"Successful “BaltikaGroup” re-branding strategy. "Mosaic" case in Lithuania".

Daina Daubarė

September, 2007

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Baltika today

Baltika Group is a rapidly growing fashion retailer in the Baltics and Eastern Europe• four retail concepts • 124 stores with shop floor space

of 23,011 m2 (June 2007)• retail coverage of six countries• vertically integrated business

model

The company aims to be the leading specialist fashion retailer in Central and Eastern Europe

The Group employs 1,900 people

Since 1997, it has been listed on OMX Tallinn Stock ExchangeBaltika’s retail markets

CEE region

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Some history

• 1928  “Gentleman” is established in Tallinn;1959  The company is restructured and named Baltika; 1988  The company starts to manufacture ladies’ clothes 1991  Baltika is privatised 1991  The first gentlemen’s clothes collection – Baltman; 1993  The first ladies’ clothes collection – Christine Collection (CHR) 1995  The Evermen collection is created 2002  Strategic changes are launched to make the company into a clothes retailing company 2002  Monton fashion brand is launched in five markets; 2006  The names of CHR and Evermen retail concepts are changed; the new name becomes Mosaic 2006  Baltika opens its 100th store 2006  Baltika acquires an Estonian well known fashion brand Ivo Nikkolo 

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↓ CUSTOMER ↓

Brand manufacturer

Label manufacturer

Product manufacturer (does not own label)

Subcontractor

Retail company(net profit margin 3-7%)

↑ ↑

“China”attacks

Vertical

(≥10%)

Retailer

Wholesale company(3-5%)

Production company(0-3%)

↑

Retailer makes the decision

Creating a brand -

expensive & complex

Heavy competition

Differentiation & speed counts

Vertical model in fashion business

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Vertically integrated business model: unique in the Baltic's

• Own production base (four factories): specialisation in men’s and women’s tailored suits, shirts, jackets, coats (ca 40% of sales)

• Worldwide purchasing (ca 60% of sales)

Retail: ca 80% of total sales Wholesale: ca 20% of total sales

• Distribution through wholesale to

department stores in the Baltics,

Finland and Eastern Russia

• Centralised brand-based management: product design, supply chain, logistics, etc.

• Efficient inventory control and sales information systems: monitoring and analysis on a daily basis

Sourcing

Centralised management

• A balanced portfolio of different brand store chains (Monton, Mosaic, Baltman and Ivo Nikkolo)

• Strong retail organisations in target markets

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Retail Brands• trendy and fashionable fast fashion brand for ladies and men

• store format 350…600 m2

• end 2008: 65-75 stores

• possible franchising

• stylish and high-quality professional and smart casual apparel for women,

men and children

• store format 200…350 m2

• end 2008: 65-75 stores

• enlargement of wholesale business

• stylish, classic and high-quality clothes for men

• store format 100…130 m2

• end 2008: ca 30 stores

• premium level fashion brand for women

• store format 130…170 m2

• end 2008: 10-15 stores

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Retail network

Baltika’s retail markets

*Preliminary data

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Sales division between retail concepts, 2006

4%

11%

33%

52%

Ivo Nikkolo & other

+56% yoy

+39% yoy

+31% yoy

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Why new name?

Main reasons: • For the brand development, one name for menswear and

womenswear was needed• The brand has become international and more quality, new name

should reflect that better

Also:• The name was complicated to pronaunciate and difficult to remember,

that is why in some countries Christine was used instead of CHR – it has been making our marketing activities more complicated and expensive

• CHR/Evermen was not a brand, just combination of menswear and womenswear label

• No sole rights in Latvia

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The Process of Choosing the New Name

• International competition

• A choice made between several hundreds of names

• Evaluation from different markets; feedback

• When comparing the logotypes of the names, we observed the values communicated by CHR/Evermen brand: warmth, naturalness, self-confidence, joy of life and reliability

• The name needed to have a good international sound while being easy to pronounce and remember, visually distinctive and able to communicate the brand’s values

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CHR/Evermen became…

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Baltika Lietuva

• 1993. First “Baltman” shop in Kaunas. • 1996. “Christine Collection” and “Respect” brands for ladies clothing in

“Baltman” shops;• 2002. Launched new fashion brand and retail chain “Monton”. • 2003. Launched new fashion brand and retail concept “CHR/Evermen”.• 2006. Re-branding of “CHR/Evermen” to “Mosaic”.• 2007. Launched new fashion brand and retail concept “Ivo Nikkolo”.

