Shandong Ruyi Buys Bally. Why Has This 167-Year-Old Luxury Brand Never Worked Out What It Is?

New capital has handed Bally another chance, but it cannot answer the question the brand has failed to settle in 167 years: does it have one consistent, clear identity — and once it finds one, can it keep supporting it and keep delivering good design?

"The Chinese are not just buying luxury goods, they're buying the companies that make them," The Wall Street Journal wrote on February 9, when Shandong Ruyi Group announced it was acquiring the Swiss luxury brand Bally.

Public details of the deal are scarce. JAB Holding, Bally's former parent, said only that it would keep a small stake in the brand. Bloomberg, citing a person familiar with the matter, reported that Shandong Ruyi had bid US$700 million.

The contest for Bally began last September. Four of the bidders came from China, among them Fosun International, Septwolves, and Hemei Group, all busy fashion investors in recent years. Starting in 2011, Fosun International backed the Greek jewelry group Folli Follie, the American high-end womenswear brand St. John, the Italian menswear maker Caruso, the French fashion label IRO, and the Italian lingerie brand La Perla. Septwolves bought the trademark rights to Karl Lagerfeld in Greater China last year for 320 million yuan. Hemei Group has bought up one distributor of international brands in China after another.

Shandong Ruyi Group started out in textiles, the middle of the supply chain, and in recent years it has tried to remake itself by buying. In January, a Bloomberg tally showed that if Shandong Ruyi went public it would rank among the world's 20 largest fashion and luxury groups by revenue.

Shandong Ruyi Group's Acquisitions Over the Years

2010.05

Bought a 41.53% stake in Renown for 4 billion yen (US$44 million)

2014.01

Took control of the German men's suit maker Peine Gruppe, whose brands include Barutti and Materhand

2016.04

Paid 1.3 billion euros for control of SMCP, parent of the French affordable-luxury brands Sandro, Maje, and Claudie Pierlot; SMCP listed in Paris in October 2017

2016.11

Bought a 51.4% stake in Trinity Limited, the Hong Kong-listed high-end menswear retailer, gaining the operating rights to Gieves & Hawkes, Kent & Curwen, and other brands

2017.03

Paid US$117 million for Aquascutum, the near-bankrupt British trench coat brand

2017.10

Paid US$2 billion for the apparel and premium fabrics business of America's INVISTA

2018.02

Acquired the Swiss luxury brand Bally; Bloomberg reported the price at US$700 million

In sharp contrast to the busy Chinese buyers, Joh. A. Benckiser Group (JAB), the investment company controlled by Germany's Reimann family, has decided luxury will no longer be a core business.

In 2007, when the global luxury market was still growing 6.5% a year, JAB marched into fashion, buying the American designer label Derek Lam, the Italian handbag brand Zagliani, and the British jewelry brand Solange Azagury-Partridge in quick succession. Three luxury brands — Jimmy Choo, Bally, and Belstaff — went into a new JAB division called Labelux. People assumed at the time that the Reimann family wanted a luxury empire of its own, like LVMH, Kering, and Richemont.

Four years later, JAB sold Derek Lam and Solange Azagury-Partridge back to their founders, and in 2014 it decided to concentrate on the leather-goods brands Jimmy Choo, Bally, and Belstaff. Over the next three years, only Jimmy Choo went well, listing successfully; the other two ran into trouble. Bally never found a clear place for itself in the leather-goods market, and Belstaff had nothing to show beyond one marketing campaign with David Beckham.

From 2017 JAB moved its money into coffee and food. Last July it sold Jimmy Choo to Michael Kors, and last November it sold Belstaff to Ineos, the British petrochemicals and manufacturing giant. Its only remaining sizable investment in fashion is the fragrance distributor Coty.

The buying fever among Chinese companies makes the dream of a "fashion empire" look like a game of capital that players keep lining up to join. But for Bally, 167 years old, getting its glory back will not be easy.

In fact it was through those repeated changes of owner and design team that this old Swiss brand slowly lost any clear identity.

Five Owners in Forty Years

In 1851, Carl Franz Bally, then in the ribbon-weaving trade, noticed on a business trip to Germany that the laces used on leather shoes were exactly what his workshop was good at making. He founded Bally in his hometown of Schönenwerd and pushed the business into shoemaking. Over two generations, Bally built a solid name across continental Europe.

