46 of 2018

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Newsletter No. 46                                                          30 November 2018

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Cape Wools SA strikes up a conversation with SA Designers

SA Fashion Handbook

In an effort to connect and expose SA designers to the remarkable South African Merino Wool fiber, Cape Wool SA has once again partnered with South African fashion week (SAFW).

Now in its second year, the 2018 Cape Wools SAFW Designer Challenge prize goes to Woman’s wear designers Carina Louw and Natasha Jaume from Erre and Menswear designer Carlo Gibson of Klipa – and each brand has an exclusive opportunity to showcase their upcoming Winter and Summer collections at SA Fashion Week.

“The wool industry has experienced the benefit of hosting this exciting designer challenge and intends to continue its efforts to expose designers to Merino base layer clothing as it is one of the fastest growing segments within the market, says Louis de Beer, CEO of Cape Wools SA.

And this is due to its exceptional benefits such as breathability, comfort, soft to the touch, easy care and antimicrobial properties when worn next to your skin.

“Collaboration with the Wool Industry on this project is important, it stimulates interest and disseminates knowledge which assists in developing a vibrant creative fashion design industry for South Africa,” says Lucilla Booyzen, founder of SAFW.

More about Erre…

The Erre journey started with the desire to develop a brand that caters for women looking for quality wardrobes. Officially launching in Autumn/Winter 2014, at South African Fashion Week, Erre’s vision is to develop a “new kind of power-dressing for a new kind of woman”. The combined skills of Natasha’s in-depth understanding of bridal and eveningwear and Carina’s experience in tailoring and menswear, makes them a formidable design team who consider Princess Charlene of Monaco a client.

More about Klipa…

Carlo Gibson is no stranger to the art of craft making. Klipa focuses on the detailed craftsmanship, young-spirited street style, high-quality urban design and easy-to-wear silhouettes. The name Klipa is derived from the South African slang word, meaning “a hundred” in monetary terms. It speaks true to the fundamental principle the brand prides itself in, which is ‘100% homegrown’. A truly African contemporary clothing brand.

Why you should consider buying wool clothing..

Merino wool base layers are designed to be worn next to your skin. They help regulate your body temperature and keep you comfortable throughout the day.The microscopic scales on wool fibres cause water to roll off, making it an effective water-repellent material. Another well-known fact is that wool doesn’t burn, and while not completely fire-proof, it will not sustain a flame or flare up when exposed to fire. As it doesn’t melt, there’s no risk of fabric sticking to the skin either.

Why you should consider designing and making clothes with wool..

Merino wool is the perfect example of brilliant design by nature with its breathable attributes, stylish look, superior drape, long lasting durability, timeless aesthetic appeal and 100% biodegradability. It’s ideal for making a wide range of apparel and is also instrumental in slowing down fast fashion as it breaks down quickly unlike its manmade counterparts. You can’t find a greener material than wool. It’s naturally grown with minimal use of pesticides and doesn’t require chemical processes to manufacture.

Did you know ….

South Africa has a vast rich history of sheep and wool farming going back 220 years. This legacy has created woolgrowers with a keen appreciation of animal and environmental care and the result is an industry that has consistently generated a high quality, environmentally sound product for International markets with more than 90% of the wool exported.

How RMB Ventures helped SA retailer Studio 88 reach 500 stores

Interviewed by Gareth van Zyl

RMB Ventures’ Dwight Snyman and Studio 88 Chair Laurence Wernars have known each other for many years. So, when Laurence told Dwight on the golf course about a new venture of his dubbed Studio 88, it became the very beginning of a new partnership that would see the rise of a major athleisure retailer in South Africa. Just recently, Studio 88 opened its 500th store, with more planned in future. And RMB Ventures, as an equity partner, has played a key role in the rise of Studio 88.

It’s a pleasure to welcome to the podcast Dwight Snyman, Senior Principal from the RMB Ventures private equity practice, and Laurence Wernars, who is the Chairman of the Studio 88 Group of Companies.

Before we get into the partnership that RMB Ventures has had with Studio 88 for a few years now, Laurence, can you first tell me about the background of Studio 88? How did it start and what does it focus on, particularly when it comes to emerging markets?

Studio 88 was formed in 2001 when we opened our first store in the Small Street Mall in Johannesburg’s CBD. We were obviously restricted to capital and therefore only opened a few stores every couple of months. We grew the company from one store to about 130 stores in 2012. Then we got together with RMB Ventures. I’ve known Dwight Snyman from a previous transaction and that was the introduction to RMB Ventures in 2012.

Laurence, a key milestone for you is that you’ve recently opened your 500th store. Can you tell us more about your growth story?

It’s obviously a milestone in anybody’s life, especially in retail with the way it is in the market at the moment. We’ve just opened our 500th store in Mamelodi. During the first couple of years, as I said earlier, we needed a greater capital injection as we didn’t grow as fast as we would’ve liked to. From 2012, when we had 130 stores, RMB Ventures joined us and put some structure to a bunch of young entrepreneurs to grow the business from 130 to 500.