Baltika Lietuva 1993 2003 2004 2005 2006 2007FSales, mln.LT 0,47 20,33 27,62 34,97 46,57 63Number of shops 1 15 17 24 26 30

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Baltika Lietuva shops

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11

2

6Mosaic

Monton

Ivo Nikkolo

Baltman

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11

6

3 2Vilnius

Kaunas

Klaipėda

Šiauliai

Panevėžys

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Why Mosaic?

• Each item or object that we see has been pieced together from smaller pieces that connect with each other forming a whole entity.

• On an emotional and personal level, each human being is an individual comprised of different ingredients - character, thoughts, behavior, upbringing, preferences etc.

• Part of this individuality is clothing, which is an integral part of creating an impression. Clothing and the other components must harmonize to achieve equilibrium between outside and inside

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Mosaic target customer• Age 35 years, majority of buyers should be 30-40-year-old

• MC client: woman, man, a person with family (children) and encoded sense of loyalty and traditions;

• Occupation: middle level manager, specialists (incl. private and public sector, doctors, teachers, white collar workers etc);

• Mindset: stability, conservativeness, responsibility, respect for traditions, but still professionally and socially active and searching for harmony both at work and personal life; member of different professional and social organisations.

• Need: stylish clothing for feeling good at work and after 5 p.m.

• Important: style, quality and comfort

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USP, differentiation and values

• USP is built upon clients’ needs:– stylish clothing for work at a competitive price– targeted collection

• USP - contemporary stylish apparel for feeling good in the office and after 5 p.m.

• Keywords – style, comfort, quality

• Values:– Warm – Natural – Happy – Confident– Reliable

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Mosaic launch

• Objective: • Keep the current clients and attract new clients to the

stores

• Strategy: • 2006-1 transition period to connect CHR/Evermen to

Mosaic• 2006-2 new brand communication

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Communication Solutions for the transition period

• Idea

• Maintaining strong developmental linkage between the old and new names – clearly demonstrating that CHR/Evermen is going to be Mosaic

• Used:

• In retail outlets of the Baltika Group

• In media channels (depending on the country)

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Transition period communication in shops

• Wall behind the cash desk• Stickers on the window• Plastic bags• T-shirts for sales assistants • Catalogues• Additional paper labels on every garment

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Mosaic Shop During the Transition Period

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Plastic bags

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T-shirts

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Catalogue (examples of different pages)

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Additional label on products

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Transition period communication in media channels

• Prind advertisements• Outdoor• TV clip

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Mosaic marketing communication• Objective: to become a strong international brand in our own

targeted niche and with our own focus

• Very important: shop environment, marketing communication and customer service (staff training + set-based compatibility)

• The customer is more conservative -> lower speed of achieving desired results -> need for better targeted channels and stronger communication:

Image of styling brand – Mosaic will help you look great – advice for stylish wardrobe together with cosmetics, perfume etc:

• Style Editor – styling advice through one person, stylist• Testimonials of the clients (famous and ordinary) – local

opinion leadersLocal strong co-operation projects (communities, forums,

www, events) through local opinion leaders and by word of mouth

• Marketing communication on different levels – brand, market, city.

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“Mosaic” development

Baltika Lietuva 2005 2006 Growth 2007 I H Growth LFL

Sales, mln.LT 9,2 14,8 61% 8,6 34%Number of shops 9 9 0 11 2

Baltika Group 2005 2006 Growth 2007 I H Growth LFLSales, mln.LT 33,9 53,4 57% 31,1 32%Number of shops 32 45 13 51 6

Thank you!