Kappa Europe's François-Xavier Chupin on the sportswear brand's potential for pan-European expansion
today Feb 8, 2019
For over a decade, Sport Finance has been the distributor in France of Italian sportswear brand Kappa. In the course of a 13-year relationship, the links between the Nantes-based French company and BasicNet, owner of Kappa, have grown stronger and stronger, Sport Finance gradually taking charge of Kappa’s distribution in other European markets too. At the end of January, the two companies announced their merger, as BasicNet, via its BasicItalia subsidiary, acquired a 61% stake in Sport Finance. Now rechristened Kappa Europe, the new entity has ambitious European expansion plans under president Alessandro Boglione and François-Xavier Chupin, the founder of Sport Finance, who remains in charge of the newly created company. Chupin spoke to FashionNetwork.com about the challenges and opportunities brought about by the merger, and about his vision for reaching a revenue of €120 million in like-for-like terms by 2024.
FashionNetwork.com: You have been working for a long time with BasicNet, the owner of Kappa. What challenges lie behind the merger with BasicNet and the creation of Kappa Europe?
François-Xavier Chupin: This is a great time for us. We started out with Kappa 13 years ago, relaunching the brand in France. BasicNet, Kappa’s owner, is confident we can lead a Europe-wide project. This is crucial, since all our main clients, like JD, Intersport, Sport 2000, Courir, Decathlon and Foot Locker, have European organisations. Our mission is to talk to them at the continental level.
FNW: You currently do not operate across the whole of Europe. Are you going to expand into new markets?
F-XC: We are currently working in France, Spain, Portugal, the UK, Switzerland and Benelux. BasicNet operates licensees in each of its markets, but sometimes licensees can struggle to deal with the branches of major European retail groups. There are as many special cases as there are licensees. The new model envisaged is that of a main European licensee, with the potential of eventually taking over all markets. The merger with BasicItalia is designed to bring our two companies gradually closer together. It is the first step.
FNW: In practical terms, how did BasicItalia buy a stake in Sport Finance?
F-XC: Two of our financial partners, BNP Paribas Développement and Sodero, the regional investment arm of [French semi-cooperative banking group] Caisse d’Epargne, sold their stakes in Sport Finance, and BasicItalia took over from them. A share capital increase also followed, allowing to set our sights even higher. It is proof of our solidity, enabling us to finance our working capital requirements. Alessandro Boglione is the new entity's president. With Olivier Tanneau, I remain in charge of Kappa Europe's operations. The owner takes the corporate strategy decisions, which we then implement locally. Our work ranges from product development to shipping the goods out to retailers.
FNW: You announced the intention of doubling the revenue of Kappa Europe [currently reported as €60 million] in like-for-like terms within five years. Which opportunities are you looking at?
F-XC: On the performance side, we have the tools, the stock, the level of service and digital data sharing agreements with our partners. We now need to push ahead with the development of certain markets. We will soon announce new sponsorship deals in the UK and France [Kappa is the official supplier of football clubs Napoli in Italy, SCO Angers, Estac Troyes and FC Lorient in France, and of French top-flight rugby union teams Montpellier, Grenoble, Castres and Bayonne]. In the UK, we began with Leeds football club and we are going ahead with another club, as well as making progress with rugby. We also have a foothold in North Africa, as suppliers to the Tunisian national football team and club side Espérance Tunis. We are strong on the retail side too, since we run the stores of the Real Betis football club in Seville, Spain. It’s an added value, something which enables to work with our partners in the long term.
FNW: You are strong in team sports. Yet, though the global sport market is expanding, growth rates for team sports aren’t the most dynamic. Do you still see a potential there?
F-XC: It isn’t so simple, since community-based clubs aren’t the wealthiest ones around, and public authorities have fewer resources to spend on small local clubs. Yet the market is still growing, with pricing a significant issue. We must keep up with it. Sport Finance, now Kappa Europe, is one of Europe's leading sport team suppliers, with the capacity to distribute from Malaga to Edinburgh through third parties, whether a group like Intersport or a local independent specialist. We made significant inroads into this market, with a stock worth €12 million. We offer a collection with a three-year life span, plus one-day delivery and a high level of service. It's quite a package, enabling us to differentiate ourselves from the competition. We already feature this kind of package on other markets with other licensees, which come to us in order to be able to offer solutions like these to their clients. The model works well, and we are going to develop it further.
FNW: Expanding into new markets will also generate economies of scale for you.
F-XC: It would indeed allow us to standardise our range on a European scale, and to approach suppliers with larger order volumes.
FNW: The sport team segment is therefore going to drive your expansion?
F-XC: Opportunities actually exist in the majority of market segments. Sport teams currently account for 40% of our business, while shoes and sportswear sales to generalist retailers like Intersport or Sport 2000 are at a level below that. We are developing a fitness range. In terms of footwear, we used to be mass-market-oriented but we’re now moving towards an edgier, more directional range. Fashion-wise, we don’t know when the sportswear brands boom will peter out, but we have a foothold in this market, for example via our presence at Asos and Urban Outfitters in the UK. We will get on the right track.
FNW: You have ambitious expansion plans, but certain brands already have a strong presence in the leading retail groups and on the sport market in general. How do you plan to go about it?
F-XC: For the sport and performance categories, the dominant brands are focused on their own monobrand and e-tail distribution. We are able to offer a bespoke range to sport retail chains. Medium-sized brands will compete with us for these retailers, and some of these brands have rather chaotic organisations. We have a significant opportunity. We will focus on working alongside sport retail chains, as well as independent stores. In terms of fashion, we are growing our range, notably footwear: we are available at Foot Locker, and soon at Courir.
FNW: Do you have an investment budget to back your growth plans?
F-XC: Our marketing and communication budget is 8% of our revenue. Its size is destined to increase as the business grows. We must also upgrade our web presence.
FNW: Sport Finance also generates about €10 million in revenue through other licenses. What will happen to them? Will you be ceasing these activities?
F-XC: We were licensees of Voiles de Saint-Tropez, but the agreement was not renewed. We will continue to expand Canterbury, our second brand, for which we are licensed on the French market for the next three years. Kappa and Canterbury aren’t in conflict with each other, since one is a generalist brand and the other is a long-established rugby brand. We also operate other, more mass-market licenses, like MLB, which we are going to keep.
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