Aditya Birla: Increasing The Stakes
With a 51% stake in Finesse International, Aditya Birla Fashion and Retail Ltd. (ABFRL) is making steady strides in becoming the next fashion conglomerate. Whether it’s their ownership of a number of esteemed brands like Ralph Lauren, Ted Baker, Louis Phillipe, Forever 21 (to name a few) or their strategic investment in Finesse International – a bespoke occasion and ceremonial contemporary apparel for men and women under the brand name ‘Shantanu & Nikhil’, ABFRL is set to establish itself as the crème de la crème of fashion companies in India. Emerged after a merger of branded apparel businesses of Aditya Birla Group, ABFRL took on its moniker in May 2015 and has been foraying into the business of fashion ever since. The marriage of ABNL’s Madura Fashion division and ABNL’s subsidiaries Pantaloons Fashion and Retail has truly defined ABFRL’s core concepts: Fashion & Lifestyle, a genre that directly takes the company in the leagues of conglomerates.
“This consolidation creates India’s largest pure play Fashion and Lifestyle Company with a strong bouquet of leading fashion brands and retail formats. This move brings India’s #1 branded menswear and womenswear players together.”
– Kumar Mangalam Birla, Chairman, Aditya Birla Group.
What are fashion conglomerates and why are they so successful?
Power play fashion companies are earning all the big bucks today, but why is that? How does such a fragmented market benefit from unifying under one label? Although fashion does seem to have an endless number of labels in its reach, it is a well known fact that only a handful companies truly call the shots – they’re the sole rulers in this seemingly limitless kingdom we know as the business of fashion. A conglomerate, in its true senses of the word – is a large corporation that owns various businesses in diverse fields. This diversification into heterogeneous businesses is undertaken by larger corporations to reduce investment risks. Say, for instance, if LVMH is suffering losses due to failure of a cosmetics company – expansion into another venture or increasing stakes in a more successful business can easily counterbalance financial stability.
To probe further into the matter – why do smaller labels give up autonomy to be micromanaged? While it may be a well established fact that diversification helps corporations reduce investment risks, there are various reasons why a subsidiary might benefit being under a large corporate umbrella. Conglomerates are a sort of mother lode – in the sense that such companies are better equipped to maintain a relatively stable position in the market and thus, the smaller brands are less affected by adverse fluctuations. Moreover, highly diversified groups are growing handsomely and gain considerable funds in international markets, which translates into sustainable futures for those unionized.
In addition to this, smaller brands get a platform for their products in a market where institutional voids usually exist. This enables said brands to market themselves to the right audience and hence, they place their resources in the hands of a nucleus that regulates businesses effectively. This centralization of capabilities enables brands to access a larger, more exclusive corporate network to meet their needs. This means availability of professional services and capital, along with being placed in the right niche. Hence, it can so be said that the success of a conglomerate is not always dependent on the financial capabilities of its subsidiaries. However, this is hardly proof that conglomeration is always a good idea. In diversifying, lay two paradoxes: a flux of income for the father company and investing in management costs of a colossal group. These two factors here really exemplify what it truly means to be a conglomerate – nuances of financial investments and usage of resources. In managing a large group of people, there might be risks in situations that are unforeseeable. Lack of specialization on the conglomerate’s part might cost a small business their integrity and essence. This usually leads to a lack of focus which sadly, calls for an untimely demise of what might have been an otherwise successful business, had they not had their wings clipped, or worse – getting kicked out of the nest.
The insurgency of ABFRL as a fashion & lifestyle conglomerate
With the kind of cut-throat competition this industry sees, it is no surprise that more often than not, a lot of smaller, more regional brands go unnoticed. ABFRL is aiming to be India’s first billion dollar pure play fashion powerhouse and whether that means more exposure to our Indian artisans is yet to be seen. Earning around a hefty 1000 crore rupees, Madura Fashions is the custodian of iconic brands like Louis Philippe, Van Heusen, Allen Solly, and Peter England which are all under the mighty umbrella of ABFRL. Their goal of acting as a synergistic core & nucleus of the future of fashion business in India and globally has translated into exclusive partnerships with Simon Carter and Ted Baker in 2017 and furthermore, 2018 saw a Store Licensing and Distribution Agreement with the very popular Ralph Lauren. Expanding retail and rising incomes tied with increased global exposure has turned the subconscious wants of consumers into active demands, and through e-commerce and the exponentially increasing offline branding ABFRL is meeting the various demands of a wide consumer base. Among their many possessions are the online and offline branding rights for Forever 21, which according to recent developments may file for bankruptcy. ABFRL is also investing in fast fashion. With their aim to catalyze the business of fashion through their direction, ABFRL might just guide the Indian industry towards a global future. While the implications of that are rather staggering, it is a segment that is yet to be explored and what this means for the landscape of the Indian fashion industry is something only time, (or ABFRL) will tell.