Bvlgari wants to be a shining star

As one of the leading luxury brands, the Bvlgari Group is looking to become an organisation that is more dynamic, flexible and cost efficient.

The company's plans of becoming more streamlined follows good financial results, as its last three-year plan ended in 2004 with a 35 per cent increase in sales, a 60 per cent profit increase after taxes and a debt decrease from about 300 million euros (Dh1.329 billion) at 2001 to almost zero in 2004.

Although the Bvlgari group admits that the market environment is not similar to that of the 1990's, where Bvlgari was growing at a 30 per cent yearly rate, the double digit growth achieved in 2004 is seen as sustainable.

In fact, the group's turnover for the first quarter of this year increased by 12.8 per cent to 179.4 million Euros (Dh795 million), while net profit went up 9.1 per cent to reach 14.7 million euros (Dh65.1 million), compared to the first quarter results of 2004.

Gulf News sat down with Bvlgari Group CEO, Francesco Trapani to talk about the organisation's goals for the future of the luxury industry, and plans for the Middle East market.

Gulf News: What are the long term plans for the Bvlgari Group?
Francesco Trapani: The long term objective that we are pursuing is to make Bvlgari the number one luxury brand in the luxury arena. To do so, we are working on all our product categories in which we are present today.

We are already a relevant player in the jewellery, watches and perfume businesses, where we have worked on developing in the last years with a lot of commitment.

In these same categories, we have also launched a lot of new products. The objective now is to become a relevant player also in accessories.

We are already present in this sector of the business, because we produce and sell leather goods, silk, eye wear and silver products, but these categories for us are still a small business and our objective for us is to become a relevant player in these categories as well.

If you think about Bvlgari today, it is a company that is under a lot of pressure to develop new products in all these categories.

We are also working on developing to boost our distribution because, although we already have a very powerful distribution network base around the world, we still have room for improvement.

For example, we can relocate or expand some of the Bvlgari stores, since today we need more space to display our products.

So on the one hand, we are working on the products to have a more effective portfolio and on the other hand, we are working on distribution to have a more powerful network.

Another thing we are working on is communication, because this business needs a lot of investment in talking to our clients and we are also concentrating on organisation, because we have to develop, distribute and sell very different products from a network of stores in more than one hundred countries.

GN: What is your view on the balance between diversification of Bvlgari Group and being cautious not to spread the brand too thin?
FT: Diversification is a key element of the growth strategy of a luxury company today. If you look at the market there are very few examples of non-diversified luxury brands.

In fact the only one I can remember is Rolex, which is a big luxury brand that sells only watches. All other luxury brands are very diversified.

There is really no magic rule that can be applied to all the companies about how much you can stretch your brand without diluting it.

This is an answer that should be given case by case. So, it depends on which company you are talking about and the recent history of this company.

GN: So if you take the case of Bvlgari Group, how does this theory apply to its diversification plans?
FT: In the 1990s, the company had done a lot in terms of diversification, because at that time the company was non-diversified. But today, our focus is on consolidating the position within each product category.

So, for example, today we are not thinking of going into fashion but we are reinforcing the high jewellery collection, or we are improving our portfolio in the watches category.

I think we have the right diversification in terms of product portfolio, so now the focus is on consolidating our position and working on improving everything, including the quality of the product, distribution and communication.

GN: Bvlgari Group has also launched its own hotel mid last year in Milan; is that part of the future diversification plans you were talking about?
FT: The hotel business is the last diversification that was decided by the company in the 1990s. The plan is to open a total of four to six hotels; a couple of them would be resorts, and the rest would be city hotels.

We launched our hotel, as we believe that we can get a good return on our investment. But the main reason is that we think we can nourish the image of the company in the specific market in which we opened this hotel.

Today, we have one hotel that is open and the second one will be open ten months from now in Bali.

The Milan hotel has been conceived, because we wanted to do something unique for the city that will not only serve the client of the hotel but also the local community.

Today, the hotel has become the hot place in town for the Milanese. It is the place to go for a prestigious dinner, lunch or a business meeting.

Also, the Bvlgari brand is exposed now to the Milanese community not only through the Bvlgari stores and the multi-brand stores that are selling our merchandise, or through the typical marketing activities that Bvlgari and all the other brands are doing in Milan, but also through this public relations machine that we have created that is expanding the exposure of our brand in the local community.

It is actually giving the brand a much higher exposure than before, which is greater than what competitors can achieve through other ways of exposure.

So the hotel has nourished the image of Bvlgari and our objective is to open other hotels in Paris, London, New York, Tokyo and Hong Kong, which are places with a big market for luxury businesses.

GN: What do you make of the performance of the global luxury market?
FT: The luxury business was growing very rapidly in the 1990s, but with the events of September 11 everything changed dramatically.

The market became very difficult for a couple of years, then the situation started to become more positive by 2004 and is continuing to rebound.

It is still a market that's growing and is very interesting, because today Europe's market is flat, because of its difficult economic environment, while the American, Asian, Middle Eastern and the Latin American markets are improving.

On a global basis, the luxury market is still growing,