Mulberry: Can Countryside Chic Maintain Its Luxe Appeal?

Emma Hill, creative director of British fashion house Mulberry, prefers quirky over austere, and friendly over froid—­characteristics that shone through at her London Fashion Week show in February. Inspired by the furry critters of Maurice Sendak’s children’s book Where the Wild Things Are, she dressed her models in fulsome coats made of long-haired Mongolian goat fur with shaggy gilets cinched at the waist. The models shared the stage with two 3-m-high yetis, more huggable than scary, and one model walked the runway escorting a gray Hungarian puli with a sheepskin-trim canine parka. A-listers like Anna Wintour, Michelle Williams and Olivia Palermo crowded the front row and nibbled chocolate cupcakes made to resemble monsters. “We’re cheeky and playful, and we don’t take ourselves too seriously,” Hill says of the firm, which celebrated its 40th anniversary in September. “Anything that is English tends to be a little bit irreverent and a little bit silly.”

Whimsical fetes are one thing, but when it comes to business, Mulberry is as serious as it gets. Even in a down economy, the brand’s bohemian take on En­glish country style has struck a chord with consumers who stampede to its stores for accessories like the $1,750 Travel Day Bag in “grass green lizard print leather.” Its profits and revenues are at all-time highs. In January, the company announced that Mulberry-store sales shot up 41% over the holiday season to Jan. 14 and wholesale orders for the spring were up 35%. In December, Mulberry reported that profits more than tripled in the first half of fiscal 2011. And for the year ending March 31, 2011, revenue shot up 69%, to $199 million, and profits jumped 358%, to $38 million. Its share price rose 526% over that period, making it the best-performing fashion-retail stock in the world.

Mulberry’s growth is just one sign that splashing out on luxury goods is still in vogue. The consulting firm Bain & Co. estimates that owing to strong results in the U.S. and Europe last year and continued growth in China, the global luxury market expanded to $252 billion in 2011—up 10% from the previous year. Niche brands like ­Mulberry—still small compared with luxury behemoths like Louis Vuitton—seem particularly well poised to capitalize on the boom. “The trend is to look for more authenticity, which works in the favor of niche brands,” says Jean-Marc Bellaiche, a senior partner at the Boston Consulting Group in New York City. “In the imagination of the consumer, with small comes more craftsmanship.” He says mature consumers have moved past conspicuous consumption and the logos of mass labels and “want to look more sophisticated by finding brands their friends don’t know.” In emerging luxury markets like China, where flashier brands like Louis Vuitton and Hermès still rule the roost, Mulberry aims to compete on price.

For a brand that still produces many of its leather goods at its factory in rural Somerset, England, the downturn presented an opportunity to scoop up discerning shoppers mindful of quality and heritage. “The recession was good for us in a funny way,” Hill says. “People don’t stop spending money on beautiful things. They’re just a lot more thoughtful about what they buy.”

Taking Niche Global

Last fall, Mulberry inaugurated its third store in New York City, and it plans to roll out two in California and New Jersey this year. Housed in a former zipper factory, the 465-sq-m flagship on Spring Street features a series of follies inspired by English gardens, as well as several walls fashioned from 8,000 hardback books. For Mulberry, which makes 59% of its sales in Britain, the 14 stores that rolled out in the rest of the world in 2011, from Amsterdam to Bangkok, marked a major tipping point: by the end of the year, the company had more stores outside Britain than in it.

It’s the kind of global reach Mulberry founder Roger Saul could hardly have imagined. In 1971, at age 21, he used a £500 birthday present from his parents to start making leather belts in their garage in Chilcompton, a village in rural Somerset. Within two years, swanky department stores like Harrods in London and Prin­temps in Paris were stocking Mulberry’s belts and leather agendas, and the firm opened its factory in bucolic Shepton Mallet, one of the many leathermaking towns in Somerset. The brand took off after Saul received rave reviews at Mulberry’s first show at London Fashion Week, in 1975, helping popularize le style anglais—the tweedy hunting-and-shooting look that solidified Mulberry as a true English lifestyle brand. By 1988 it had nine freestanding stores in eight countries, including Denmark, the Netherlands, Germany and Singapore.

Just as Mulberry was expanding its ­operations in Japan, the 1997 Asian financial crisis hit, undermining the company’s success. In 2000, Ong Beng Seng and his wife Christina, Singaporean billionaires, swooped in with a $12 million investment to boost the company’s finances, giving them a 42% share in the business. Within two years, they had ousted Saul in a boardroom coup, reportedly over differences about the company’s expansion strategy. In a bid to take the company global, Ong, mindful of Mulberry’s fusty reputation, recruited famed British designer Nicholas Knightly to overhaul the brand’s image—­then more in sync with country matrons than cool Britannia. Seizing on skyrocketing global demand for handbags and accessories, which offer much higher margins than clothing, Knightly focused on creating a handful of It bags with broad appeal, including the Roxanne and the Bayswater, an understated leather tote bag that remains a best seller. Stuart Vevers, who stepped in after Louis Vuitton lured Knightly away, did even more to shrug off the brand’s stuffy, tweedy image with savvy marketing, including a series of highly successful ad campaigns launched in 2006 that featured the work of iconic American fashion photographer Steven Meisel. By the time Hill, Vevers’ replacement, released the Alexa in 2010, Mulberry bags dangled from the arms of youthful celebrities like Kate Moss and Keira Knightley, whose look caught on with celebrity watchers around the globe.

