Lafuma S.A.

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Lafuma S.A.

B.P. 60
26140 Anneyron
France
Telephone: ( + 33) 4 75 31 31 31
Fax: ( + 33)4 75 31 57 26
Web site: http://www.lafuma.fr

Public Company
Incorporated: 1930
Employees: 1,232
Sales: EUR 132.3 million ($113.7 million) (2000)
Stock Exchanges: Euronext Paris
Ticker Symbol: LAF
NAIC: 339920 Sporting and Athletic Goods Manufacturing

Lafuma S.A. is one of the world’s top ten manufacturers of outdoor-oriented clothing, shoes, and accessories, including backpacks, sleeping bags, tents and other camping paraphernalia, and equipment for rock climbers, mountain climbers, and the like. Headed by Philippe Joffard, grandson of one of the company’s founders, Lafuma has built a strong portfolio of brands, led by flagship retail consumer-oriented brand Lafuma. In 1999, the company reorganized its brand operations around three core areas: Mass Market, featuring the Lafuma brand; Technical, including Millet, Rivory, and One Sport; and Hunting/Fishing, featuring the boots and clothing of Le Chameau and La Dunoise. Well known in its European home market—the company is the leading producer of backpacks and camping equipment in Europe and in France, number two leading manufacturer of hiking and mountain climbing clothing, and the second largest manufacturer of specialized boots—Lafuma is looking to expand into the United States, where the company’s competition includes such industry heavyweights as Timberland and Columbia. Lafuma also has targeted Japan and other Asian markets for its turn of the century growth. Since the late 1990s the company has made strong progress toward the internationalization of its revenues. In 2000, foreign sales represented nearly half of the company’s total sales of more than EUR 132 million. Lafuma also has branched out into retail, opening its first store in Hong Kong and three more stores in France.

Backpack Innovators in the 1930s

The Lafuma brothers, Victor, Alfred, and Gabriel, started up a business manufacturing canvas bags in 1930 in Anneyron, in the Drome region of France. Among the Lafuma brothers’ products were backpacks, and it was this category that was to provide the company with its initial success. In 1936, Lafuma created the first backpack with a metal frame. The invention of this product coincided with a new social innovation—the French government had enacted legislation providing for paid holidays. Camping quickly became a favorite holiday among French families. Lafuma’s backpacks also were quickly adopted by the French military, and the French military services remained one of Lafuma’s principal clients into the 1950s.

After the military ended its orders for backpacks, Lafuma was forced to look elsewhere to boost its sales. The company expanded beyond its backpacks to manufacture tents, camping beds, and other camping equipment, remaining a principal supplier of these products to its French market. The booming French economy, the implantation of the automobile, and the appearance of an entirely new leisure activity in postwar France provided Lafuma with new generations of camping and hiking enthusiasts in the 1950s and 1960s.

The Lafuma brothers had either died or retired by the beginning of the 1970s, leaving their company’s direction to others, although Lafuma was still wholly owned by their three families. Despite branching out into other products, Lafuma’s core product remained its backpack, which itself remained more or less unchanged from its original design. Yet the company’s competitors had been steadily developing the market for backpacks, introducing new designs, technologies, and materials. The lack of new innovation in the small, family-owned company’s backpack design nearly led to Lafuma’s disappearance. By the early 1980s, the company’s backpacks had been outclassed by its competitors and the company was on the verge of bankruptcy.

Yet Lafuma was rescued from oblivion in 1984, when Philippe Joffard, grandson of founding brother Gabriel Lafuma—and holder of one-third of the company’s shares—agreed to take over the direction of the company. Joffard, who had been working for a noted management consultant firm in Paris and was then just 29 years old, began his new career by filing for bankruptcy.

Joffard’s plan for rescuing the company included cutting out 84 of the company’s 450 employees, which earned the company a week-long strike, during which Lafuma’s workers occupied its headquarters. The two sides ended up agreeing on an innovative compromise, when workers agreed to accept a 35-hour work week averaged across an entire year and thus adaptable to peak production periods.

