Per reporter: Du Wei Zhu Peng
Entering September, the heat has faded, and under the slight coolness, down jackets are about to enter the peak sales season. Major brands are gearing up to achieve high sales this winter.
"Compared to fiscal 2022, we are ahead of the time invested in marketing in fiscal 2023. The aim is to further expand the brand's reach when peak sales season arrives. "In mid-August, Canada Goose (hereinafter referred to as "Canada Goose", GOOS. N, with a share price of $17.73 and a market capitalization of $1.87 billion), expressed its emphasis on the peak sales season at its new quarterly earnings exchange.
Canada Goose, from the country of maple leaves, has entered the Chinese market since 2018, pushing up the ceiling of the domestic down jacket market at a price of 10,000 yuan. In the hearts of many consumers, it has established a trendy and luxurious image, and also subverted the stereotype of down jackets in the fashion circle. Born in the grassroots and with no prominent background, how did Canada Goose become the Hermès of down jackets?
Canada Goose product price Image source: Tmall flagship store
While attention is rising, Canada Goose is inevitably under a comprehensive scrutiny from the market. Not long ago, Canada Goose triggered a huge backlash from consumers due to the "double standard" policy of returns. At the same time, Bain Capital, which entered Canada Goose in 2013, has a shareholding ratio of 54.7% today, which has shaken Canada Goose, which is originally a family business?
In the cultivation of the Chinese market, Canada Goose spares no effort. On August 23, Canada Goose appointed Li Zihou, who held key positions in brands of Richemont and LVMH Group, as its president of China. On the occasion of the latest personnel changes, the Daily Economic News reporter exclusively interviewed Dani Reiss ,, chairman and CEO of Canada Goose (hereinafter referred to as "Ruisi"), to listen to him tell how the "big goose" born from the "small workshop" flew to the world with 65 years and three generations of hard work.
From the expedition snowsuit to the Hermès in the down jacket
Canada Goose, which has been passed down for three generations, is not from a famous family. 65 years ago, Canada Goose was born in a small warehouse in Toronto. Initially, vests and snowsuits were provided to police and polar workers.
"My grandfather Sam Tick ("Dick") dreamed of founding Canada Goose in a small warehouse in Toronto, but he probably didn't think Canada Goose would be where he is today. Reese said.
In 1997, at the age of 24, Reese officially joined Canada Goose after graduating from university. For the year, the company's annual revenue was $3 million. Twenty-five years later, that number soared to $1 billion, a 333-fold increase. This is mainly a change after Reese took over the Canada Goose.
According to the company's financial report, in fiscal 2022, Canada Goose achieved revenue of 1.098 billion Canadian dollars (about 5.777 billion yuan), an increase of about 21.5% over the previous fiscal year; The company's gross profit was C$734 million and gross margin was 66.85%, an increase of approximately 5.5 percentage points over the previous fiscal year.
Image source: Screenshot of earnings report
If the timeline is stretched a little longer, canada goose's rapid growth in recent years will be more intuitive. In fiscal 2018, the company's revenue was $591 million, and in just four years, revenue almost doubled. For consumer goods such as down jackets, which have obvious seasonality, it is rare.
What happened in those 4 years? One answer is Canada Goose's DTC (Direct-to-Consumer) business model transformation.
Eight years ago, Canada Goose opened an e-commerce website and started the DTC business transformation. Today, DTC business revenue accounts for more than 2/3 of the company's total revenue. For consumer goods companies, e-commerce and offline direct physical stores are the main forms of DTC business, and Canada Goose is no exception.
It is reported that at present, Canada Goose has a total of 45 directly operated stores around the world, of which 16 are Chinese mainland alone. "In fiscal 2023, the company plans to open 13 new stores around the world, four of which are in China." Reese said.
At a time when online channels are popular, Reese believes that offline physical stores are still important, even more important than ever. In his view, today's consumers, especially young consumers, expect to integrate online and offline buying experiences.
"We're going to continue to increase the share of DTC business, no matter where consumers are, no matter how they want to buy our products, we can communicate directly with them to build deeper relationships and better understand their ideas." Canada Goose's latest fiscal 2023 first quarter report shows that the company's Q1 DTC revenue was $34.8 million, an increase of 19.6% year-on-year.
Rhys claims that the Asia-Pacific market is one of the company's inspirations. There is no doubt that this is directly proportional to the revenue contribution of the Asia-Pacific market. From fiscal 2020 to fiscal year 2022, the Asia-Pacific market revenue continued to climb, and in the last two fiscal years have been ranked first, accounting for 29.21% and 29.92% of the total revenue in the current fiscal year, respectively.
