surge in online activity by bloggers where they create new outfits using new design launched by Vlisco , is helping in promoting the company’s turnover.
Thus, as a result of re-designed strategical decisions, the company was successful against all economic and financial odds. By the end of 2013, the annual turnover of the company reached 300 Million Euros and a total of combined workforce of 2700 people in Netherlands and Africa.
Potential acquisitions/bolt-ons for Vlisco:
The most talked about Bolt-On acquisition of Vlisco is by Actis Capital, a London based private equity firm. Since Actis Capital is known to invest in developing markets, in that case, investing in Vlisco- a vibrant brand which has a significant presence in African Continent can add value beyond capital to Vlisco’s pan-African growth strategy with our on-the-ground presence and deep consumer sector expertise.
Strategic Comments on the Industry:
The African textile industry is mainly concerned with the production of fabrics both for local market and for off-shore markets. The industry is pre-dominated by the cotton based garments followed by man-made fibers. While the cotton base fabric is ruled by African Prints(wax, java etc), hand-made fabric includes uniforms and socks.
As for the current strategy in the Textile Industry, although the main focus is to reduce the economic dependence, the government with the help of following means is helping the industry to flourish:
i) Loose Credit Policy:
The textile industry is being offered long term concessionary credit for expansion, rehabilitation and modernization so as to cater the needs of local and export market.
The current tariff trends are being revised so as to confirm with the actual economic trend in the Textile Industry.
Another Information: Growing threat of Chinese Textile Prints and Vlisco’s response
The increasing domination of Chinese Textile Products in Africa has been frustrating for the existing brands in Africa. Since Chinese imports are always of low cost, a significant surge has been witnesses in their demand over the years. As for African Pants imitations, although the Chinese printing is of inferior quality and is done only on one side, but for those who cannot afford high luxury Vlisco Fiber, Chinese African Pants are a great alternative.
Interestingly, Vlisco has prepared itself to fight against Chinese Imitations and has thus changed its marketing plan. As a result of this new strategy, it will brand itself as a fashion house and will release 20 to 30 designs every month. This will turn beneficial as it takes 2-3 months for Chinese to imitate the design and with such a frequent launch of designs will help Vlisco to sit ahead with fresh patterns.
Felsenthal, J. (2012, March 1]). The Curious History of “Tribal” Prints. Retrieved from Slate.com: http://www.slate.com/articles/arts/design/2012/03/african_fabric_where_do_tribal_prints_really_come_from_.html
Interview: Actis acquires African fabric manufacturer. (2010, October 8). Retrieved from http://www.howwemadeitinafrica.com/: http://www.howwemadeitinafrica.com/interview-actis-acquires-african-fabric-manufacturer/4091/