Knowing that the Italian sports brand KAPPA (back-to-back) partner in China, Li Ning, officially announced yesterday that it would "don't fall in love."
On July 4, Li Ning Co., Ltd. announced that the company will sell 80% of Beijing Dongxiang Sports Development Co., Ltd.'s shares and also reached an agreement with another French sports brand, AIGLE, to form a joint venture company with sole responsibility for AIGLE brand products. Production, promotion and sales in Mainland China.
Previously, Beijing Dongfeng has been responsible for the manufacture and distribution of KAPPA products in the Mainland, but its exclusive operating rights will expire at the end of 2007. Founded in 2002, the company is funded and established by Shanghai Li Ning Sports Goods Co., Ltd. It is the exclusive agency company of Italian famous sports brand KAPPA in Mainland China and Macau.
Industry sources pointed out that the Li Ning Company's sale of its equity in Beijing, also means that Li Ning Company, which has numerous sports apparel sales channels in the Chinese mainland market, will no longer be responsible for operating the KAPPA brand in mainland China. Moreover, because of the overlap of many products between the two, in the future, they will become partners in mainland China.
Li Ning Company stated that the KAPPA brand and other brands of Li Ning Company are operated independently and the stores are not shared. In the future, Beijing Trend will continue to be responsible for the operation of KAPPA until its expiration.
The inability to renew the BasicNet Group to which KAPPA belongs is an important factor in Li Ningâ€™s exit. Li Ning Company acknowledged in the announcement that the KAPPA concession agreement only lasted for 5 years. In the long run, Li Ning Company could not share the value-added effect of investing in KAPPA. The company hopes to renew its contract with BasicNet when it expires in 2007 and extend the concession time, but it has not been adopted by the BasicNet Group and has withdrawn.
Li Ning, who has withdrawn from KAPPA, has already invested in the operation of another sports brand.
According to the announcement, Li Ning Co., Ltd. and AIGLE International will set up a joint venture, each holding 50% of the shares. The joint venture will establish a wholly foreign-owned enterprise in China and be exclusively authorized to produce, market and sell AIGLE products in China.
AIGLE is a famous outdoor leisure activity and extreme sports brand in France. It was listed on the Paris stock market in 1994. AIGLE officially entered the Chinese market in 1997. And it maintains a 50% annual sales growth rate in mainland China.
This is exactly what Li Ning Company values. An insider of Li Ning Company told the â€œDaily Economic Newsâ€ that Li Ning abandoned KAPPA and switched to AIGLE. One important reason is that AIGLE is an outdoor brand, and Li Ningâ€™s own product line is rarely overlapped, and with the rise of Chinaâ€™s outdoor sports. Li Ning Company is very optimistic about the future earnings of AIGLE.
The source also pointed out that the joint venture company will have the 50-year franchise to produce and promote the AIGLE brand in China, which is the longest period of franchise operation that can be enjoyed by Li Ning and KAPPA.
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