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LOTTO AND STONEFLY, THE ROUTE FOR EXPORTS LEADS TO THE EAST AND AMERICA
Andrea Tomat is the guiding light behind two Italian companies which are brand leaders in the manufacture of shoes for sports and city wear. He is the President of the Lotto Sport Italia group one of the top Italian companies specializing in the production and distribution of sports footwear, clothing and accessories. At the same time he is at the head of Stonefly, the company he founded in 1993 with the aim of combining the performance of sports shoes with the comfort of traditional footwear. At a difficult time for the world economy we asked Tomat to explain if and how the group’s export strategy is changing and what counter-measures are planned in view of the expected weakening of demand in the coming year.
President Tomat, is internationalizing your production rather than concentrating on a strong export drive the consequence of the progressive enlargement of your sales markets, or is it the basis of your business model?
Our business activity is located in many markets: this is the logical consequence of a strategic choice to internationalize our production. Our positioning, in that way, must therefore be global. Our ambition is to sell our products in all the world markets, obviously varying our prices from country to country.
To serve so many markets around the world you have to be very close to your customers: is it truly essential to de-localize your production?
Absolutely. Our network consists of 55 production sites in ten different countries, some of them outside Europe. The network is controlled by a logistics structure which, from its nerve centre in Hong Kong, manages five principal offices around the world, four in Asia and one in Turkey. The network is responsible for production strategy, quality control and product sorting.
Where do you envisage the best opportunities being for market penetration in the near future?
We are convinced that the biggest future growth will be in the emerging economies. On the other hand, there is some concern in European markets in view of the fact that the business climate is expected to be difficult during 2009. Our perception is that growth and development will be tied to increasing demand in the Near and Middle East and in Latin America.
Lotto serves 80 different markets, from South America to Asia, including Korea and Japan. Stonefly focuses more on Europe. How did 2008 go on the international markets for the two different brands?
Ahead of the final results I can say that the projection for the end of 2008 was a turnover of 320 million by Lotto and 85 million by Stonefly. For Lotto 24% of the turnover was in Italy, its main market. The other European markets (France, Spain and Germany in that order) plus the Middle East, contributed 40%, while Asia and the Americas made up 26%. That’s the situation today. But the mix is going to change in the coming years: Asia and the Americas are going to become much more important. One can envisage that in three or four years’ time Europe, the Middle East and North Africa will account for 50-60% of our revenue, while our earnings from Asia and the Americas will increase to as much as 40-50%.
What future do you see for Stonefly in the short term?
Fifty per cent of our revenue comes from Italy and 25% from other European countries (Spain, Portugal, Turkey, France and Germany are the most important). Soon, however, the influence of China will also help our export quota outside Europe to increase. I foresee that that in three years’ time the non-European markets will account for 40% of our revenue, as opposed to the present 25%. In this context the agreement signed in China to open up 350 stores is important.
In conclusion, can you sum up the philosophy behind your market penetration strategy?
Our approach is to discover at the outset what is the most suitable distribution system for each market. For example, in China and Korea we operate with single-brand shops or zones. We are doing the same in Eastern Europe and certain South American countries. In the rest of Europe we prefer to put together sales teams with mixed commercial companies: in these markets multi-brand sales outlets predominate. In the countries of the Middle East, North Africa, Asia Minor and Central America we rely on local distributors. Finally, we also have recourse to production and distribution licenses, as in the case of Brazil, India, Indonesia and Malaysia. Indeed, it was in Malaysia in October 2008 that we signed our most recent agreement for the sale and distribution of Lotto brand products.