Image source: Screenshot of earnings report
However, in Q1 2023, Canada Goose's revenue in the Asia-Pacific region was $16.1 million, down 28.1% year-on-year.
Looking back at the company's progress and financial reports, it may be more intuitive that the Chinese market has played an important role in the transformation of its DTC business.
Reese told every reporter that Canada Goose has adopted a localized operating model in every region. While maintaining a globally unified image, the company will take into account the regional differences, emphases and diverse perspectives of the local market. "We are optimistic about the Chinese luxury market and believe in its influence on the global luxury market."
Bain Capital already holds more than 50% of the shares
"My parents never wanted me to take over the company because it was so hard. I never thought about it either, I wanted to go my own way instead of relying on my parents to provide jobs. Reese told every reporter.
After earning a degree in English Language and Literature from the University of Toronto, Reese wanted to become a writer. However, his parents offered him a three-month opportunity at his own company to earn money to travel. However, three months turned into six months, and eventually, Reese decided to stay in the family business.
Somewhat surprisingly, Reese used to be a person who didn't believe in brands. "I used to cut off the brand logo on my shirt because I didn't understand the brand." The drama is also here, a person who was once full of doubts about the brand, but has since single-handedly created the world's most successful down jacket brand.
Canada Goose logo production process Image source: Canada Goose pinxuan video screenshot
Like many business stories that ignite entrepreneurial passion, Canada Goose is not a big capitalist or backed by a big company. The story begins in a small warehouse in Toronto.
In 1957, Reese's grandfather, Dick, who worked as a tailor in a garment factory, founded Canada Goose in a warehouse. At first, its target audience was people working in cold areas. Later, Reese's father, David Reese, took over the family business.
David designed a down-to-cool parker coat specifically for scientists at mcMurdos research station in Antarctica. This became a key milestone in the "professionalism" of Canada Goose, and also made Parker coats gradually popular around the world in the following decades.
If David laid the foundation for canada goose's many achievement genes, then the addition of Reese is like a shot in the arm, allowing canada goose to enter the "acceleration era". After officially taking over the company in 2001, Ruisi led Canada Goose to expand rapidly, opening an e-commerce website and expanding offline retail stores.
Unlike short-term marketing operations, scale expansion is inseparable from solid capital, and Ruisi is also well versed in this. In 2013, he introduced Bain Capital Private Equity, and with the power of Bain Capital, Canada Goose was listed on both the New York Stock Exchange and the Toronto Stock Exchange in 2017. Born out of the family workshop, the "grassroots goose" officially completed the leap from quantitative change to qualitative change.
Canada Goose Toronto Office Image source: Courtesy of the interviewee
As noted by reporters, to date, Bain Capital's shareholding in Canada Goose has reached 54.7%.
As of June 24 this year, Canada Goose major shareholder shareholding image Source: Screenshot of the company's report
After entering the capital market, Canada Goose is also inevitably subject to a full range of scrutiny, especially the company's public popularity is still rising. For example, the use of animal furs, which has previously been criticized, and the setting of "double standards" when returning goods at home and abroad, have been questioned.
Reese told every reporter: "Canada Goose is my family wealth, I have made the annual income of $3 million to the current annual revenue of $1 billion, I am proud to make the company continue to grow at a high level." ”
"We're going to keep going anyway, Canada Goose is going through changes every year, my personal job is, and so are all Canadian employees." Reese said.
Big goose flying all over the world costs "oil money"
Using the celebrity effect is a big move for Reese to lead Canada Goose to go deep into consumers.
Canada goose is featured in many global blockbusters such as "The Day After Tomorrow" and "National Treasure". Well-known actors, such as "X-Men" actress Rebecca Romeyn, "007" actor Daniel Craig, Beckham's family, South Korean star Lee Jong-suk, etc. have appeared in the public eye in the public eye. In 2013, the well-known American supermodel Kate Upton wore a bikini and a white Canada Goose down jacket on the cover of Sports Illustrated, which made Canada Goose a powerful hit in the international fashion circle.
Canada Goose is good at using well-known singers, internet celebrity bloggers and other celebrities to do product marketing Image source: Canada Goose official Weibo
Although the down jacket category is considered by many to be thick and clumsy, the variety is not rich, and the high-end products are still very expensive, Canada Goose has redefined fashion: down jackets can also become luxury goods.
