Text: Ren Cairu
Edited by Qiao Qian
A "personnel shock" at the beginning of 2023 will finally echo at the beginning of 2024.
On January 18 last year, ANTA Sports announced on the Hong Kong Stock Exchange that Ding Shizhong would step down as CEO and remain chairman of the board of directors, the largest personnel adjustment of the group in the past decade, involving a number of senior executives. One of the key moves is that the 54-year-old Zheng Jie stepped down as the president of the group and the CEO of the outdoor sports brand group, and continued to be in charge of related businesses as the CEO of Amalfen (the parent company of Arc'teryx). Mr. Zheng's move was ostensibly a downgrade, but at the time it was seen as a sign that he would focus on promoting the IPO of Amalfen with Mr. Ding.
Before and after this change, Amalfen has been rumored to be on the market many times. Most recently, in September 2023, Bloomberg quoted people familiar with the matter as saying that Amalfen is expected to launch an IPO that valus the company at up to $10 billion and is expected to raise $1 billion or more.
Now, the boiling rumors have finally been finalized. On the evening of January 4, Amalfen officially submitted F-1 documents (prospectus for foreign companies not registered in the United States) to the U.S. Securities and Exchange Commission, planning to use "AS" as the stock code, and the lead underwriters have a luxurious lineup, including Goldman Sachs, Bank of America, JPMorgan Chase, Morgan Stanley, etc. If the listing is successful, Anta, as the largest shareholder, will truly move towards a deeper "globalization", which is also one of the words that Ding Shizhong has mentioned many times in recent years.
The acquisition at the beginning of the story has been told many times. On December 7, 2018, a consortium of investors led by Anta launched a takeover bid for Amalfen, which also included FountainVest Capital, Tencent and Anamered Investments (an investment company owned by lululemon's founders), and completed the acquisition in March 2019 for 4.6 billion euros (about 36 billion yuan).
It should be known that from the 90s to around the millennium, Amalfen has successively acquired outdoor sports brands such as Wilson, Salomon and Archaeopteryx, which are also the "handles" of Amalfen today, including the later Peak Performance, which was also acquired in 2018. Some consumer investors commented on 36Kr that Amalfen said that its acquisition before Anta's entry into the game was somewhat like a PE style, but in recent years, it has not been, and the operation of the brand is obviously deeper and stronger.
In the past four years since Amalfen "started anew" after Anta entered the game, what has the company experienced and what has changed?
1. The years of being acquired
Overall revenues rose by 45 percent, with Arc'teryx rising the most
Internally, Amalfen has divided its business into three divisions, namely Technical Apparel, Outdoor Performance, and Ball Games and Racquet Sports, each of which is led by a core brand – Arc'teryx, Salomon and Wilson. The division of these three business segments also reflects how they cluster their brands based on similar consumer, product, marketing and operational factors.
As part of its post-acquisition transformation, Amalfen revalued its brand portfolio, divesting Mavic in 2019, Precor in 2021 and Suunto in 2022.
Amalfen's three business units and the corresponding brand portfolio (source prospectus)
Looking at the overall results, Amalfen deserves a good hand, with its revenue surging 30% to $700 million in the first nine months of 2023, with revenue growth in all regions. In 2022 and 2020, the first full year after the completion of the acquisition, the group's revenue increased from US$2.4 billion to US$3.5 billion, with a compound annual growth rate of 20%, which is even more rare in the three years of the pandemic.
The biggest contributor is Archaeopteryx. From 2020 to 2022, Arc'teryx's single-brand revenue increased from $547 million to $952 million, an increase of 74%, and it is still growing rapidly in 2023, achieving $941 million in revenue in the first nine months.
In recent years, Archaeopteryx has developed well at home and abroad. In China, it has come from the outdoors to the city, becoming one of the most favored brands of the elite, people have become Xi wearing it in and out of offices, cafes and other everyday places, and fashionable young people use it as a talking point in social circles. Abroad, it is also more "hot" than ever. A short video in 2022 once swept TikTok - a blogger stood under the shower head in an Arc'teryx jacket and exclaimed "just beads right off" for the performance of water droplets gliding through the fabric without seeping down, which led to a lot of analysis reports about "Archaeopteryx becoming popular".
