Itochu’s investment curve



In 2000, Itochu and Youngor reached a comprehensive cooperation. In 2009, Itochu acquired a 25% stake in Shanshan Group. In 2011, Itochu invested in Shandong Ruyi Technology Group. In 2015, Itochu and CITIC Sec…

In 2000, Itochu and Youngor reached a comprehensive cooperation. In 2009, Itochu acquired a 25% stake in Shanshan Group. In 2011, Itochu invested in Shandong Ruyi Technology Group. In 2015, Itochu and CITIC Securities subscribed for 1.303 billion new shares of Bosideng.
Itochu Corporation (ITOCHU for short)’s ambitions for the Chinese market continue to show.
At the end of April, Itochu and CITIC Securities jointly purchased 1.303 billion new shares of Bosideng at HK$1.19 per share, with a total subscription amount of HK$1.55 billion. Previously, Itochu had just teamed up with Charoen Pokphand Group at the beginning of the year to invest approximately 64.4 billion yuan in China CITIC Limited (referred to as CITIC Limited). After taking a stake in CITIC, Itochu stated that it will cooperate with CITIC in six aspects including finance, real estate facilities, resources and energy, and manufacturing in the future.
After three months, Itochu and CITIC have completed their first joint investment cooperation in a Chinese-funded enterprise.
Behind the investment in Bosideng
Regarding Itochu’s investment in Bosideng this time, Yang Dayun, an expert in China’s fashion industry and brand management and president of Uta International Brand Investment Group, said that this should be a commercial investment project made by an investment company under Itochu.
“Itochu is a large Japanese trading company with a wide range of business operations. It has its own financial companies and banks, and it often looks for projects and companies with growth potential to invest in.” Yang Dayun told reporters that the current share price of Bosideng Look, it is at a low level and has great potential and room for growth in the future, so it is worth investing in the stock.
At the same time, in addition to the financial investment value, the strong business correlation between the Itochu and Bosideng brands is destined to make this cooperation worthwhile.
“ITOCHU has the agency rights for many internationally renowned brands in Asia. Cooperation with powerful domestic clothing giants will also help open up sales channels for its international brands in China.” Yang Dayun told reporters that after ITOCHU took a stake in Bosideng, it was able to enter Therefore, in terms of Bosideng’s future international brand agency and multi-brand cooperation, Itochu’s brands will definitely enjoy priority cooperation rights. As the leading brand of down jackets in China, its complete marketing network has a strong appeal to Itochu.
At the same time, judging from the current time point of cooperation between the two parties, this cooperation will have a great beneficial effect on both parties.
Although Bosideng’s down jacket products have an absolute advantage in the Chinese market, down jacket sales have their own insurmountable limitations – strong seasonal sales, obvious fluctuations in raw material prices, and the trend of global climate warming, all affecting down products. market sales in recent years. Therefore, Bosideng has been promoting the four-season clothing strategy, hoping to break away from the limitations of a single down product.
It is reported that in order to promote the four-season development of its products, Bosideng not only launched its own men’s clothing brand, but also acquired brands such as Jesse women’s clothing, Mogao, and Jingle Cat. Under the current development background, if Bosideng can establish a strategic partnership with Itochu, which owns more than 150 internationally renowned brands, it will be of great help to its realization of multi-brand development and four-season clothing strategies.
Itochu also needs Bosideng.
“The relationship between China and Japan has been relatively tense in recent years, and the external environment is not suitable for Itochu to invest directly in China.” In this regard, according to industrial economist Bai Yimin, choosing Chinese clothing that is familiar with the Chinese market and has rich channel resources Cooperation with giants is a good cooperation strategy for Itochu to promote its brands.
The investment in Bosideng is obviously just a small step in Itochu’s strategic layout for the Greater China region. It also has bigger plans for the Chinese market.
Occupy the profit commanding heights of the industry chain
Early before investing in Bosideng, Itochu had already begun looking for partners in the textile and apparel industry.
