By CultureBanx Team
- Parent companies of Coach and Versace are embarking on a $8.5B merger
- Hip-hop’s association with Versace has amplified its influence in urban culture
The parent companies of Coach and Versace are embarking on a monumental $8.5 billion merger, intending to penetrate deeper into the thriving streetwear culture and capitalize on the robust spending power of Black consumers. Could their expansion plans tap into the mutual admiration that lingers to this day between Versace and the hip-hop community, to control debt and increase sales?
Why This Matters: Tapestry (TPR +1.30%), the owner of Coach and Kate Spade, declared its plans to acquire Capri Holdings (CPRI -1.41%), the parent company of Michael Kors and Versace to fortify the conglomerate’s position against its high-end European competitors. Terms of the agreement indicate Capri shareholders will receive $57 per share.
Versace, with its nearly 30 million Instagram followers, carries significant influence in the virtual world of luxury brands. This factor is crucial, as Black consumers form 43% of Instagram’s user base. Not to mention that a study by McKinsey reveals the immense potential of Black consumers. Their economic power is forecasted to soar from $910 billion in consumption in 2019 to $1.7 trillion by 2030.
Hip-hop’s association with Versace has amplified its influence in urban culture. Also, Versace’s strategy has been focused on engaging Generations Y and Z, who are expected to contribute 45% to global luxury spend by 2025.
Sneaker collaborations, such as Versace’s “Chain Reaction” shoes in partnership with 2 Chainz, have further cemented the brand’s position. Global sales of sneakers witnessed a 10% increase, surpassing $4 billion in 2020. The global sneaker market will reach a whopping $75.8 billion in revenue in 2023 and is expected to reach $98.1 billion in 2028. This will account for 19% of the total footwear sales.
Market pundits have expressed doubts about luxury brands maintaining relevance under conglomerates focused more on profits than brand identity. Brands like Dior, Gucci, and Yves Saint Laurent have found homes within companies like Kering SA or LVMH. On the other hand, Chanel, Ferragamo, and Burberry have managed to evade the grasp of luxury conglomerates.
What’s Next: Upon completion, the combined entity will boast “six highly complementary brands with global reach”, expecting an annual sales turnover of over $12 billion across more than 75 nations. The companies anticipate savings of $200 million within three years, synergizing their operations. As the Coach and Versace merger unfolds, the fashion industry awaits the emergence of a new powerhouse. This strategic move, designed to tap into streetwear culture and the spending power of Black consumers, might set a precedent for future mergers and acquisitions within the industry.
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