In terms of data, Arc'teryx is also the most evenly distributed among the three core brands, with the largest Chinese market accounting for 43%, the United States and Europe accounting for 35% and 13% respectively. By comparison, more than half of Salomon's market is concentrated in Europe, while Wilson is even more concentrated, with 70% of its revenue coming from the United States.
The performance distribution of the three core brands in different regions (source prospectus)
In addition to Archaeopteryx, Salomon is also performing very well, although the growth rate is not as fast as Archaeopteryx, but from 2020 to now, its revenue scale has been the highest in Amalfen. From 2020 to 2022, its revenue increased by 26%, achieving $949 million in the first nine months of 2023, compared to $941 million for Arc'teryx in the same period. Together, they hold up half the sky of Amalfen.
A very important initiative: DTC
If you want to extract the two key words from Amalfen's prospectus, then the naked eye will be visible to the naked eye is "DTC channel" and "Chinese market".
DTC (direct-to-consumer) is another channel strategy relative to wholesale, and it is most directly embodied in two kinds - self-operated stores and DTC e-commerce. Compared to wholesale channels, DTC has the advantage of being able to personalize the consumer experience, gain impactful consumer insights, capture a larger share of the value chain and improve gross margins, and more.
As of September 30, 2023, the number of self-operated retail stores of Amalfen exceeded 330, an increase of approximately 69% compared to 2019. During the same period, revenue from the wholesale channel increased by 19.9% and that of the DTC channel increased by 56.7%.
The term DTC appears in the prospectus in the attribution of many indicators. When referring to the post-acquisition transformation, Amalfen specifically talked about the "strategic transformation of the go-to-market strategy", and the official explanation is that it will establish a deeper and more meaningful connection with consumers through the brand direct sales model.
However, the situation is different for different brands, and not all brands are suitable for drastic DTC reform at this stage, and it may be more suitable for brands that already have a certain consumer base and more independent development opportunities. For example, when Li Ning recently acquired the outdoor brand "Haglöfs Matchsticks" through Lane Capital, a senior outdoor practitioner told 36Kr, "If Li Ning comes up and fights all self-operated as soon as it comes up, the result will probably be a dream, because even several major retailers of Archaeopteryx have suffered losses on matchsticks before." ”
Specific to Amalfen, Arc'teryx is currently the most thorough brand in DTC, with a sense of scene and design to help consumers immerse themselves in the scene, but Salomon and Wilson have always been wholesale-oriented brands, and wholesale channels are quite heavy at the moment.
The "shuffle" of key figures
A foreign media report said when talking about the change in management: "When Anta acquired Amalfen in 2019, the terms of the agreement meant that the latter would continue to be an independent entity, and there would be no changes in personnel or management, but only 18 months later, the former president stepped down and was replaced by Anta executives, and the market was very sure that the company would adjust and prioritize the Chinese market." ”
Zheng Jie, who joined ANTA Sports in 2008, has been appointed CEO of Amalfen since 2020. Prior to that, he held various positions at Adidas, Reebok, Procter & Gamble, and others from 2001 to 2008. In addition, Yao Jian was appointed General Manager of Amalfen Greater China, where he led Nike's Greater China business for more than 17 years.
In the "Transformation" section of the prospectus, Amalfen also highlights the past few years, building a "talented and innovative leadership team" to execute the transformation and growth strategy. However, it may be biased to say that Amalfen's management has become "very Anta", and the leadership of the three business units has been reshuffled after the acquisition, but the new talent is also people with deep experience in global brands.
For example, Stuart C. Haselden leads Arc'teryx and Peak Performance, where he served as COO and CFO of Lululemon Athletica, as well as executive positions at brands such as J.Crew;
Franco Fogliato, who led Salomon, previously served as Executive Vice President of Global Omnichannel at Columbia Sportswear (Colombia) and held positions at The North Face and Billabong;
Joseph Dudy was promoted to CEO of Wilson, having previously worked at Wilson for more than 28 years.