With this human relations problem settled, Joffard turned to transforming the company itself. Through the mid-1980s, Joffard recreated Lafuma’s in-house culture, adding a new design department as well as marketing and especially market research personnel to spark a new era of innovation. The company adopted new and lighter-weight materials to a modernized range of backpack designs, taking into account changes in the marketplace. Lafuma also sought to develop new product categories, striking gold with its development of a new breed of school bag for France’s student population, introduced in 1985. Adding padded straps and using lightweight materials and youth-oriented designs, as well as technical innovations such as reflective strips, the company’s satchel-like designs quickly captured a leading share of that growing market. By the 1990s, buying a new school bag had become an essential part of the country’s yearly back-to-school ritual, and Lafuma’s ten percent market share gave it sales of some 250,000 bags per year in France alone.

Lafuma again extended its product range in 1986, when it brought its technical expertise to bear on related markets, creating a line of sleeping bags and tents. To support this new operation, the company opened a new subsidiary, Context, in Tunisia, marking the first time Lafuma had moved beyond France for its production.

Joffard also recognized that, to build the company into an international competitor, Lafuma needed to expand its operations. Rather than taking the family-owned company public, Joffard rallied most of the family of shareholders and convinced them to open up its capital to outsiders for the first time. This took place in 1987 when the company sold shares to Axa and Siparex.

Building the Outdoor Market in the 1990s

Lafuma was beginning to benefit from a growing new trend in the late 1980s that was to result in the creation of an entirely new retail category in the 1990s. The so-called Outdoor market developed around the rising numbers of hiking, rock climbing, mountaineering, and other outdoor enthusiasts. With more and more people taking to the hills in their leisure time, demand for Lafuma’s backpacks, which were steadily regaining their reputation for innovation and quality, was once again taking off. The company extended its backpack and outdoor products operations with the acquisition of rival Pamir, in 1987. This was to be the first of a number of highly targeted acquisitions made by the company in the 1990s.

The majority of Lafuma’s sales continued to come from France, while it steadily gained a leading share of the European market as well. In 1988, the company made the first steps to broaden its global reach, opening a commercial subsidiary in the United States. The following year, the company opened a sales office in Hong Kong as well. By 1990, Lafuma had topped FFr 200 million in annual sales. In that year, the company opened its capital again; by the time of its public offering in 1997, the Lafuma family reduced shareholding position to slightly less than 50 percent.

In 1992, Lafuma made a new acquisition, taking it into an entirely new category. In that year, the company added Mac, a specialist in technical clothing for the “adventure sports” market. This move gave Lafuma an important entry into the lofty realms of the mountain climbing circuit, which in turn was to improve the company’s image among consumers as a maker of “serious” outdoor gear. At the same time, Lafuma boosted its manufacturing capacity with a new subsidiary in Hungary. This subsidiary opened a production facility for the company’s high-end backpack and Gore-Tex clothing designs. Lafuma had been among the first to adapt the Gore-Tex material to its clothing products.

When the company discovered that consumers also were convinced that Lafuma manufactured its own line of sportswear—which until the early 1990s, it did not—the company decided to launch itself into this category as well. The Lafuma brand outdoor clothing line was introduced in 1993.

As the Lafuma brand name came to be more and more closely associated with outdoor activities, the company formed a joint venture company, Lafprom, charged with developing licensed products using the Lafuma brand. In this way, Lafuma was able to associate its name with a wider variety of related products, without having to invest its own capital in product development and manufacturing.

An Outdoor Leader for the 21st Century

In just a decade, Joffard had succeeded in transforming the company from a failing family-owned company into a fast-growing global contender for a leadership spot in the booming global Outdoor market. The company’s product development had become one of its strongest arms, receiving up to three percent of revenues to add to and constantly redevelop and redesign its product range, enabling the company to take the forefront of technical developments in its industry. By 1994, Lafuma sought to boost its expansion further by seeking a listing on the Paris stock exchange.