Back then, the first thing the name brought to mind was "a rugged men's brand with a style of its own." One story gets told again and again to make the point: nearly 60 years ago, when the explorers Tenzing Norgay and Sir Edmund Hillary became the first to stand on the summit of Mount Everest, they were wearing Bally mountaineering boots. The other thing people associate with Bally is vintage posters and hand-drawn art. From the 1920s on, Bally worked often with well-known artists, promoting itself through posters, folding fans, and other media, and the results turned up in exhibitions.

But once the workshop entered its era of capital, Bally's luck ran out. Its first two buyers either had no interest in running it or no experience at all in luxury and fashion.

In 1976, Carl Franz Bally's descendants sold the brand to the Swiss entrepreneur Werner K. Rey, who held it for just a year before passing it to the Swiss defense group Oerlikon-Bührle and cashing out 60 million Swiss francs. Oerlikon-Bührle had no background in fashion; its core divisions were aerospace and vacuum technology. By 1991, after a round of restructuring brought on by poor management, the group put all its resources into technology.

Bally's Owners Over the Years

1976

The Swiss entrepreneur Werner K. Rey

1977

The Swiss defense group Oerlikon-Bührle

1999

The American private equity firm Texas Pacific Group (TPG), for US$200 million

2008

Joh. A. Benckiser Group (JAB), the investment company controlled by Germany's Reimann family, at a valuation of US$600-700 million

2018

Shandong Ruyi Group; Bloomberg reported the price at US$700 million

The 1999 purchase by the American private equity firm Texas Pacific Group (TPG) was a turning point. With TPG's help Bally finally built the basic structure a capitalized luxury brand needs, and its products spread from shoes into ready-to-wear, accessories, and handbags.

TPG's holdings then ranged widely — Ducati motorcycles, Continental Airlines, the fashion retail group J.Crew, Del Monte Foods — but it had no strong fashion brand. Managing director Abel Halpern brought in his Harvard roommate Scott Fellows to work out what to buy. Their first choice was Fendi, but in 1999 LVMH and Prada beat them to it, jointly taking 51% of Fendi.

Bally did not look like a worthwhile substitute at first. As an industry analyst put it at the time, it had not turned a profit in more than a decade. Buying it would cost $600 million, with another $175 million of investment expected afterward.

"Scott and I thought about it carefully and decided Bally was interesting enough. Its positioning was fuzzy and its sales channels were spread too thin, but it had a rich history — in the 1950s and '60s it was the classic jet-set brand, the one favored by the rich who flew their own planes," Halpern explained in a 2001 interview with New York Magazine.

Halpern decided to put Scott Fellows, then 36, straight in as Bally's creative director. Fellows had no standard designer's résumé. He had never worked in a Paris fashion house or atelier; he took his bachelor's degree at Carnegie Mellon and his master's at Harvard, then studied briefly at the Fashion Institute of Technology in New York. Before Bally, his only relevant job was six years as global marketing director at Salvatore Ferragamo.

But Fellows knew exactly what the investors wanted. "Can fashion be art? Maybe, but that alone can't sustain a $500 million fashion business ... Bally is like an uncut gem. Our goal is to put it back to its old trade, making beautiful things people can use every day."

Under Fellows, from 1999 to 2002, Bally's sales recovered and its idea of itself got clearer. The Australian architect Craig Bassam was hired to give every store in the world one design, built around open, modern, accessible luxury. An in-house creative team did nothing but design the ads that ran in Vogue and Wallpaper. Beyond shoes and handbags, full men's and women's collections appeared on the runway at Milan Fashion Week.

In 2004 Bally returned to profit, held double-digit growth for the next three years, and reached $500 million in sales in 2007. In 2008, TPG sold it and cashed out.

The Question Left Open for a Decade: What Kind of Luxury Brand Is Bally?

But once the brand passed to Joh. A. Benckiser Group (JAB), the investment company controlled by Germany's Reimann family, and the financial crisis hit, Bally's management and design teams fell into disorder again.

In 2009, Marco Franchini, who had joined as CEO under TPG, left. Chairman Peter Harf then put the brand's development into improving its retail network — opening online sales through Yoox.com in 2009, for example.

But the core question — who Bally actually is — went unanswered. In the ten years from 2007 to 2017 Bally changed creative directors three times, and each one brought a completely different style.

Bally's Design Teams Over the Years

1999 - 2002

Scott Fellows

2002 - 2007

Melissa Maish on womenswear, Luca Ragonese on accessories

2007 - 2010

Brian Atwood

2011 - 2013

Michael Herz and Graeme Fidler

2014 - 2017

Pablo Coppola

2017 -

Three designers, one each for menswear, womenswear, and accessories

Brian Atwood, in the job from 2007 to 2010, was known for sexy, wild sky-high heels in the vein of Sex and the City, a style that sat badly with the conservative, classic streak in Bally's Swiss bloodline. From 2011 to 2013, Michael Herz and Graeme Fidler took Bally back to a 1930s American vintage look, still a departure from its original spare, dignified image.