We’ve been growing at approximately 30 to 50 stores every year. It’s been self-funded. Thank goodness that we haven’t had too much gearing and that RMB Ventures have supported us in this as well, because in retail, at the moment, if you have too much gearing – I don’t have to tell you, there’s been a couple of bloody noses.

Dwight, RMB Ventures came into the picture with Studio 88 in 2012, when you bought out one of the original founders. What did RMB Ventures, at that stage, see in Studio 88 and what is the nature of your stake in the business?

From left Dwight Snyman, senior principal, RMB Ventures and Laurence Wernars, chairman, Studio 88 group of companies

The genesis to the transaction really started some 20 years ago when Laurence and I did a private equity transaction for his previous business. So, it really started there. We’ve known each other for many years. The nice anecdote is we were playing golf in 2006 when it was announced that SA was going to win the 2010 World Cup. I remember we were walking along the fairway and Laurence intimated to me that this was going to be a watershed moment for his new business (the one that he started in 2001, namely Studio 88) in terms of an awareness around brands, international brands, and athleisure as a product then.

I approached Laurence initially in 2010, and we spent about 18 to 24 months to get a congruence of thinking about how we would take the business forward. We also discussed his rationale for onboarding a private equity partner, what his expectations were and what ours were. Since that initial discussion, it became clear that we were to back what we believed to be the best retail team in the sector. These are guys with a proven track-record, guys who understood their market, their customers and consumers, and guys who really thought through and developed a very unique value proposition in terms of their business. You can chat to Laurence a little bit about what that is. But from an investor point of view, it’s around a unique location strategy. It’s around operational excellence. It’s around proximity to your customers. In other words, saying to your customers, you don’t have to travel long distances and pay exorbitant prices for international brands. We’ll put our stores near you. We’ll sell it for cash, and we’ll sell it at a significant discount to the credit chains. So, we’ve always liked the play and that’s gained traction over the six years that we’ve been together.

Dwight, let’s just get back to the partnership journey with Studio 88. Has it just involved equity, or has it been a lot more than that?

From the outset, Laurence and his team and the RMB Ventures team sat down and came to the realisation that what we were investing in was basically a growth play. So, we never sought to introduce any leverage into the business. As Laurence has alluded to already, retail and leverage are allergic to each other because there’s a lot of inherent leverage on a retail company’s balance sheet by virtue of the leases.

So, yes, it was an equity participation. We bought a high 30% stake which equated to a significant influence in minority shareholding, and we structured that simple equity as ordinary equity. We then aligned our interests with the management team and with the founder of the business absolutely identically.

Our philosophy is one of: ‘we must all go to the weddings, but we must also all go to the funerals.’ We can’t pick and choose. That alignment of interest and the relationship and the trust that exists has seen us prosper as partners over the last six years. When I’m quizzed about it, I always say that one of the marks of success in relationships like this one is that no one has ever had to put their hand in the drawer and pull out the shareholders’ agreement or refer to this clause or that clause. It’s just not that kind of relationship. It’s about like-minded people, with cognitive thinking involved. They look after the operations and we help them with capital allocations and strategic decision making. We both chip in and hopefully the pie grows, which it has.

Laurence, what has the partnership with RMB Ventures meant for you and for your business, and the way that things have panned out and developed?

We had a goal when we started our business. Our business was founded on four pillars, which were fashion first, exclusivity, price and a shopping environment. Obviously, we could take that to a certain point, but thereafter we needed a formal structure in the company. We needed vision and help with landlords. RMB Ventures brought in so much to the company from that point of view to help us with the restructuring of our leases with the landlords. Being partners of ours, they’ve had to negotiate with their own partners in FNB etc. to get us better rates from the banking world. The professionalism that they brought to the business and the experience that they have in other businesses has helped our business tremendously. If it weren’t for them, I don’t think we would be talking today about our 500th store.

Dwight, in terms of your involvement with Studio 88, is it a good illustration of RMB Ventures in terms of the general approach that your company takes towards other partnerships as well?

Agreed. Our orientation is longer-term, and I think longer-term than many other first-year private equity players because we are not beholden to a range of investors in a fund when the time arrives. So, we’ve been in a partnership with Studio 88 for six years. We get a call, to be frank, two to four times a year from any number of interested parties around, ‘does RMB Ventures wish to exit and is the business for sale?’. These discussions have not gone anywhere because it’s a happy association. We’re six years into it. So, quite frankly, why not another six years? But as and when the time comes there will be a conversation. I think it speaks to the longer-term thinking and orientation that a strategic shareholder or non-operation strategic shareholder brings to bear.

Just to also supplement what Laurence said around the partnership between the operational management side, and the private equity partner being RMB Ventures: I think if you look through the corporate landscape, there are many disasters and catastrophes that often occur in the listed space. Those occur often when there’s a poor allocation of capital and those decisions are being driven by people running businesses,  operators. These people often know how to run businesses, but they don’t invest money professionally. This is where things could potentially go wrong.

