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12:00 AM 18th May 2024
business
Opinion

Market Analysis: Burberry & Imperial Brands

 
Burberry: Slowdown in luxury industry; Struggling to elevate its brand; Heavily reliance on wholesale may help sales but hurt brand's image and margins. Imperial Brands: Further flavour regulation in the market is expected; Profitability issue persists due to intense pricing competition; Expanding market should be the current focus

in the luxury space, Yanmei Tang, Analyst at Third Bridge remarks on Burberry, informed by insights from industry experts:

“Burberry is among the brands that have been affected by a slowdown observed across the wider luxury industry. High-end customers become pickier about what they buy”

“Our experts say Burberry is struggling to clearly define and elevate its brand identity, resulting in confusing messaging and poor sales growth. There is too much reliance on a new creative direction rather than making operational changes.”

“Burberry needs to take risks by launching innovative products to succeed. But they also face investor pressure and resource constraints as a standalone brand compared to giants like LVMH and Kering.”

“Burberry heavily relies on wholesale for revenue and will need to use promotions due to financial pressure. Predictions suggest continued challenges in 2024, with the US wholesale business likely to decline further. Over-reliance on wholesale has harmed the brand's image and margins, despite boosting sales.”

“Setting ambitious targets to double leather goods sales and increase outerwear sales by 50% is unrealistic given the competitive pressures and operational challenges."

In the tobacco space, Orwa Mohamad, Analyst at Third Bridge reports on Imperial Brands.

“The profitability issue in NGPs persists for Imperial Brands due to intensifying price competition in the market. Many brands employ multi-level pricing strategies for both devices and consumables, which will gradually reduce profitability.”

“However, our experts remain relatively unconcerned as Imperial is still in a growth phase. Their current focus is on expanding market reach by introducing new products in new regions.”

“Imperial Brands faces a significant risk due to inconsistent innovation, given the rapid influx of new products and market changes in the NGP sector. It took them four years to introduce Blu 2.0 and Pulze 2.0.”

“Our experts expect further flavour regulation in the market, particularly on nicotine pouches which will slow down growth but the category will still have significant growth potential globally”

“Experts expect more governments to impose excise taxes on NGP products in an effort to claim back lost revenue, but it will take time to find the correct model to continue to incentivise people to switch to reduced risk products”

“Pulze heated tobacco volumes hold a small market share of approximately 0.2%, yet its product quality and early performance have been notably strong, particularly in launch markets like the Czech Republic.”



Third Bridge is a global primary research firm that interviews more than 6,000 internationally recognised industry experts and business leaders a year to compile 360-degree market intelligence for institutional investors. www.thirdbridge.com