The Greater Bay Area: Boosting the ‘Bay’Top-selling Brazilian �ip-�op brand aims to walk the lifestyle walk across the GreaterBay Area

Analysis and News - Case Studies

The company’s Brazilian‑themed Kwun Tongo�ce has an international team of employees,but key among them are the native Hong Kongstaff.

When considering the scope and vision of the Greater Bay Area (GBA) initiative much of the focus naturally falls on business, while what happensoutside the hours of work rates barely a mention.

However, the pioneering Brazilian �ip‑�op brand, Havaianas, which opened its Hong Kong o�ce in Kwun Tong in May 2019 is in the market tochange all that. Its vision for China and the GBA sees a coming together of business and lifestyle, with a desire to see the potential of the ‘bay’component in the GBA name realised.

Owned by Sao Paulo‑based footwear company, Alpargatas, Havaianas was launched in 1962 as a basic functional slipper, but becamepopularised as a fashion item in the mid‑1990s. Today, 240 million pairs of Havaianas are sold annually in more than 100 countries. In 2018, thecompany – which also owns Dupé, Osklen, Topper Argentina, Meggashop and Mizuno – generated net revenue of US$980 million.

Push into the GBA

Until 2018, Alpargatas’s owned operations were primarily focused in Brazil, the US, Europe, the Middle East and Africa (EMEA), while the rest of theworld was run as an export market. Last year, the group restructured its businesses into �ve regions: Brazil, Latin America, North America, EMEAand Asia Paci�c. To further bolster its push into the fast‑growing Asia Paci�c region, it created a regional subsidiary – headquartered in HongKong – Alpargatas Asia, in May 2018. 

Company President for the Asian‑Paci�c region, Robert Esser, was positive about its regional base, saying: “The Hong Kong o�ce, and the productmanagement and marketing skills of the Hong Kong people in our international staff, can help spearhead a push into China and the GBA.”

The GBA aims to closely link nine cities in Guangdong province with the Hong Kong and Macau Special Administrative Regions (SARs) to createan economic zone which will form a key component in the next phase of China's economic development. The area covered by the initiative has acombined gross domestic product of US$1.6 trillion.

Signi�cant Strides

Over the past year, from its base in the Kwun Tong district of Hong Kong, the company has madesigni�cant strides in Southeast Asia. For the next phase of growth, it is targeting North Asia – China,South Korea, Japan, Taiwan and Hong Kong – where it has a big presence in wholesale but nomono‑brand stores at the moment. Seasonal pop‑ups, however, make up a core part of themarketing programme in these markets.

Esser said that China and the GBA is a priority for the coming months in what will be an e‑commerceonly proposition for the �rst year. After that, the company will look at building bricks‑and‑mortarstores in selected places, possibly including a �agship store in Hainan, with a view to gettinginvolved in travel retail in the mainland.

The company is building up Havaianas brand awareness with both traditional and digital marketing, as Esser explained, saying: “We have quite aheavy programme this year in digital marketing, consisting of Instagram, Facebook and Google AdWords, with WeChat, Weibo and VIP.com inChina starting in June. We also do quite a lot of out‑of‑home (OOH) advertising in and around airports. Right now we’re running a huge OOHcampaign in all 14 airports in Thailand.”

With all Havaianas �ip‑�ops produced at the company’s factories in Campinas Grande and Minas Gerais, Brazil, the average price of a pair ofHavaianas is US$25, but can go up to more than US$100 for custom pair featuring Swarovski crystals. The customisation service is only offeredin retail stores, where customers can choose from a range of strap styles, base colours and pin designs.

Hong Kong Hires Give a Marketing Edge

13 May 2020

Louis Chan

Esser believes that by headquartering itsAsia‑Paci�c operation in Hong Kong givesHavaianas an edge to better understand andserve the China market.

Esser believes that headquartering its Asia‑Paci�c operation in Hong Kong gives the company anedge for a number of reasons, including the smoothness of the work visa issuing process in the city,its low taxation rate, the international nature of the city's environment and the bene�ts of aconvertible currency.

Esser said: “If you’re going to have one o�ce in Asia, I believe you pretty much have to situate it inHong Kong. The skills that Hong Kong people bring to the business and the special understandingthey have of the China market are particularly crucial.”

The company employs 16 people from 11 different countries around the world in itsBrazilian‑themed Kwun Tong o�ce and key among them, according to Esser, are the native HongKong staff.

He said: “The Hong Kong people that we hired have a uniquely insightful ability to see what is going on in mainland China and �gure out what theunique selling point (USP) of a western product is for that market. I have been working with Hong Kong people at the interphase of trying to sellinto mainland China for 25 years and I have found this to be the case.

“They get the USP of western fashion and they understand the psyche of people in China to a greater extent. I think for that reason they are goodat product management and marketing for China.”

Maximising the ‘Bay’ in the GBA

While �ip‑�ops are of course very much part of everyday life in Hong Kong – for the obvious reasons of high temperature, humidity andprecipitation, as well as practicality – Havaianas hopes the lifestyle appeal of its product can also be capitalised on by authorities across the GBAmaking the most of the ‘bay’ component of initiative.

Esser points out that, by de�nition, the �ip‑�op market is seasonal, but if this seasonal nature of the business is combined with the lifestylecomponent of leisure footwear the sky is the limit.

He said: “If you look at Beijing, for example, the selling window for �ip‑�ops is three, maybe four months of the year due to the climate and so on.In Hong Kong, and hence across much of the GBA and southern China, that selling window is perhaps seven or eight months.

“It strikes me also that the GBA is going to be the largest population centre that we have in China. By its very nature it is going to be our biggestmarket. We de�nitely have a critical mass, but the di�culties of border issues need to be addressed and – importantly – the lifestyle commercialopportunities of the ‘bay’ component of the GBA should be exploited.

“We sell two million pairs of Havaianas a year in the Philippines, and while I would love to see us doing that volume of sales in the GBA, issues ofseasonality might make it di�cult.”

Lifestyle Component

While Shanghai is big in terms of sales, one of the mainland cities Esser believes has potential in his line of business is Chengdu because of itsreputation for being fashionable and the fact that it is seen to be working on creating a work‑life balance culture. He said: “It is one of our targetcities.”

The Chengdu approach, Esser believes, could be the key to business success across the GBA, in essence, capitalising on the lifestyle aspect of theGBA.

He said: “The clue is in the name. The GBA is a ‘bay’ area. The question I would ask is this: to what extent is a lifestyle component of living in theGBA relevant? The answer to that, in my view, is to a very big extent.

“If we take a look at the original bay area – San Francisco – the reason people moved there was not just the economic opportunities it offered, butthe lifestyle. People were doing cool things like roller‑blading, sur�ng and eating at cosy waterfront restaurants.

“The GBA, in my view needs to have that kind of vision. Obviously Havaianas products are part and parcel of that lifestyle and we hope that wecan ride the selling wave it brings.”

Related Topics

Footwear Hong Kong Mainland China Brazil Central & South America Retail Branding

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