Burberry investment to cash in on Japan growth

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WHEN British fashion icon Burberry announced in November that it would plough at least £50m in a new state-of-the-art factory in Leeds, the investment in itself didn’t come as a surprise to many – there are plenty of compelling reasons to do business there – but the scale of the venture did.

The company intends to employ around 1,000 people at the new site – considerably more than the 770 employed at its current Castleford and Cross Hills facilities, which the new site will replace.

It was widely assumed that the investment was intended to cope with a surge of demand from the obvious market: China.

But it can now be revealed that Burberry is expecting far more growth from another quarter: Japan.

According to a company source, Burberry products have been made under licence by Sanyo Shokai for more than 30 years, but Burberry revoked the licence this summer and is reshoring all production.

It will also be expanding heavily in Japan, aiming ultimately to run a string of 30 stores, with another 30 concessions in department stores. It currently has just six stores in the country.

As a result, it is eyeing year-on-year revenue growth of 30 per cent.

The move is a canny one. Valued at $26bn, Japan is the second-largest luxury goods market in the world, with 11 million luxury customers accounting for 8 per cent of global sales – and yet it currently accounts for less than one per cent of Burberry’s global revenues.

It is understood that the products made under licence were ‘premium’ products, whereas Burberry classes those made in Yorkshire as ‘luxury’ – a nuance of meaning it fully expects not to be lost on its new upmarket Japanese customers.

The first phase of the company’s move towards the centre of Leeds will see the redevelopment of an area of the South Bank to create a new facility offering increased capacity for trenchcoat production.

Later phases of development include plans to restore and renew the Grade I-listed Temple Works building.

When the venture was announced in November, Christopher Bailey, Burberry’s chief creative and chief executive officer, said: “Burberry is a proudly British brand and we are so excited that our plan for a new site in Leeds means that we will continue to produce our most iconic product.”

The leader of Leeds City Council described it as an “extraordinary statement by an iconic global brand” and said it would help attract a new generation of top-class textile designers.

Coun Judith Blake said she had already been contacted by local universities who wanted to help provide a supply of skilled textile workers and added: “It’s incredible recognition for Leeds and the wider city region.’

Work on the site is due to begin in 2016 and the new facility is due for completion in 2019.