"Over the past 60 years, we have witnessed a shift in industry and consumer behavior, especially in the last two and a half years." Riistan said the COVID-19 pandemic has greatly affected consumer behavior, which he calls a "turning point in the world."
Changes in consumer attitudes have directly driven the transformation of the "luxury" industry. "In the past (a decade ago), luxury was associated with ultra-high prices, extravagance and rapid iteration; Now, 'luxury' is more about the product manufacturing process, what the brand represents, and how it empowers consumers. Reese pointed out that consumers have realized that value does not have to be expressed in a material way, and "luxury goods" should not be in the hands of only a few people.
Back to the more specific business level, all about the construction of the brand is inseparable from real money, Canada Goose is willing to invest heavily in marketing.
Looking at Canada Goose's earnings report, it classified expenses such as marketing expenses in the "other" category. Looking at the company's data for the past three fiscal years (2020-2022), revenue was C$958 million, C$904 million and C$1,098 million, respectively, and operating profit was C$187 million, C$117 million and C$157 million, after deducting cost of sales and other comprehensive expenses. Other business operating profits, including marketing expenses, were -C$206 million, -C$220 million and -C288 million, respectively.
In 2021, Canada Goose's revenue exceeded the $1 billion mark, but its operating profit was inferior to that of 2020. In addition, the overhead of other businesses continues to expand. Although the exact brand marketing expenses are not disclosed, the operating pressure brought by Canada Goose's marketing expenses can also be imagined in the context of the epidemic and rising costs.
When it comes to the development of the company, Ruisi adheres to the concept of "framework". "The organizational structure of a business is the key to success. I'm always trying to make sure the company has the right organizational structure to respond to the changes we have today, tomorrow, and 20 years from now. ”
Canada Goose store full of fashion products Image source: Per reporter Dong Xingsheng photo (data map)
Open a store with a luxury brand and create a trendy image
The "big goose" from the country of maple leaves has pushed up the ceiling of the price of down jackets with a price of ten thousand yuan, filling the gap in China's high-end down jacket market. The huge consumption potential contained in the Chinese market is also deeply attracted to Ruisi.
Dani Reiss, Chairman and CEO of Canada Goose Image source: Courtesy of the interviewee
According to the "2020 China Down Jacket Market Analysis Report", it is estimated that in 2022, the market size of China's down jacket industry will reach 162.2 billion yuan. CITIC Securities expects that there will be at least more than 20% of the increase in China's down jacket market in the future. Compared with the 30% to 70% penetration rate of down jackets in European and American countries, There is still 90% of China's blank market promising.
In terms of cultivating the Chinese market, Canada Goose is very diligent. Not only did it use designers such as Chen Anqi from China, but also the global debut of new shoes and boots in China. "We have achieved brand milestones in China, which is inseparable from China's well-developed digital infrastructure and huge consumer base. We are encouraged by positive feedback from consumers and we will continue to expand in the Chinese market. Canada Goose has 21 global stores in the Asia-Pacific market, 20 of which are located in China, Ri stan said.
"This year, we will continue to expand our investment in the Chinese market. This fiscal year, we will open 4 stores in China, and we will continue to expand our e-commerce business to adapt to China's innovative and rapidly evolving e-commerce environment. ”
In China, canada goose stores have always been located adjacent to luxury brands. Ruisi revealed that in the future, in addition to strengthening the existing market in Beijing, Shanghai and other cities in China, it will also turn its energy to developing new urban markets such as Harbin and Ningbo. "These regions have accumulated strong consumer interest and support for brands. In the vast territory of China, Canada Goose can have such popularity, and it can also be seen that Chinese consumers recognize the lifestyle we advocate. ”
Canada Goose Kind Fleece Wool Fleece Series Image Source: Courtesy of the interviewee
In addition to the direct business (DTC), Reese told every reporter that in 2022, Canada Goose still has investment priorities in the Chinese market.
Canada Goose's earnings report shows that in fiscal 2022, benefiting from lightweight down jackets and other apparel categories, non-parka coat collection revenue increased by more than 70%. "It shows that our new category does resonate with consumers, which is a huge opportunity for us." Reis plans to expand into more new categories.
Since the launch of the shoe line last year, Reese believes that Canada Goose still has many possibilities to explore. "We will continue to invest in this (footwear). Other apparel categories are another area of demand growth that we are seeing. Today, windbreakers, raincoats and knitwear ranges are included, and more products will be new in the future. At the same time, we will cooperate with co-branding through new creative promotional films and product lines to establish a connection with culture and trends. ”
"We want consumers to feel the warmth we deliver, both physically and emotionally." Reese said.
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