CEO Talk | Christophe Chenut, Chief Executive Officer, Lacoste

Cristophe Chenut | Source: Lacoste

PARIS, France – Entering the headquarters of Lacoste, one of France’s biggest and most widely known apparel and lifestyle brands, everyone is remarkably ‘on brand’. From the sporty looking women at the reception desk to the public relations executives, practically everyone is wearing the brand’s iconic polo shirt with the jaunty, world-famous crocodile logo.

It’s easy to forget just how influential Lacoste has been over the years. And indeed, as soon as my antennae were attuned to polo shirts, the streets of Paris seemed to be full of them. Not all were emblazoned with crocodile logos, however. Since René Lacoste — the scion of a wealthy Parisian family and a tennis champion who won numerous French Open, Wimbledon and US Open titles — invented the world’s first short-sleeve cotton piqué polo, in 1933, the market has been flooded with competition from all quarters: luxury polos from Ralph Lauren, lifestyle polos from Abercrombie & Fitch, and remarkably well-cut, high-quality polos from Uniqlo which cost less than $20.

But Mr Lacoste was a true innovator in much more than polo shirts. When bronchitis cut his tennis career short, his focus turned to product and business innovation. He was the first to use an identifiable brand logo on a piece of clothing, the first to create an apparel licensing business, as well as the first tennis player to create an eponymous fashion brand, paving the way for everyone from Rod Laver and Fred Perry to Serena Williams, Bjorn Borg and Roger Federer.

But how does the company Lacoste founded compete and stay relevant when its core product has been co-opted by competition, all the way from the low-end to the high-end of the market? I sat down with chief executive Christophe Chenut – who was wearing a Lacoste polo shirt, of course – to find out.

BoF: I would like to start with the heritage of Lacoste. Everything – from the iconic crocodile logo to the licensing model – these have all been part of Lacoste since the very beginning. How does this heritage define Lacoste?

Cristophe Chenut: [René] Lacoste is [still] very famous as a tennis player, especially in France. But while he was a tennis champion for 6 years, he was a big inventor [for over] 60 years.

He was focused on innovation in everything, including, of course, putting a logo on a garment, inventing the petit piqué, and building a business [using] a licensing model. Not a lot of competitors were built like that. And for years after, he continued to invent and innovate [in] a lot of different ways, the metal racket, different things for golf, for cricket, for baseball. It’s truly part of the spirit of the company and even if it’s more and more difficult to innovate in the textile business today, I think we have to keep this philosophy in mind.

BoF: The Lacoste business had a couple of tough years with negative growth, but last year revenues rebounded to €1.6 billion. What were the specific actions you took to reverse the decline?

CC: In 2008, we [commissioned] a study with the Boston Consulting Group. To summarise, the idea was to recreate desirability around the brand. We have worked hard on that over the last 3 years, with the creation of Lacoste Live, dedicated to the young customers and focusing on Lacoste Women.

What we wanted to do was recruit the young and trendy people, and also women that are talking about fashion. These people are more interested in fashion than our historical male target. We thought that by offering them a better collection, we could recreate desirability around the brand, make those people [speak] good words about the brand, and make the classical customer happy to see his children and wife wearing Lacoste again.

To do so, we have a new art director, new communication, new collections, new boutique concepts at the same time, and this has created a huge appeal and that’s why we have a very nice rebound. This year, we should have 14 percent growth again, which, in the economic situation we are all facing, is very good news.

BoF: What is driving the growth?

CC: On the product side, all the categories are doing well, mainly thanks to Lacoste Live and Lacoste Women. But, I think the most significant thing we can see regarding the growth is geographic growth. Of course, Europe is flat in general. France, Germany and Northern Europe are doing very well, but Europe is +1/2 percent last year, and is supposed to be between 5-10 percent growth this year, which is nice. Italy, Spain, and Portugal will be down, of course, for economic reasons.

It’s Asia on one hand and Latin America on the other hand that are doing very, very well, especially Brazil which is amazing. In Asia, of course, there is China, but Korea and Japan are very good for us.

BoF: When I travel in emerging markets everyone talks about the growth of the luxury markets, but when you look a bit deeper it is really the middle classes that are growing and the Lacoste product and brand seem perfectly positioned for this.

CC: We are targeting the middle class more than the upper class, and this category of population is growing by millions, thousands of millions across the world. At the same we are specialists of casual wear and everywhere in the world, including Japan, you can now go to the office or a party without a tie and without a jacket, and that means at the same time we are [benefitting from] the rise of the casual wearer.

For more than 30 years, Lacoste has been in Brazil. Bernard Lacoste was as visionary as his father was an inventor in terms of geographic expansion. He started to develop the brand everywhere in the world at the first minute it was possible. We registered the brand in China in 1980, started the business in 1984, so it’s a 20-year story in China, where some brands are just arriving right now. The same [can be said] for the Philippines and for Thailand, so that’s a huge advantage. They have always known Lacoste because they have seen this brand since they were born.

BoF: I also want to better understand this very interesting licensing partnership you have had with Devanlay since the founding of Lacoste almost 80 years ago. In addition to the licensing deal, there are cross shareholdings where Devanlay owns 35 percent of Lacoste and Lacoste owns 10 percent of Devanlay. But it begs the question, why haven’t the two companies just merged? What’s the strategic rationale for operating as two separate entities, even if there is such a long standing relationship?

