Case Study: Eurostyle

Case Study Company: Eurostyle, Cork, Ireland
Regions Involved : Europe, Far East, U.S.
Case Study Date: August, 2006

Lessons Learnt

Securing a licence agreement is only the beginning – sales will not occur automatically and the hard work only begins when you try to achieve your sales targets.
Eurostyle did not realise that Cutter & Buck styling and sizing would not be accepted universally in the marketplace and that the product would have to be adapted for the local market. Enterprise Ireland can be hugely important both in helping to devise an effective  strategic plan and in providing finance. Brand is King. Brand loyalty and brand recognition is essential.

Background

The company was founded in 1972 in Cork and there are currently 50 employees. It’s a family run business founded by George Dwyer, father of the Managing Director Alan and brother Peter, who’s also a Director. Originally the company manufactured menswear and boyswear, such as check shirts however in the late ‘80’s cheaper imports from China made it impossible to compete effectively in this market. In 1989 Eurostyle launched a new brand, Green Lamb – this was a totally new departure for the business as it is a Ladies Golf clothes specialist brand. Enterprise Ireland operated a Trade Market Consulancy scheme at that time and offered a refund on 66% on the marketing spend over 3 years, of which 33% was subsequently to be repaid over future years. Alan Dwyer explains “This allowed Eurostyle to leverage the marketing budget and to invest in building a recognisable brand, which has been critical to our success”. By ‘92 the company had secured approx 300 UK accounts. By ‘97 manufacturing was all outsourced to factories in China, Peru, Thailand and elsewhere, although the design and brand marketing was retained inhouse. By 2002 the Turnover reached about €5,000,000. “Around 2000/2001 the business was in a strong position and still growing so we were open to new opportunities”, Alan explains.

Negotiating a Licensing Agreement

At this time, Cutter & Buck were the No. 1 golfwear brand worldwide. They directly managed their european sales, however after 9/11 they were keen to move out of Europe and were actively looking for a local Licencee to manage the European market. “As we had developed our own successful golfwear brand, we were in a good position to negotiate an agreement”, Alan says. The key elements to the Agreement included exclusive rights in Europe, a 5 year term (this has now been extended for another 4 years), the purchase of clothes from Cutter & Buck manufacturers at cost price and a Licence fee per item to be paid to Cutter & Buck. Also originally all design was to be carried out by Cutter & Buck.

Once the Licence Agreement was completed, Enterprise Ireland helped by supporting the salaries of key employees and by funding some of the necessary training involved during the change-over period and for a few years afterwards. They also grant-aided the purchase of a new, specialised clothing software system, Prima. “This was important as it included a Business Objects report-writing facility which Cutter & Buck also used”.

Challenges

Initially sales were slower than had been anticipated  “One of the problems we encountered fairly quickly was the fact that American sizes were a lot bigger than European sizes. As fashion evolved, it became clear that we needed to develop sizes and styles to suit the European Market. Essentially we had to localise the product” Alan outlines how they approached this problem “We developed Cutter & Buck Europe and did the design work ourselves, inhouse. About 50% of the Cutter & Buck sales come from inhouse designs, which are more fitted and are in line with European fashions. These designs are now also being used by Cutter & Buck licencees in Canada, Australia and South Africa.”

Another issue that had to be dealt with was that the two brands within the same business were competing against each other; Cutter & Buck and Green Lamb. “We realised that the best way forward was to separate out the two brands into two companies, so that each could compete effectively against one another”.

The Advantages of Scale

“Our business has benefited hugely from engaging with Cutter & Buck – we’ve learnt so much about how they manage the operational side of the business; the way in which they negotiate prices with suppliers, the advantage of scale in dealing with vendors and even the way in which they forward-order and manage the logistics. No MBA could teach you these things!” Alan says. He’s rightly optimistic about the future “The two brands are leading the way in terms of strong design and brand recognition and we’re confident about the future  – you only have to look at the hype surrounding the Ryder Cup to know that golf is a growth market”.