The strategy paid off. Mulberry’s international sales increased 115% over the six months ending Sept. 30, 2011, with handbags and briefcases making up 77% of company revenue. “When it comes to a handbag, it doesn’t matter what size or shape you are. There isn’t a fit issue,” says Godfrey Davis, the firm’s chairman. Products like the forthcoming Del Rey bag, named after American indie hipster songstress Lana Del Rey and available beginning in May in “ink blue sparkle croc print,” and the leopard-print Alexa clutch also avoid issues of modesty in many emerging markets. “Arab countries have very specific dress requirements,” he says, “but women can still carry a stonking handbag.”

In China, where the luxury-goods market expanded by as much as 30% last year, high-end luxury consumers still gravitate to the biggest Western luxury names. But Mulberry, which opened its first store in mainland China in January 2011, is ­betting it can appeal to aspiring luxury lovers, says David Stoddart, a retail analyst at London brokerage FinnCap. On the road from middling brands like Coach and Radley to top-shelf brands like Louis Vuitton and Prada, consumers “get to Mulberry,” he says. After sales across Asia rose 319%, to $23.6 million, in the year ending March 31, 2011, the company is expecting a deluge of Chinese customers this year. Hence its plans to open three new stores in China, including its first in Shanghai, by July 2012.

Expansion in China carries plenty of perils, from counterfeiting to muddled distribution. The central challenge for Mulberry—and any other niche brand going global—is to continue expanding while remaining exclusive. “They may hope that 1.3 billion Chinese want a Mulberry handbag, but they’d better make sure they don’t all get one,” says Stoddart. “You lose your brand positioning if you do.” Such was the case with British brand Burberry, which undermined its luxury status in the 1970s, ’80s and ’90s by selling off licenses to its iconic check pattern, allowing manufacturers in Asia and elsewhere to reproduce it on everything from umbrellas to underwear. Angela Ahrendts, who took over in 2006, bought back the licenses and steered Burberry designs away from the checks to restore the brand’s prestige.

Keeping It Real

In an increasingly crowded market, niche brands can distinguish themselves through their provenance. Chaumet, which helped drive up LVMH’s jewelry and watch sales by 23% over the past year, regularly invokes its onetime status as jeweler to the French kings. And German automaker Porsche, which saw turnover rise by 19% in the first half of 2011, invites customers to pick up their cars at its factories in Germany. As its website says, “Discovering how and where Porsche cars are meticulously built makes the journey there more than worthwhile.”

That point isn’t lost on Mulberry. The brand’s rural roots frequently crop up in fashion shows, which sometimes invoke nostalgia for the countryside through foliage, and its ad campaigns, including a recent ad shot at an English manor house with oversize animal props. It isn’t just fashion frippery. Mulberry also invests heavily in its factory in Shepton Mallet, which produces about 25% of its handbags. “It’s a fundamental part of our brand proposition that we manufacture the bags ourselves and we have people who know how to do it,” says Davis. Leather is flawed and variable and requires a skilled artisan to cut each piece. Some of the factory workers in Somerset come from families who have worked with leather for generations. “It adds to the quality and our understanding of the material,” Davis says. “It gives us something extra in our ability to develop a more interesting product.” Mulberry recently took on 50 new employees in Somerset, with the goal of raising the share of bags made in Britain to 30%. And in October it announced ambitious plans to invest $8 million in a second Somerset factory, set to open in early 2013. That will create 256 new manufacturing jobs and produce approximately 140,000 more handbags per year, mostly for export to meet growing international demand.

The more a brand emphasizes its national heritage, the more important insourcing becomes to cachet. When Mumbai-based Tata Motors acquired Jaguar from Ford in 2008, it sought to protect the car’s British heritage. It didn’t outsource production to India, and assembly of all Jaguars still takes place in Castle Bromwich, England. Building on that British heritage helped steer Tata’s Jaguar Land Rover division to $1.7 billion in profits last year, up from barely breaking even the year before.

As Mulberry takes le style anglais global, Hill has no plans to alter the brand’s DNA—even if other labels have had some success recasting theirs. Hermès, for instance, launched a limited-edition ­sari line in India and a new fashion brand in China called Shang Xia, which bills itself as a blend of Chinese craftsmanship and contemporary design. “It’s our Britishness that people love and want to buy into,” Hill says. Mulberry has, however, modified existing bags in subtle ways—though both times in limited edition—to drum up attention for new store openings or, as it says, to “honor the local market.” Before Mulberry’s flagship opening in New York in September, it released 150 units of the Clipper satchel, available for the first time in red, white and blue versions. And to celebrate the opening of a new Hong Kong store in November, the company released 99 Bayswater satchels with an inscribed logo on the inside that read mulberry loves hong kong.

But that’s about as dramatic as Mulberry’s branding adventures will get, says Hill. “You shouldn’t make yourself more modest in the Middle East or more blingy in Russia.” That may be true for international customers seeking today’s heritage look, but not if luxury lovers outside the West start demanding their own heritage brands. For now, sprucing up redcoat heritage will have to suffice.