State of the Luxury Goods Market in 2014

TRENDS AND INSIGHTS IN THE GLOBAL LUXURY
GOODS MARKET
2014
POWERED BY PASSPORT FROM EUROMONITOR INTERNATIONAL

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NEW INSIGHTS: GLOBAL SNAPSHOT
EMERGING MARKETS
DEVELOPED MARKETS
KEY CATEGORY TRENDS
E-COMMERCE
M&A
PASSPORT: LUXURY GOODS DATA UPDATE 2014

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What’s the
global
growth
trend?
?
Where’s
“the next
China?”
?
Where’s
? the value?

7
Luxury Goods Sales in Excess of US$317 Billion and Growing…
Continued growth Strength from emerging economies
China Spending rising steeply despite government clampdown
Japan A weaker yen bolstering Japan’s penchant for luxury
Affordable luxury Still breaking new ground especially in developed markets
Expanding middle
class
Expanding B and C class in emerging economies fuelling a new
culture of luxury aspiration

Luxury Goods Power On..
450
400
350
300
250
200
150
100
50
8
14
12
10
8
6
4
2
0
-2
-4
-6
-8
0
2008 9 10 11 12 13 14 15 16 17 2018
% Y-o-Y Value Growth
US$ billion
Global Luxury Sales (US$ billion) and Growth 2008-2018
US$ billion Year-on-Year % Growth

Hard Luxury and Accessories Lead Global Growth
9
Category
2013
US$
million
(current)
2014
US$
million
(current)
Y-o-Y
real
growth
2013-2014
2018US$
million
(current)
CAGR
2013-2018
Designer Apparel (Ready-to-
Wear)
132,935 136,785 2.9% 154,299 3.0%
Luxury Jewellery and
Timepieces
62,218 65,042 4.5% 78,693 4.8%
Luxury Accessories 51,251 53,488 4.4% 64,652 4.8%
Fine Wines/Champagne and
Spirits
29,508 30,600 3.7% 35,931 4.0%
Super Premium Beauty and
Personal Care
28,007 28,959 3.4% 33,377 3.6%
Luxury Cigars 5.516 5,635 2.2% 6,077 2.0%
Luxury Travel Goods 4,576 4,754 3.9% 5,512 3.8%
Luxury Writing Instruments
and Stationery
2,124 2,160 1.7% 2,376 2.3%
Luxury Electronic Gadgets 1,022 1,043 2.0% 1,236 3.9%

NEW INSIGHTS: EMERGING MARKETS
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
11
Emerging Markets Will Continue to Drive Growth
0%
% value share
Luxury Sales Developed vs
Emerging Markets 2008 - 2018
Developed Emerging
Much of this impressive growth has
come from the emerging markets.
Where thanks to continued
urbanisation, economic development
and the overall love of luxury which
has brought a large proportion of new
consumers into the luxury market.

12
Asia Pacific to Become Regional Leader

13
Luxury Sales Fuelled by Expanding Middle Class

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
14
China Overtakes France and Italy Despite Government Clampdown
0%
2013 2018
Value share
Luxury Goods Top Five Markets
Value Share 2013/2018
US Japan China France Italy ROW
2012 2016 2020
Population in (‘000) above US$150,000 gross
income
US 17,947 24,847 33,856
China 2,081.6 3,635.1 5,396
Japan 3,579.9 3,460.3 3,375
Germany 2,201.4 2,561.3 2,930
Australia 1,316.8 1,877.5 2,438.4
France 1,746.6 2,050.4 2,393.8
UK 1,514.8 1,819.9 2,192.8
Brazil 897.6 1,345.9 1,839.8
Russia 667.9 1,090.3 1,548.8
Italy 1,260.7 1,356.0 1,465.3
Canada 923.3 1,089.6 1,278.0
India 515.1 826.6 1,224.4

15
China Set be Number Two in World for Luxury Goods…
China has overtaken France
and Italy to become number
three in the world. Government
crackdown on luxury gifting
has led to a slight slowdown in
demand but growth potential
remains positive.
China's projected 72% value growth by 2018
means China will overtake Japan to become
the worlds second largest luxury goods
market. China is also forecast to have the
second largest population with annual gross
income over US$150,000 by 2020 behind
the US.