Company Perspectives:

A GROWTH STRATEGY: Based on the probability of a favourable market and a group comprising one of the most attractive brands and product offering in Europe, our development plan gives priority to 2 areas: 1. An organisation in 3 sectors representing a complete, complementary and synergetic offer. 2. Organic growth by increasing the product offering and international operations.

Yet the company placed the listing on hold to digest two important new acquisitions made in 1995. The first of these was the purchase of Millet, in February 1995 (the company was to buy out the Millet license holder in Hong Kong in 2000, giving it full control of its new subsidiary). Millet, a manufacturer of high-end backpacks, helped expand Lafuma’s range and provide a key element in the company’s new multibrand strategy for the second half of the 1990s. Three months later, in May 1995, the company announced its acquisition of bootmaker Le Chameau, giving the company a new brand and two new product categories: boots for the outdoor enthusiasts, such as the hunting and fishing markets, and boots for professional use. These two acquisitions helped boost the company’s annual sales to nearly FFr 460 million for 1995–96, representing a jump of some 30 percent in one year. More significant, Lafuma’s profits also were growing, with profits of FFr 14.3 million representing a gain of nearly 57 percent over the previous year.

Lafuma succeeded in merging the Millet and Le Chameau acquisitions by 1997, enabling it to make its public offering at last, listing on the Paris Bourse’s secondary market in May of that year. The company’s insistence on a public listing was based on its increasing interest in expanding its international activity. As Joffard told La Tribune: “A quoted company definitely has a more serious image in the American and Asian markets.” The company turned once again to the acquisition trail, now buying up Rivory & Joanny, a specialist in rope manufacture for climbing apparatus. Despite the fact that this acquisition made Lafuma the market leader of the category, the company sold off its newest acquisition after little more than a year as it redeveloped its growth strategy on finished products.

That strategy, now firmly focused on developing Lafuma as a multibranded Outdoor products company, brought a new acquisition and line of products into Lafuma’s expanding portfolio. In 1998, the company made new acquisitions, including Charles Dubourg and its hunting clothing line, the La Dunoise brand of hunting and fishing clothing and accessories, and One Sport, a manufacturer of boots and shoes and other products for rock and cliff climbing.

In 1999, Lafuma restructured its operation around three primary divisions while rebranding its product range to its major brands. The first, and largest, revenue generator was its Mass Market division, represented by its Lafuma brand. The second division was its Technical division, led by the Millet brand name and including its One Sport range. The third division was its Hunting/Fishing division, which was regrouped under the Le Chameau brand name.

By the end of 1999, Lafuma was boosting its new brand strategy with the addition of a new line of Lafuma shoes. The company also opened its first retail store in Hong Kong. The success of that opening led the company to open three new Lafuma stores in France, with plans to expand the retail chain worldwide. The company’s international growth became its primary focus at the turn of the century, as Lafuma, which by then ranked among the world’s top seven Outdoor specialists, sought to deepen its penetration in the U.S. and Asian markets. The acquisition of Millet Asia in 2000, which completed the company’s control of that brand name (which had long been a top seller to the Japanese market), gave it a still stronger springboard from which to build its brand name in that and other Asian countries. Philippe Joffard, who himself had developed a passion for mountaineering after taking over the company’s direction, expected to lead Lafuma to new heights in the 21st century.

Principal Subsidiaries

Context (Tunisia); Lafuma Hungary; Lafuma Hong Kong; LWA (Belgium); Lafuma America; Lafuma GmbH (Germany); Lafuma BV (Netherlands); Lafuma UK; LAFPROM (49%); PAMIR; Millet One Sport; Rivory & Joanny; Cousin Rivory SNC; Le Chameau; Caoutchoutiere des Zenatas (Morocco).

Principal Competitors

Aigle SA; Berghaus; Columbia Sportswear Company; Decathlon SA; Helly-Hansen; K2; North Face; Lost Arrow; Orvis Company; Patagonia Inc.; Peak Performance; Pentland Group Ltd.; REI; Schieffel; Timberland; VF Corporation.