Because sales were weak, Bally was long shut out of multi-brand boutiques. Its retail network leaned on airports: it had points of sale in 137 airports worldwide, second only to Salvatore Ferragamo.

At the end of 2013, Frédéric de Narp, who had been an executive at the hard-luxury brands Cartier and Harry Winston, joined Bally as CEO. He brought in the designer Pablo Coppola, formerly of Dior, Tom Ford, and Céline, as creative director.

Coppola did win praise from the fashion world. His spare, dignified style fit Bally's DNA. He made the Sommet, one of the few hit handbags Bally had produced in 20 years. And with an openness and energy comparable to Gucci's creative director Alessandro Michele, he put out a run of crossover collections — with the graffiti artist André Saraiva, the music producer Swizz Beatz, and the Spanish artist Ricardo Cavolo — to pull in younger buyers.

But in 2017 Coppola left. As at Salvatore Ferragamo, design authority over menswear, womenswear, and accessories was split again among three designers.

In an interview with WWD last July, de Narp said his goal was plain: "The most important thing Bally has to recognize is that it is not an aspirational luxury brand, it is an accessible luxury brand. Most of our products are at entry price points, and you shouldn't put a pile of crocodile bags next to a pair of 250-euro sneakers in the same store. For the past 20 years Bally never got this straight, and that caused a lot of confusion in the supply chain, the store experience, and hiring."

That vision sounds like a return to the position Scott Fellows set in 1999.

To get there, de Narp has changed a great deal, in product and in retail. By the figures he gave WWD: the British architect David Chipperfield was hired to redo the stores, and 55 stores worldwide now use the new concept; women's products rose from 28% of the range in 2013 to 37% in 2017, and last autumn's sales grew 32%; the brand no longer reaches consumers through shoes alone, with 53% of revenue now from accessories and 44% from shoes and ready-to-wear; the number of products will be cut by 40-50% to sharpen the brand and lower costs; and to work more efficiently the London headquarters has closed, leaving offices in Milan and Switzerland.

De Narp thinks everything is turning. Orders for the 2018 spring/summer collection, at least, rose 41% from a year earlier. Neiman Marcus and Selfridges, the high-end department stores that had shut Bally out, have opened their doors again.

He said little about a promise made three years ago. In 2014, the last time Bally disclosed annual sales, the figure was $400 million — below what the brand was doing when TPG sold it in 2008. De Narp told Reuters at the time that he meant to take Bally's sales to $1 billion within five to ten years.

What Does the Chinese Market Mean for Bally?

Asked how Bally would use the new money, de Narp was vague. He said only that the new shareholder would help Bally open and refurbish stores faster and give it more support — not financial support. "From this year we can't keep burning cash. We have to execute the strategy we've already settled on."

Plainly, if Bally wants to change and build "an accessible brand image," the first market it has to crack is China. By 2008, when TPG handed the brand to JAB, China was already Bally's biggest market, with 52 stores, more than any other country.

In an interview last week with the fashion outlet Ladymax.com, de Narp said the brand now has 60 points of sale in China, and that Chinese consumers buy close to half of all Bally goods sold worldwide each year.

In that WWD interview last July, de Narp mentioned China twice. Once was in answering where luxury's growth would mainly come from: "By 2030, China's middle class will be growing 9% a year." The other was in explaining how big travel retail could get: "Chinese consumers spend the most when they travel, and their numbers are growing fast too. There were 30 million in 2000, 120 million by 2015, and by 2030 it's expected to reach 240 to 260 million."

Judging by the investments Ruyi Group founder Qiu Yafu has made so far, Bally need not worry much that supply-chain integration will damage the brand. Take the already-acquired Gieves & Hawkes: in Australia, Qiu Yafu also holds controlling stakes in the Cubbie Station cotton farm and in Lempriere, the country's largest wool manufacturer, which protects Gieves & Hawkes's reputation for where its raw materials come from.

At bottom, what de Narp has to solve is the problem this brand has not overcome in the 167 years since it was founded: whether it has one consistent, clear identity, and, once it has the answer, whether it can keep supporting that identity with good design and products good enough to match.

Chinese consumers, after all, are long past the stage of paying for a name alone.

Cover image from Bally's official website