As early as the beginning of 2000, Itochu signed a comprehensive strategic cooperation agreement with Youngor; in 2009, Itochu signed a comprehensive strategic cooperation agreement with Shanshan Group, holding 28% of the shares of Shanshan Group; in 2011, Itochu acquired it for US$200 million. 30% stake in Shandong Ruyi Group.
“ITOCHU generally chooses powerful textile and apparel companies to cooperate in China. After making equity investment, the two parties will also cooperate in industry, resource sharing and other aspects.” Yang Dayun told reporters.
This investment strategy is also in line with the investment philosophy of Japanese trading companies. Bai Yimin once worked for Mitsui & Co., a well-known comprehensive trading company in Japan, and he is very familiar with the investment model of Japanese trading companies. He said that when Japanese trading companies choose partners in China, they generally focus on two points: first, the company’s strength, scale and growth potential; second, the company’s background and resources.
Wu Jianmin, chairman of Shulang Group, also confirmed Bai Yimin’s statement. “ITOCHU’s partners in China are all powerful and large companies, and the cooperation between the two parties generally extends from upstream fabric supply to downstream brand cooperation.” Wu Jianmin told reporters that Shulang and Itochu are also negotiating. Cooperation in logistics, but before that, ShulangHigh-end fabrics have been imported from Itochu for a long time.
“The ultimate purpose of Itochu’s cooperation with local apparel companies is to serve the construction of its global industrial chain and turn Chinese companies into a link in its global industrial chain.” Bai Yimin said.
This is also the operating method that Japanese trading companies have always adopted. The book “Mitsui Empire in Action” has a detailed description of the operating model of Japanese trading companies – organizing the industrial chain to form a smooth chain of interests, and constantly strengthening this connection, is what the Japanese consortium always runs through in its operations. the basic idea.
Japanese trading companies represented by Itochu need to leverage this resource to help their products and services successfully enter the Chinese market and maximize their profits. “Japanese large trading companies are very familiar with all links in the industrial chain. They will only control the links with the greatest profits, that is, the upstream raw material supply and downstream business channels. For the OEM links with low profits, Chinese companies are generally responsible for them. Done.” Bai Yimin said.
The reporter’s inquiry into the affiliated enterprises of Itochu (China) Group Co., Ltd. found that as of December 2014, of the 36 affiliated enterprises of Itochu in China, 11 were clothing and trading companies. Among these companies, there are 6 companies engaged in trade and logistics business, 4 companies engaged in fiber fabric business, and 1 clothing brand company, namely Shanshan Group. Shortly after Itochu took a stake in Bosideng, its announcement of cross-border e-commerce in China was also released a few days later.
In this regard, will cooperation with these Japanese trading companies with clear goals bring unique transformation ideas to local apparel companies, or will they become cheap tools in Itochu’s global industrial chain layout after sharing business channel resources with Japan? ?
Risk of Marginalization
Among ITOCHU’s ever-expanding textile and apparel cooperative enterprises, many enterprises not only hope to obtain financial support, but also hope to learn the advanced management models of Japanese enterprises and share their rich international brand resources to promote enterprise development. But are these goals really achievable?
In the 1980s, Stone Group also hoped to expand and consolidate its dominant position in the Chinese printer market through cooperation with Mitsui & Co., Ltd. But unfortunately, after acquiring Sitong’s advantageous channel resources and social network, Sitong was abandoned by Mitsui & Co.
“After Itochu cooperated with a Chinese clothing company, the business performance of the company was not what Itochu was most concerned about. He was more concerned about whether this cooperation could effectively drive the utilization rate of its entire industry chain products.” Bai Yimin told reporters , Itochu owns Itochu Fiber. After the cooperation, Chinese clothing companies will give priority to using Itochu’s fiber fabrics. At the same time, Itochu can also fully access the business channel resources of Chinese companies. This is what Japanese trading companies are most concerned about.
​Are Chinese companies ready for such cooperation?

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Author: clsrich

 
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