With the booming Asian economy, more and more Asians are traveling abroad. In a region crazy for Louis Vuitton trunks, Samsonite is eager to take a bigger slice of the $25 billion luggage market.
In a video conference ahead of launching the retail portion of its $1.5 billion Hong Kong IPO, the company's chairman and CEO Tim Parker told reporters that Hong Kong is the "logical choice" because "we need to orient the company to where the center of gravity will be in the future."
According to its listing prospectus, Asia was its most profitable and fastest growing region last year, followed by Europe and North America. Sales shot up 45.1 percent to $405 million from 2009, dwarfing its global growth rate of 18.1 percent. Asia took up one-third of total net sales with gross profits of $265 million. Global sales stood at $1.2 billion.
In 2010, its EBITDA margin in Asia stood at 19.8 percent, higher than that of Europe (17.9 percent), North America (13.1 percent) and Latin America (13.6 percent). Asia is more profitable because of "the relatively higher retail content of our business in Asia, and due to the fact that we achieve a slightly higher premium for our products." For mature markets like North America, margins are lower because they only sell to 12 major customers (i.e. department stores).
Founded in Denver, Colorado, the luggage maker is ready to take on Asia. Sales in the region grew at an annual rate of 23 percent in the past decade. It's top three markets are the U.S., China and India. The company is based in Luxembourg.
Going forward, Asia's rapidly expanding middle class is expected to fuel top line growth for the company. It expects the Asia ex-Japan travel market to expand 8 percent per year till 2015, twice the forecast for Europe.
The company plans to focus on developing business in high-growth Asian markets, particularly China and India. For instance, China alone takes up 9 percent of its $100 million marketing budget. It will invest in marketing and expanding its distribution network, while also tailoring products to suit local needs and taste.
Ramesh Tainwala, Samsonite's president of Asia-Pacific and Middle East, said the company will operate a "dual brand strategy." It'll engage both Samsonite and American Tourister, its cheaper brand, so as to offer a "wider price spectrum." It will also expand its distribution coverage, especially in secondary cities.
Apart from suitcases, it is planning to raise its portfolio of business and casual bags. Tim Parker admitted that the company has been "slow, really, to penetrate the business bags and casual bags market." Those account for over 60 percent of the travel market but only one-fifth of its business.