Nike plans to take over the distribution of Converse in the U.K. and China after the end of this year from its current licensees, after the expiration of present contracts: a company in Hartfordshire, RPQ Supplies, for the U.K.; and GM Asia Pacific in Hong Kong for China.RPQ Supplies, a unit of Focus Group set up at the end of 2007 to manage the Converse business in the U.K., will close down after Dec. 31.
Focus Group is looking for another big company to represent in the U.K. after 10 years with Converse. Focus already represents Sergio Tacchini and Ecko in the country. It recently took on a U.K.license for the entire product line of Ellesse. Pentland Group, which has been licensing out Ellesse in other major markets, owns 57 percent of JD Sports Fashion, which in turn bought a 49 percent stake in Focus at the end of 2007.
Converse, which is owned by Nike, currently sells its products directly only in the U.S. and Canada. It uses licensees in the rest of the world, and this strategy has paid off handsomely, especially in markets such as France, Germany and Italy where annual sales under the brand have increased to more than €100 million in each of these countries. RPQ officials admit that Converse is generating lower sales in the U.K., but stress that the brand is only being offered by “the best retailers” in the country.
At a meeting with financial analysts in New York last week, Nike said that the acquisition of the distribution in the U.K. and China should help the company to double its revenues from Converse from the current level of almost $1 billion within the next five years. Including the licensees’ sales, Converse already generates annual sales of about $2.2 billion.
In Nike’s accounts, Converse is grouped into an “other businesses” unit along with Cole Haan, Hurley, Nike Golf and Umbro. Total revenues from this unit are expected to double from current levels through low-double-digit average increases in annual sales, and thus reach indicated revenues of $4 billion by 2015, or between $1.5 billion and $2 billion more than current levels. Like Converse, Umbro, which is currently distributed only in the U.K., is likely to take over the distribution from its licensees in some other countries.
Excluding Nike Golf, which generates annual sales of $650 million, the Nike brand alone currently accounts for 85 percent of the Nike group’s total revenues. As outlined in the latest issue of SGI Europe, number of initiatives are planned to raise the Nike brand’s sales from $16.7 billion to $23 billion by 2015. Overall, the new strategies laid out publicly last week are set to raise the Nike group’s total turnover by 40 percent to $27 billion through 2015.