Three brands, three futures
In terms of future growth strategies, the three core brands have their own plans.
Archaeopteryx wants to harvest the female group and occupy more life scenes with a broader product portfolio. In addition to the core outdoor category, the women's apparel category will be the focus, with initiatives mentioned in the prospectus including "expanding the variety, color palette and updated fit, as well as working closely with female athletes" to further expand the market share of female consumers. In addition, in terms of new product development, Arc'teryx has recently opened a footwear office, and in order to increase the seasonality of the product line, the product portfolio of the business line "Veilance" will be further expanded.
Archaeopteryx Veilance series poster (source official)
Salomon is more "step-by-step" in its senses. Represented by the XT-6, innovation has always been the foundation that underpins Salomon's iconic products, and today Salomon Sportstyle has become a pop culture with its streamlined shapes, mesh materials, and more, with revenues of more than $80 million in 2022 and $165 million in the first nine months of 2023, making it the fastest-growing collection among Salomon brands. The prospectus stated that it intends to continue to use its superior innovation capabilities to improve existing product lines and develop new products to increase market share.
Wilson wanted to expand the category of more "soft" goods in addition to professional ball sports equipment. Generally speaking, when we talk about Wilson, we tend to think of equipment such as tennis rackets, but in the Tennis 360 Softgoods strategy, they launched a tennis shoes and apparel business, and the series products accounted for 3.7% of the brand's total sales in 2022 and 5.1% in the first nine months of 2023. In the future, in addition to "very hard" equipment, the proportion of this kind of soft footwear and clothing business is expected to continue to increase.
2. Play: The Chinese market
Greater China does not account for a high percentage of revenue, but it is growing rapidly
After Anta's acquisition of Amalfen, the penetration rate in Greater China has increased significantly, which is easy for everyone to perceive, and the official said that the growth is closely related to the popularity of Arc'teryx and Salomon.
In fact, Greater China is not the largest market for Amalfen, but its growth rate is indeed unique among the major regions. Overall, the United States is the largest market, contributing revenue of US$1.226 billion in the first three quarters of 2023, a year-on-year increase of about 19.3%, Europe, the Middle East and Africa revenue ranked second, with revenue of US$999 million in the same period, a year-on-year increase of about 22.6%, and Greater China revenue of US$593 million, but a year-on-year increase of about 67.6%.
The prospectus describes the transformation over the past few years as "proven capable of winning in Greater China" – revenue grew from $202.3 million in 2020 to $523.8 million in 2022, a compound annual growth rate of 60.9%, and operating margins in Greater China outpaced the margins of the overall business.
In China, Arc'teryx is more likely to open stores, and the efficiency of Arc'teryx's stores in China is higher than that in North America
Surprisingly, consumers in Greater China have more spending power on Arc'teryx than in North America. In 2021 and 2022, sales per square foot of annual sales in Arc'teryx stores in North America were $622 and $817, respectively. In the same time, the figures of self-operated stores in Greater China are $1,251 and $1,269, that is, the annual sales per square meter can reach about 100,000 yuan, and the number of stores is also more than that in North America.
The floor effect of the store is a microcosm of Amalfen's "better understanding of China" in terms of opening stores. According to the prospectus, store locations were selected through detailed data analysis, with each location seeking to bring the brand story to life, "and we use the key lessons learned from our long-term stakeholders to improve our capabilities and performance in Greater China." "It shows that Anta has an impact on its deep exploration of the Chinese market.
"After Anta's trading, Arc'teryx opened a flagship store on Huaihai Middle Road in Shanghai in 2020, and officially announced Liu Wen as the spokesperson, which is a signal in itself. The manager of a snowboard brand once summed up to 36 Krypton. This store on Huaihai Middle Road more or less represents the tonality of Arc'teryx and Salomon after Anta's operation - the store should be large and bright enough, the floor should be lowered, and the clerk's words should be standard.
Among these experiences, in addition to retail knowledge, channel resources, store location, etc., there is another point that cannot be ignored: the improvement of brand positioning, which is the most extreme embodiment in Arc'teryx.
