Notepad or iPad?

We were big users of Moleskine notebooks at CRICKET. They were easy to fit into a pocket or computer bag and helped organise thinking by having all essential notes in one place. Paying £15 for an oiled cloth notebook seemed a bit steep but given that each one lasted well over a year that was only £1 a month – bargain! But then the iPad became part of the way we worked and it wasn’t long before people were using apps like Bamboo Paper and Noteshelf to take notes, project ideas on the fly onto VDUs and e-mail draft charts back to the office for turning into readable PowerPoint. It seemed that Moleskine might go the way of the Filofax.

So it was with a mix of surprise and shock that we saw that Moleskine is planning a high-priced IPO that could value the brand at up to €560 million ($722 million). According to commentator Zac Steward, Moleskine’s bankers are using a unique positioning and the high margins on paper products to justify a valuation between 22 and 29.1 times the company’s earnings last year. That’s higher than many established luxury brands like Prada, Burberry and luxury goods conglomerate Richemont. 

Maybe they aren’t living totally in La La Land. The most exquisite £200 Prada shirt often ships out of a factory somewhere in the East for c£10 a piece and that results in Prada having an operating margin around 26%. Moleskine’s operating margin was apparently over 40% last year which must mean that the average £12 notebook has an ex-factory of around 50 cents.

Steward questions whether Moleskine is primarily a stationery company selling paper products or, as their bankers suggest, the very opposite as this chart from the IPO prospectus shows…

 

 

They argue that Moleskine lives in a mind space that is beyond pure luxury. It’s not a dreary old lifestyle brand… it lives in that hallowed ground of a ‘luxury cultural lifestyle’ brand. It’s the notebook that Mariella Frostrup in a sexy dress at a party with Alain de Botton would have in her Prada handbag. It’s the notebook that Benedict Cumberbatch/Sherlock Holmes pulls out of his Oswald Boateng overcoat when even his ‘brain the size of a planet’ needs to jot something down. It has the provenance of Van Gogh and Picasso, Hemingway and Chatwin.

 

It’s a nice idea. Perhaps turning up to a client or business meeting with a Moleskine rather than a iPad or a souped up school exercise book says that extra something about your analog life. But is it really either / or? Cool and hi tech, cool and low tech - there's space for both. JS

It was 50 years ago today…

We are always wary of the ‘iconic’ word. Rarely is it used in the way as defined by the Oxford Dictionary or even in the spirit of its intended meaning.

 

For us it means a symbol or image that commands immediate recognition worldwide as the original. Authentic. Unmistakable – past and present.

 

Too often it is applied to a person, image or brand that is anything but iconic…. call us and we’ll share our gallery of ‘iconic brand’ mis-users.

 

However, 50 years ago today The Beatles released their first LP. The cover shot was snapped by the surrealist photographer Angus McBean in 5 minutes on the staircase of the then EMI HQ in Manchester Square.

 

It is one of the iconic images of the pop age.

 

The slightly less mop haired band mimicked their own image in a later Greatest Hits album cover and the Sex Pistols mimicked it again a couple of decades later.

 

But 50 years ago The Beatles did something that was to be their first iconic moment and created an image that has echoed down the years. JS

Words of the wise…

A colleague recently pointed me in the direction of the website for Berkshire Hathaway. He said ‘Who would have thought the 8th largest public company in the world, owned by the 3rd richest person would have a website that looked like this?’                                                   
Before you click – assuming you’re not a regular visitor – imagine what this corporate site might look like. Now click.

Surprised? We don’t think the site looks like it does by accident. The Sage of Omaha on our reckoning doesn’t leave much to chance. The site is as calculated a communication as the most lovingly crafted advertising campaign. Its tone of voice and structure says ‘we spend our shareholders’ money where it matters – recruiting the best managers, finding lost value and building equity. Why would we need to impress our shareholders with fancy graphics, roll over optimisation and glitzy photos?’

But if you want to see some serious crafting and writing talent just take a look at any of Warren Buffett's annual letters to shareholders. The one for 2012 is pretty much on par. Personal. Focussed. Folksy if you wish to read it that way – but that’s his individual style and part of the brand identity. Most of all, it’s a piece of powerful, persuasive writing that lets you believe that your investment dollars are in safe hands.

 

He starts with an apology and a paragraph of honesty and humility which neatly restates the mission statement and adds in a reminder of what they are good at:

 

Our relative performance, however, is almost certain to be better when the market is down or flat. In years when the market is particularly strong, expect us to fall short… we do better when the wind is in our face.

 

A brilliant demonstration of when less is more. JS

Understanding the Chinese consumers' desire to Trade Up and Stand Apart

We’ve been interrogating China a lot over the past few weeks…. looking at both how the West views it as an opportunity as well how the domestic Chinese market is evolving.

 

Looking in - there has been a lot of analysis and talk around China’s economic growth ‘rebound’ – alongside what looks like an over exaggeration of companies returning home from Asia, or re-landing manufacture back home or into cheaper Western manufacturing centres.

It’s probably a good thing that people seem to have walked away from viewing China as either the saviour of Asia or of the world, and while there is a lot of scepticism about the growth prospects for China, we don’t see any of the respected sources predicting a hard landing. For investors, the big talk is about growth and expansion potential in China’s Tier 3 and 4 cities. While not as obviously dynamic or ‘brand advanced’ as the Tier 1 and 2 cities, they still represent truly huge markets for both domestic and international brands. The skill is going to be choosing the right timing – ahead of the wave or riding it - and a willingness to deliver products truly appropriate to these culturally different regions.

From within - the Chinese consumer continues to rapidly evolve. Certainly the appetite for authentic luxury brands by the truly affluent shows no sign of abating – but with over one million multi $ millionaires in PRC, why would it? But the watchword is, as ever, authenticity. Brand owners like LVMH are putting their biggest bucks, best people and best ideas into China – and that’s the key to their continued success.

 

The emerging middle class – the Sugar Generation – are using their rapidly growing disposable income and with that becoming extremely brand and quality savvy. While they no doubt like to show off brand logos in ways that Western eyes may see as immature, they are far from naïve. Brands are not bought into at any price or without consumers first appreciating the story or culture of the brand. Much of their knowledge is informed by a blogosphere awash with brand commentary and insight – not a new phenomenon, but one the Chinese have grasped with a fervent enthusiasm; some fashion bloggers have 10m+ regular followers.

The opportunity and challenge for premium Western brands considering entry or looking to develop their offer is their ability to understand the Chinese consumers’ desire to ‘Trade Up and Stand Apart’. JS

A Perspective on China's Growth Rate

We were meeting one of our US based clients earlier this week and during a discussion on whether the Chinese economy had fallen behind the pace we used the following reference to scale the current speed of China’s growth…

"China creates a Greece in 12.5 weeks. Since 2010 China has created an India".

The source of the quote was Jim O'Neill, the Goldman Sachs economist who invented the BRIC acronym.

Given the state of the Greek economy it generated a few quick gags at the expense of the drachma but is still an astounding statistic. JS