JAL Group, which claims to be the largest supplier of higher-end safety and work shoes and boots in Europe, has a plan to grow by 50 percent in the four years through 2014 under the leadership of Ambrogio Merlo. The 52-year-old manager, who ran Vibram between 2002 and 2007, became the chief executive of the Italian-based group last February, taking the place of Carlo Cellerino, following the entry of new institutional shareholders in July 2010.
JAL's sales reached €128 million in 2010, up from €118 million in the previous year, and the vast majority was generated in Europe, where the group estimates its market share at around 30 percent in value – excluding basic shoe models retailing for less than €30 a pair at retail and made for the most part in Asia. Aside from an important private-label business, the bulk of the turnover comes from three major brands: Jallatte, Aimont and Lupos.
The group's revenues are expected to be stable in value this year as it has decided to concentrate on the higher end of the market, but profitability has increased. JAL has reduced its annual production by about 400,000 pairs to around 7.5 million pairs – all made at its own big factory in Tunisia and at Jallatte's remaining plant in France – by refusing small orders of private-label items and eliminating models sold to its clients at less than €17 per pair.
About 3,500 pairs of high-end work and safety shoes per day and special toe protection units in carbon fiber are still made by 74 workers at Jallatte's remaining factory in France, located at Saint Hippolyte du Fort. Four years ago, after the shutdown of another Jallatte factory and the clamorous suicide of its founder, Pierre Jallatte, the group agreed to keep that plant in operation. Jallatte France still employs a total of 139 people, up from 119 in 2007.
JAL will continue with its policy of manufacturing all its shoes in-house to ensure high standards of quality and for maximum flexibility in production planning. With a total staff of 4,500-odd people in Tunisia, JAL is the second-largest industrial employer in the country and the biggest one in the footwear manufacturing sector. Its local factory was protected by the Army during the recent popular unrest in North Africa.
About one-third of the group's turnover comes from private labels, a segment that has been growing strongly for the company in the last few years and that is expected to develop further, but Merlo insists that JAL will no longer take orders for less than 10,000 pairs per year for any particular models. Unlike Chinese OEM producers, which tend to accept smaller orders for off-the-shelf products, JAL offers a turnkey service where it works closely with clients such as Puma to determine sales targets, brand positioning and pricing and to put together carefully adapted collections.
The name JAL stands for three major house brands – Jallatte, Aimont and Lupos – that have their own distinctive position in the market and represent most of the group's remaining turnover, with the exception of marginal sales in North Africa and other emerging markets through a couple of entry-level brands, Almar and Auda. The group originated in 2000 from a merger between Jallatte, based in France, and Aimont, based in Italy.
Jallatte was taken over in 1998 by a large investment group, CVC Partners.
A pool of American banks and hedge funds then bought the group in 2005,and sold it in mid-2010 to an Italian private equity fund, Progressio Investimenti II, with JAL's management holding a minority stake of 10 percent. Rahman, the Indian group that owns a major French competitor, Lemaitre Sécurité, had offered to buy the group or its Jallatte subsidiary.
With sales of €42.5 million in 2010, Jallatte is still the biggest asset for the company. It is the most technical, innovative and expensive brand within the group, but more than half of its turnover is in France, where it reached a level of €25.4 million last year. Merlo feels that Jallatte has a high potential for international development, especially in important distant markets such as the U.S. or Japan where it enjoys a high reputation and where certification procedures may be difficult. He is looking at possible joint ventures or licenses in these and some other countries, similar to those that Vibram struck in the past in the U.S. and Brazil.
Aimont is a more contemporary and design-driven brand, featuring a very wide range of medium-priced products with a strong component of comfort and lightness. Some of the models can even be used for running or hiking. The brand generated sales of €41 million last year. Curiously, at €7.1 million, its sales in Germany were higher than the €4 million it made in Italy. Aimont has a good position also in France, Spain and the U.K.
According to Merlo, Aimont's range is well suited for certain markets in Eastern Europe, such as Russia, and for countries such as Turkey where it still doesn't have yet a presence. One of his ideas is to expand the distribution of Aimont safety shoes in the do-it-yourself retail circuit in some countries, using a specific sales force for this retail channel as it already does in Italy and Spain. On the product side, Aimont is now featuring a line of waterproof shoes that use Gore-Tex membranes, like certain models in the Jallatte and Lupos collections.
Lupos, a German brand of safety and work shoes that was bought by Jallatte in 1972, is the least exploited brand within the group, with sales amounting to only €5.3 million in 2010, of which €4.6 million came from Germany. The company had a small factory in Mönchengladbach until about five years ago, but then all its production was merged with all the other product lines of the group in Tunisia.
Lupos' revenues were double than that 10 years ago, but the brand has been somewhat neglected lately. JAL has decided to boost its communication efforts and its sales network. Lupos' sales team will be reinforced in the next months by two new area managers, and it will also be responsible for sales in Germany of Aimont, Jallatte and JAL's private label business. A new dedicated logistic pole will be set up for the purpose in Germany.
Furthermore, to help revive the Lupos brand and to expand its presence, especially in the colder countries of Northern Europe, the group has introduced a new Arctic line of shoes with ice crampons under the brand. Another novelty in the Lupos range is a line of shoes with SD soles for the dispersion of static energy.
In general, the new management intends to expand its research and development operations, especially in the areas of materials and biomechanics. Located at Trani, in the South of Italy, its R&D department now has a team of 21 people, complemented by 10 others who handle product development and prototyping at the Tunisian factory. It will also invest more in communication, with specific actions by brand and by channel.
To implement the new strategy, Maurizio Corallo, who had been responsible for marketing and R&D since 2005, is now also in charge of sales for the whole group, filling a function that did not exist before. More recently, in September, Jean-François Bertin, a French executive who has worked for Candy, Hoover and other brands of household equipment, was appointed managing director of JAL's French operations, including Jallatte.
Merlo's appointment at the helm of JAL Group last February was part of a major reshuffle of the top management that also saw the departure of the three Falco brothers who had been running the company for many years – Giovanni, Roberto and Edoardo Falco – and of Joël Aunos, the former managing director of Jallatte. Giovanni Falco was the former managing director of JAL, a function that has been eliminated. His two brothers were in charge of private labels and purchasing.