CC: That’s a good question. This is an everyday question for everybody, because the model is totally different compared to our competitors but it seems to work. As CEO, I’m not in charge of discussing this issue, but of course, I have my own opinion.

I think more than anything, it’s a family story. The Lacoste family wants to keep the ownership and the control of the Lacoste brand. It’s their name and the system that has been put in place by the grandfather, or great-grandfather makes it possible because they don’t have to invest. The investment is made first by all be the licensees in every product category. They have to continue the stories, the values of the brand which is the family name, so they want to keep that under their control. They don’t want to be part of an industry or distribution business because it’s not what they like, what they feel, but they want to make sure that this brand is crocodile, remains under their control as long as possible, because all of the shareholders we have — we have around 20 now — they are all very close to René Lacoste and it’s part of their story and it’s part of them. They don’t want to disappear. If we merged the two companies, they would not keep control of the brand.

From a business point of view, with Devanlay and ourselves, we always try to show to the other that we have better ideas. I think it can be really positive to have these two companies, because we have this healthy tension.

BoF: You’ve gone through a pretty significant transformation in terms of the creative leadership of the brand, with the departure of Christophe Lemaire and the arrival of Felipe Oliveira Baptista. How do you manage that kind of transition internally and what has that meant for you here at Lacoste?

CC: That’s where Devanlay’s interest is. Felipe Oliveira Baptista is mainly part of Devanlay because he is in charge of the textiles and the leather goods business that are under the license of Devanlay. We have a design team at Lacoste of about 20 people in charge to communicate all the values, all the clothes, the trends for the brand to all our partners, not just Devanlay, but for shoes, for the eyewear and everything. When we changed from Christophe Lemaire to Felipe, the team here stayed the same, so the continuity could be assured by the Lacoste design team.

Of course, Felipe brought his ideas to rejuvenate the brand especially in women’s, because he is a specialist in women’s couture. It was really interesting to see how a Portuguese understands this brand, I think, much more than Americans. Lacoste’s roots are casual wear, but our style is different. It was interesting to see how this guy had a different understanding of the brand and it was evidence for everybody that he was the right one, so thanks to that and a couple of hours he spent with the team here and at the conservation centre, it has been quite easy to manage. And, after ten years it was good for Christophe to move on. You always need to rejuvenate.

BoF: But the core of the business is still in the polo shirt. Since 2003 there have been more than 81 million Lacoste polo shirts sold, which is a staggering number. But it made me wonder, in this environment, where there is a lot of competition and the polo shirt is something that’s been adopted by lots of different brands, how do you compete?

CC: We are lucky enough to have an iconic product. It’s funny to think that this garment is 80 years old. Sometimes young people think that the polo was invented by another brand. We try to communicate as much as we can to say we invented that 30 to 50 years before, thanks to René Lacoste. All the brands may be proposing polo shirts, but they are not from Lacoste.

Having an iconic product is a strength and a weakness at the same time. It’s an incredible opportunity to have so many customers coming into your boutiques to buy one iconic product, but it’s very difficult to make them move to other products because they want to buy a polo shirt, they pay and they go back into the street, you say, ‘Hey guys, do you want pants? A jacket?’

You have to invest a lot to make sure your iconic product will remain iconic and at the same time you want to say ‘Hey guys can you buy something else when you’re in the boutique.’

That said, as far as Lacoste is concerned, the polo shirt represents 30 percent of sales, in terms of value, so it’s huge, but at the same time it’s nice to see that we have been able to sell twice the volume and the value from other products.

BoF: I was taking a look at the internet presence of the brand and I am quite interested to know how you’re going after the digital opportunity both in terms of communication and commerce, and also in terms of how you think about the cross-channel opportunities between a physical retail store (you have 1200 stores, so a physical retail network is a big part of this brand) and digital?

CC: Digital represents three different activities. First is social media. Second is classical communication through the website and the third is e-commerce.

I think that we are outstanding on the social media part, because, as we learned two years ago, we are the leading French brand in terms of fans. This shows the incredible awareness and attractiveness of the brand.

With regards to classical communication we are very good, maybe not outstanding, but very good. We are managing a lot of campaigns for Lacoste Live, of course, because all the communication targeting young people is on the web.

The third part is e-commerce, where we are a newcomer. Apart from the US, where we started around 2004, we only launched in the UK, France and Germany in 2010. We started e-commerce a couple of months ago in Japan and Korea, and will launch in 2013 in China.

There are a lot of reasons for this. Because of our licensing model, it took a lot of time to [get] everyone around the table to agree. In some countries, people were a little bit scared to create competition to the bricks and mortar network, so we launched it later than some of our competitors. But it’s doing very well and we are above plan.

BoF: Theoretically, with this kind of product, with the fan base you have online and the recognition that you have, this is potentially a huge opportunity.

CC: Yes, it is a huge part of the business that we need to develop and it is starting late, but that shows we still have opportunities. It’s true, an iconic product is easy to sell online.

CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief, Imran Amed.