Investment

Luxury maker maintains foothold in China

By Chen Weihua (China Daily)
Updated: 2010-09-14 12:14

A woman passes a Montblanc billboard in Beijing. China became the company's largest market in 2008. Wu Changqing / for China Daily

NEW YORK - Lutz Bethge, CEO of the luxury goods company Montblanc, does not remember how many times he has visited China.

He has been there three times this year and he will go again in November for a promotional event in Beijing.

In 2008, China became Montblanc's largest market, succeeding the United States.

"What surprised me was how fast it came. I was always saying that China will overtake the US in 2010 or 2011," Bethge told China Daily on Friday, two days ahead of the global launch of the Montblanc John Lennon Edition pens.

Although the US market has been doing very well, Bethge believes China will continue to be its No 1 market in the future. "The US market will continue to grow, but the Chinese market offers more opportunities than the US market," he said, citing reports that 0.5 percent of the Chinese population of 1.3 billion can afford luxury products.

A report from the Chinese Academy of Social Sciences earlier this year shows that sales of luxury goods hit $9.4 billion in China last year, accounting for 27.5 percent of the world's total, surpassing the US and trailing only Japan. The report forecasts that by 2015, China will become the No 1 market for luxury goods, with annual sales of $14.6 billion.

Montblanc already has 98 stores in China, compared to 34 in the US. In the next five years, the company is expected to have 120-130 stores in China, Bethge said.

The Montblanc store on Shanghai's Nanjing Road is the largest of its 400 stores in the world, but Bethge said a larger one will be unveiled in downtown Beijing next year.

The company's largest investments this year, either in advertising or erecting stores, are in China. In some second-tier cities, smaller stores will be expanded in order to give customers a better chance of experiencing the brand.

Bethge cited the early arrival of its products in the Chinese market as a major reason for the good business. "It has to do with the fact that Montblanc was known in China relatively early. It is not just in stores in Shanghai and Beijing, but from Harbin in the north to Shenzhen in the south, where we have had stores since the mid-1990s," Bethge said. He would not disclose the company's exact figures for sales and profits in China, only saying that China is a very profitable market and that sales account for 10-20 percent of the company's total.

Of the Montblanc product line, watches and pens are the most popular with Chinese customers. But leather goods and jewelry are also catching up.

Bethge said the piracy of Montblanc has not taken away its business since most of its customers will not buy fake products. "But it's a little embarrassing when those vendors tout fake Montblanc goods to our customers outside our stores," he said.

While Bethge said piracy is a serious issue, he felt glad that the Chinese government has listed Montblanc as one of 10 luxury brands to be protected. "That helps us a lot in fighting piracy," said the German national, who joined Montblanc in 1990.

Bethge said that a pen commemorating a Chinese icon will hit the market two years later, but he declined to reveal details. "We want to be very careful so people don't think we are trying to create Chinese products because Chinese artists and designers are better in creating these products," he said. Last year, Montblanc launched a Beijing Opera Masks Edition writing instrument.

Bethge said part of the proceeds from the newly launched John Lennon Edition will be given to the John Lennon Educational Tour Bus, a nonprofit organization providing help to young people to compose, play and perform music. The rest of the proceeds will go to cultural projects all over the world, including China.

China Daily