Emerging countries eye fashion brands: Milan executives

Emerging countries are improving the manufacturing quality of designer clothes and are looking to buy brands in mature markets, fashion executives said in Milan last week.

Several fashion houses have moved production to countries with low manufacturing costs to remain competitive.

"Certain emerging countries are producing high-quality products. I think it's not a secret that many, many brands are sourcing their products in emerging countries," Gianluca Brozzetti, chief executive of Italian fashion house Cavalli said in an interview.

"But creativity must remain in Italy", he said on the sidelines of Just Cavalli's springsummer 2011 womenswear show.

Brozzetti said Roberto Cavalli's first line was totally designed and made in Italy.

"If we produce outside of Italy, we are dead", Michele Norsa, chief executive of fashion house Ferragamo, said.

He said Chinese buyers prefer "made in Italy" luxury products to ones manufactured locally, meaning the appeal of Italian brands endures.

Some designers said they were not afraid of the growing quality of products manufactured in India or China.

"People will buy fashion products for their brands more than their country of origin," Elio Fiorucci, trend-setter and founder of the namesake fashion brand, said.

Some European brands have already been sold to buyers from emerging markets. Last year, Megha Mittal, the daughter-in-law of ArcelorMittal chief executive Lakshmi Mittal, bought German fashion brand Escada for an undisclosed amount.

Indian jeweller Gitanjali Gems Ltd has said it plans to spend up to 25 million euros ($33.36 million) to buy five Italian brands to boost sales in Europe and the Middle East.

"India is a huge market for fashion. Indians are very well aware of what to buy internationally and locally," an Indian buyer, who asked not to be named, said.

Buyers from emerging countries are expected to account for 50% of global luxury spending by 2020, according to Italy's luxury goods association Altagamma.

"We expect a new wave of mergers and acquisitions in 2011-2012," Armando Branchini, secretary general of Altagamma, said at a conference last week.

"We will see companies buying old brands with growth potential and relaunching them on the market," he said.

Prodos Capital Management, a US-based merchant bank, in a group with South Korean conglomerate Samsung , is in final talks to buy Italian fashion house Gianfranco Ferre, one of the three special commissioners running parent company IT Holding said at Ferre's show.

The Milan fashion week runs until September 28.