16
…China’s New Discerning Consumer Leads Brand to Go West

17
Brazil’s Regional Battle Ground
Brazil’s luxury goods market
has been underperforming,
given the size of its economy
and major brands are yet to
extended their presence
beyond the three main cities
of Rio de Janeiro, Brasilia
and São Paulo.

Brazil’s economic slowdown teamed with ultra-high import tariffs and luxury tax is
creating a major barrier for international luxury brands and consumers, despite rapid
urbanisation, a fast-growing middle class and greater access to consumer credit.
18
Brazil’s Import Tariffs Are a Bigger Barrier Than a Weaker
Economy
Topshop, London US$61
Topshop, São Paulo US$94
Gucci, New York US$2,438
Gucci, São Paulo US$4,370

Brazil’s Favourable Demographics Will Help Drive Growth
19
Beyond China, Brazil is one of the most promising growth markets for luxury goods
thank to a surging middle class. It’s population with annual gross income over
US$150,000 will grow by 46% to reach 1.4 million people by 2018.

Brazil Luxury a Young Man’s Game
20
Brazilians in their late 30s to early 40s had the highest average gross income in 2013.
Unlike many of the mature luxury markets such as France and Italy, the very top
earners in Brazil fall into the 40-44 age group. These also made up 18% of all Brazilians
earning above US$150,000 in 2013.

Are the BRICs Still Important to the Luxury Goods Growth Story?
21
2013 witnessed an important shift in the BRIC economies raising questions as to
whether they are becoming less important to the global luxury goods industry
• Despite impressive growth rates
these countries only account for
around 4% of total luxury goods
spend . Which is is set to increase to
5% in constant value terms by 2018

Sub-Saharan Africa Next Luxury Hotspot?
22
Some Sub-Saharan African economies are becoming more attractive to investors
thanks to strong growing consumer markets. These economies are however still very
much classed as “frontier” markets and will not overtake the BRIC’s any time soon.
Sub-Saharan Africa is the second
fastest growing region after Asia
Pacific and home to five of the
top 10 fastest growing markets

23
An African Strategy Offers Long-term Investment Promise

500
400
300
200
100
24
Sparkling Future for Nigeria’s Luxury Market?
0
Peru China Nigeria Chile Poland
% value growth
Champagne: Top Five Global Growth Markets in Constant
Value Terms 2007-12
Between 2007-2012, Nigeria
was the third fastest growing
market in the world for total
value sales of champagne.
Champagne: Top Five Global Growth Markets in Total Volume Terms 2007-2012
Country
% volume growth
2007-12
% volume CAGR
2007-12
Absolute volume growth
(mn litres)
2007/12
Peru 502 43 0.1
China 146 20 0.9
Poland 146 20 0.2
Nigeria 130 18 0.4
Australia 99 14 2.0

NEW INSIGHTS: DEVELOPED MARKETS
26
Developed Luxury Goods Markets Should Not be Overlooked
World’s Top Five Luxury Goods Markets
by Value Share 2013
US
Japan
China
France
Italy
ROW

27
Developed Markets Help Drive Growth in Affordable Luxury

Weaker yen - 20% to the US$ in 2013
Increase in domestic luxury spend - Japanese
cannot afford to shop abroad
Increase in foreign luxury spend from Asia -
favourable exchange rates
Luxury brands confident enough to raise
prices - increase profitability
Luxury brands plan to upgrade stores and
increase Japanese footprint
28
Could Japan’s Renewed Growth Rival China’s Impressive Trajectory?
China still on course to overtake Japan but
investment could start to cool

29
BRIC Travellers Boost Luxury Sales in Developed Markets
BRICs: Top Five Developed Market
Destinations by Expenditure 2012
• US
• France
• Germany
• Italy
• Portugal
Brazil
• Spain
• Italy
• Germany
• France
• UK
Russia
• Singapore
• US
• Switzerland
• UK
• Hong Kong
India
• Hong Kong
• US
• South Korea
• Singapore
• Japan
China
Leading Countries for Incoming Tourism
Receipts on Shopping 2012
0 3 6 9 12 15
US
China
Hong Kong
Spain
France
US$ billion
Leading Countries by % CAGR in
Outbound Tourism Expenditure on
Shopping 2012-2017
0 3 6 9 12 15
China
India
Kenya
Vietnam
Taiwan
% CAGR 2012-2017