The Studio 88 and RMB Ventures partnership is one where the management team are left to run the business, to pick sites, pick products and roll out and drive operational excellence. Anything of a longer-term or a strategic nature such as the allocation of capital, they defer to their partners at RMB Ventures. After all, we make investment decisions for a living. I think this split has really served us very well. You could only have that split and prosper collectively if there’s absolute trust in each other’s respective abilities. We don’t second guess when Laurence and his team roll out 50 stores. When there’s an M&A opportunity and RMB Ventures suggests this is not something that we should chase or pursue, we would have a brief discussion and then move on.

Finally, how do you see this partnership developing into the future? Laurence, maybe you can begin first and then Dwight after that.

Laurence: Obviously, we’ve reached a milestone of 500 stores and we haven’t stopped growing and we continue growing every year as we open in excess of 50 stores a year. I think we’ve got a lot of runway for stores in SA, and we’ve got a lot of areas that we haven’t tapped into yet. While we are currently in Africa, there are certain areas in Africa that we haven’t ventured into yet. So, I think 800 stores ultimately may be significant to Studio 88. It’s a number that’s synonymous to me, but yes, I think we’ve got a bright future ahead – 800 to 900 stores.

If you look at our business starting from day one, the people who have been involved in the business were non-partners, my driver, my salesmen – we had a thing about improving oneself in the business affairs. For example, people who were salesmen have now become managers, and have become regional managers, or general managers in our organisation. We don’t necessarily go and headhunt other people from other organisations into our organisation. The people who work for us are like family. At times we do lack a few skills here and there, but that’s where RMB Ventures come to the fore.

The fundamental thing about our business is that we’ve taken people with no qualifications and uplifted and empowered them to the point where they have become managers in the organisation. Humble beginnings, but these people are still with us today. Even though I have a degree, I’m standing behind the counter of a Studio 88 store every day.

Dwight: Laurence is modest. This business currently employs, at its peak, close to 4 000 people. Those are 4 000 jobs that didn’t exist 15 or 16 years ago so. I think that is a testimony to what economic growth is and what entrepreneurship can bring to our country and society at large.

Fundamental to the success of the partnership we’ve chatted about is one that sees the private equity house, RMB Ventures, respecting the culture in the organisation. Respecting its entrepreneurial rules. Yes, we bring to bear, and request, and require corporate governance and elevated levels, etc. But if you start tampering with the underlying DNA of a business-like Studio 88 you are likely to make many people unhappy. If you try to over corporatise or over-formalise, and you start tampering with the culture of a business you can only upset the applecart and you simply won’t prosper.

Needless to say, our four board meetings a year are generally light-hearted affairs, and they always end with a very happy lunch. The journey has been a happy and a prosperous one, and a profitable one so far. We see no reason for that to change.

The opening of Studio 88’s 500th store is a testament to management’s ability and operational expertise. This has been without enormous macro tailwinds. The country is going through tough macroeconomic times. Maybe with a little bit of a rose-tinted lens on, a change in the economic environment I would like to challenge my executive chairman, Laurence, and say to him that 800 would be shooting a bit too low.

Gentlemen, thank you so much for taking the time to chat with me. It’s been fascinating finding out more about your partnership and I wish you the best in the future. BizNews

John Craig opens new stores in Gauteng

By Thobile Mizibuko

Giant menswear brand, John Craig recently opened two stores in Gauteng, Centurion Mall and Mall of the South.

The opening of the stores also marks as the launch of their new collection where Muvhango actor Gabriel Temudzani and celebrated comedian Dimpie Dimpopo, are the ambassadors for the brand.

For this season, the brand is once again reinvigorating its latest range, incorporating fresh and clean elements for summer that are noticeable yet affordable to reach new, smart and modern men.

The summer 2019 collection takes another turn, moving towards more casual wear that is worn by the youth without outcasting the mature market.

“These bold moves have led to perhaps one of the most successful turnaround strategies implemented in a retail environment in recent times, as John Craig’s exciting new product range and effective marketing plan has seen the company boost sales and get back on the growth path.

“We needed complete alignment between our product, marketing and our sales force. We enhanced our stores and changed our imagery. We’ve introduced new offerings, and by fixing all of that we have had the confidence to open all these new stores,” says Managing Director, Lily Moreira.

It focuses on the dapper gentleman who likes to maintain an air of professionalism and instinctively accessorise by adding finishing touches like caps, sunglasses and cross-body carriers to the season’s cyclical fashion trend, reminiscent of the ’80s and ’90s.

John Craig managed to introduce six new stores in just three months and after its seven-decade-long drive of success, the brand now has 106 stores nationwide. IOL News

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Did you know……..

Walter Hunt, a man from America, invented the safety pin back in 1849.

Children wore the same styles as adults up until the 1500’s, when new trends appeared specifically for children.

In the Western world, skirts and dresses are mainly reserved for women, but in other areas of the world, both sexes wear them equally as often

 

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