An early agent of Arc'teryx sorted out the development history of this brand to 36Kr in this way: from the launch of ALPHA SV during the Amalfen period, talking about the concept of hard shell, to the later promotion of the outdoor down jacket ceiling Macai, and then to the launch of the business line veilance after Anta's trading, from the default title of "the most expensive outdoor brand" in the independent brand period, to the main "most professional outdoor brand" in the Amalfen period, and then to the current "luxury among outdoor brands". In his words, this change represents a change in brand positioning, and under Anta's leadership, Arc'teryx has become a more generalized and luxury-like brand.
In the last two years, Arc'teryx's marketing actions in China have also been very "accurate", and the cooperation with "Songtsam Hotel" is an example. Songtsam is a hotel brand featuring Tibetan culture, and an investor previously told 36Kr that "Songtsam is very popular with some investment bigwigs, and many people will choose to invest in it because of this love."
Holding a plateau show, releasing co-branded products, and opening a meeting room in Songtsam..."Sports luxury brand + boutique hotel brand", Arc'teryx has brought the Tibetan aesthetics of the mountain brand to the extreme, and has been evaluated by many people in the advertising circle as "very good at marketing".
The meeting room of Arc'teryx x Songtsam Hotel (source network)
Today, Salomon's overall strategy seems to have followed the same path as Archaeopteryx, which is described in the prospectus as "developing a repetitive strategy". From 2021 to 2022, Salomon's revenue in Greater China increased by 72%.
3. Two "Easter eggs" information
The original amafen was almost incompatible with outdoor gear
Founded in 1950, Amalfen started as a tobacco company, and later opened up shipping, book publishing and printing, automobiles, plastics, textiles and other businesses, but has not been able to find and clarify the right direction of development. Relying on the considerable cash flow brought by the tobacco business, Amalfen started an investment business, and later acquired by Wilson and Atom. In 2001, Amalfen launched "Amalfen Sports", and then completely launched the tobacco business, which gradually developed into the Amalfen we see today.
Affinity with the founder of lululemon
One of the unique figures in the acquisition of the Anta consortium was lululemon founder Chip Wilson.
In the deal, Chip Wilson paid nearly $1 billion for about 21 percent of Amer's shares, and a few months later paid another $100 million for a 0.6 percent stake in Anta. In a recent interview with Forbes, he said, "90% of my time and mind are probably spent there." ”
He also said that over the past few years, he has been a behind-the-scenes advisor to Amalfen's nine outdoor brands, including ski brand Atomic and shoemaker Salomon, and that his focus has been on transforming these brands from a masculine, engineered, wholesale image to one that is "more appealing to everyday users, especially women," which seems to be what lululemon has done best in the past.
Today, he also serves as a director of Amalfen. According to the prospectus, four people, including Ding Shizhong, will serve as Class I directors, while four people, including Chip Wilson, will serve as Class II directors, and another three will serve as Level III directors.
4. Conclusion
In fact, Anta's move to take the lead in acquiring Amalfen at the beginning can be said to be a "big gamble", and the outside world is not entirely optimistic, and perhaps the protagonist of the story is also hesitant.
Lane Capital, which helped Li Ning buy matchsticks, also noticed the expansion of Arc'teryx in the Chinese market, saying in a public report that "when we first saw Anta's acquisition of Amalfen, we thought the latter was overvalued." But time has proven that Anta has done a very good job with this acquisition, and the Chinese market has undoubtedly led most of the brand's earnings growth. ”
At the beginning of 2019, Ding Shizhong sent an internal letter to Anta Group, in which he said, "This is the most important decision I have made since I started my business. He also mentioned that during the time when he decided to buy Amalfen Group with the directors, he stayed up all night for several days, thinking about what this would mean for the company and society.
Internationalization is Ding Shizhong's "obsession" as an entrepreneur, and today, he has gone far towards this goal. If it is said that at present, the entry of Chinese companies into the international market is a magnificent picture, and Anta will undoubtedly write an indelible mark in it.