30
BRIC Travellers Boost Luxury Sales in Developed Markets
14%
annual growth in outbound
shopping spending by
Chinese travellers
Introduction of China
Union Pay

31
Brazilian Tourism Boom Benefiting US Stores

NEW INSIGHTS: KEY CATEGORY TRENDS
33
Soft Luxury Houses Move into Hard Luxury

34
Fashion Brands Ramp Up Exposure Across Full Beauty Remit
Marc Jacobs 2013 Tom Ford 2011 Tom Ford Men 2013
Burberry Michael Kors 2013 Tory Burch 2013

35
The Parallel Trajectories of Apparel and Beauty

40
35
30
25
20
15
10
5
36
Men’s Global Luxury Growth Outpaces Women’s
0
Designer
Clothing
Designer
Footwear
Luxury Sun
Glasses
Luxury Bags Luxury
Jewellery
Luxury
Timepieces
% Growth
Global Men’s and Women’s Luxury Categories Retail
Value Growth 2008-2013
Men % Growth 2008-13 Women % Growth 2008-13
Men % CAGR 2008-13 Women % CAGR 2008-13
Men
+16%
% CAGR
3.0
Women
+12%
% CAGR
2.0
2008
2013
2008
2013

37
Is Luxury Manning Up?
From Mexico City to Beijing, men are
putting higher stock in their appearance.
This is especially visible in the emerging
markets of Asia-Pacific and Latin
America where thanks to growth across
the young male aspirational consumer,
categories like men’s luxury accessories
and jewellery are growing faster than
women's.

NEW INSIGHTS: E-COMMERCE
Developed Emerging
39
The Rise of Online Retailing
Sales of Luxury Goods by E-Commerce 2008-2013
Value
share 2008
Value
share 2013
Growth 2008-
2013
World 4.3% 5.3% 23%
UK 11.3% 13.6% 20%
Germany 8.5% 10.6% 25%
Japan 8.9% 9.9% 11%
France 6.2% 8.9% 43%
Switzerland 6.9% 7.4% 8%
Hong Kong 0.2% 0.5% 130%
China 0.0% 0.4% 191%
Ukraine 0.1% 0.1% 356%
Philippines 0.1% 0.1% 27%
Malaysia 0.1% 0.1% 76%

NEW INSIGHTS: E-COMMERCE
40
The Rise of Online Retailing and Social Media
Developed
Emerging

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EMERGING MARKETS
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E-COMMERCE
M&A
PASSPORT: LUXURY GOODS DATA UPDATE 2014

NEW INSIGHTS: M&A
There were 26 announced luxury deals in 2013 totalling US$17 billion, with an average premium
of 32%
LVMH leads at US$10.4 billion with 30 deals since 2010 and 61% of value
The top acquirers are France based (US$11.2 billion) and top targets are Italian (US$8.2 billion)
42
2013 Saw Flurry of M&A’s Driven by Big Names and Italian Targets
The outlook for 2014 is much the same as 2013, with a number of heavyweight M&A deals in the
pipeline

PASSPORT: LUXURY GOODS DATABASE UPDATES
44
Luxury Goods Hierarchy
MARKET SIZES
» 15 years of comparable data = 10
years historic + 5 years forecasts
COMPANY AND BRAND DATA
» Company data by global brand
owner and national
subsidiary/licensee
Brand shares at industry and category
level
ADDITIONAL DATA
» Luxury shopping malls
» Luxury department stores
» Cigar clubs
» 32 market comparative pricing data
Luxury Goods
Designer Apparel (Ready-to-Wear)
Luxury Cigars
Luxury Accessories
Luxury Jewellery and Timepieces
Fine Wines/Champagne and Spirits
Super Premium Beauty and Personal Care
Luxury Travel Goods
Luxury Writing Instruments and Stationery
Luxury Electronic Gadgets

45
Country Coverage: 32 Markets
FR, DE, NL,
CH, ES, SE,
IT, TR, GB
PL, RO,
RU, UK
IN, CN, ID, HK,
MY, PH, SG,
KR, TW, TH, JP
AU
ZA, UAE
MX, AR,
BR
CA, US

Competitor Analysis Datagraphics
46
Strategic Analysis for Greater Insight
Global Briefings
Videocasts

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State of the Luxury Goods Market in 2014

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State of the Luxury Goods Market in 2014