"Successful “ Baltika Group ” re-branding strategy. "Mosaic" case in Lithuania". Daina Daubarė September , 2007

Baltika today Baltika Group is a rapidly growing fashion retailer in the Baltics and Eastern Europe four retail concepts 124 stores with shop floor space of 23,011 m 2 (June 2007) retail coverage of six countries vertically integrated business model The company aims to be the leading specialist fashion retailer in Central and Eastern Europe The Group employs 1, 9 00 people Since 1997 , it has been listed on OMX Tallinn Stock Exchange Baltika’s retail markets CEE region

Baltika Group is a rapidly growing fashion retailer in the Baltics and Eastern Europe

four retail concepts

124 stores with shop floor space of 23,011 m 2 (June 2007)

retail coverage of six countries

vertically integrated business model

The company aims to be the leading specialist fashion retailer in Central and Eastern Europe

The Group employs 1, 9 00 people

Since 1997 , it has been listed on OMX Tallinn Stock Exchange

Some history 1928 “ Gentleman ” is established in Tallinn ; 1959 The company is restructured and named Baltika; 1988 The company starts to manufacture ladies’ clothes 1991 Baltika is privatised 1991 The first gentlemen’s clothes collection – Baltman ; 1993 The first ladies’ clothes collection – Christine Collection (CHR) 1995 The Evermen collection is created 2002 Strategic changes are launched to make the company into a clothes retailing company 2002 Monton fashion brand is launched in five markets ; 2006 The names of CHR and Evermen retail concepts are changed; the new name becomes Mosaic 2006 Baltika opens its 100th store 2006 Baltika acquires an Estonian well known fashion brand Ivo Nikkolo

1928 “ Gentleman ” is established in Tallinn ;

1959 The company is restructured and named Baltika; 1988 The company starts to manufacture ladies’ clothes 1991 Baltika is privatised 1991 The first gentlemen’s clothes collection – Baltman ; 1993 The first ladies’ clothes collection – Christine Collection (CHR)

1995 The Evermen collection is created 2002 Strategic changes are launched to make the company into a clothes retailing company 2002 Monton fashion brand is launched in five markets ; 2006 The names of CHR and Evermen retail concepts are changed; the new name becomes Mosaic 2006 Baltika opens its 100th store 2006 Baltika acquires an Estonian well known fashion brand Ivo Nikkolo

Vertical model in fashion business ↓ CUSTOMER ↓ Brand manufacturer Label manufacturer Product manufacturer (does not own label) Subcontractor Retail company (net profit margin 3-7%) ↑ ↑ “ China” attacks V e r t i c a l ( ≥ 10%) Retailer Wholesale company (3-5%) Production company (0-3%) ↑ Retailer makes the decision Creating a brand - expensive & complex Heavy competition Differentiation & speed counts

Vertically integrated business model: unique in the Baltic's Own production base (four factories): specialisation in men’s and women’s tailored suits, shirts, jackets, coats (ca 40% of sales) Worldwide purchasing (ca 60% of sales) Retail: ca 80 % of total sales Wholesale: ca 20 % of total sales Distribution through wholesale to department stores in the Baltics, Finland and Eastern Russia Centralised brand-based management: product design, supply chain, logistics, etc. Efficient inventory control and sales information systems: monitoring and analysis on a daily basis Sourcing Centralised management A balanced portfolio of different brand store chains (Monton, Mosaic, Baltman and Ivo Nikkolo) Strong retail organisations in target markets

Own production base (four factories): specialisation in men’s and women’s tailored suits, shirts, jackets, coats (ca 40% of sales)

Worldwide purchasing (ca 60% of sales)

Distribution through wholesale to department stores in the Baltics, Finland and Eastern Russia

Centralised brand-based management: product design, supply chain, logistics, etc.

Efficient inventory control and sales information systems: monitoring and analysis on a daily basis

A balanced portfolio of different brand store chains (Monton, Mosaic, Baltman and Ivo Nikkolo)

Strong retail organisations in target markets

Retail Brands trendy and fashionable fast fashion brand for ladies and men store format 350…600 m 2 end 2008: 65-75 stores possible franchising stylish and high-quality professional and smart casual apparel for women, men and children store format 200…350 m 2 end 2008: 65-75 stores enlargement of wholesale business stylish, classic and high-quality clothes for men store format 100…130 m 2 end 2008: ca 30 stores premium level fashion brand for women store format 130…170 m 2 end 2008: 10 -15 stores

trendy and fashionable fast fashion brand for ladies and men

store format 350…600 m 2

end 2008: 65-75 stores

possible franchising

stylish and high-quality professional and smart casual apparel for women, men and children

store format 200…350 m 2

end 2008: 65-75 stores

enlargement of wholesale business

stylish, classic and high-quality clothes for men

store format 100…130 m 2

end 2008: ca 30 stores

premium level fashion brand for women

store format 130…170 m 2

end 2008: 10 -15 stores

Retail network Baltika’s retail markets *Preliminary data

Sales division between retail concepts , 2006 Ivo Nikkolo & other +56% yoy +39% yoy +31% yoy

Why new name? Main reasons: For the brand development, one name for menswear and womenswear was needed The brand has become international and more quality, new name should reflect that better Also: The name was complicated to pronaunciate and difficult to remember, that is why in some countries Christine was used instead of CHR – it has been making our marketing activities more complicated and expensive CHR/Evermen was not a brand, just combination of menswear and womenswear label No sole rights in Latvia

Main reasons:

For the brand development, one name for menswear and womenswear was needed

The brand has become international and more quality, new name should reflect that better

Also:

The name was complicated to pronaunciate and difficult to remember, that is why in some countries Christine was used instead of CHR – it has been making our marketing activities more complicated and expensive

CHR/Evermen was not a brand, just combination of menswear and womenswear label

No sole rights in Latvia

The Process of Choosing the New Name International competition A choice made between several hundreds of names Evaluation from different markets; feedback When comparing the logotypes of the names , we observed the values communicated by CHR/Evermen brand: warmth, naturalness, self-confidence, joy of life and reliability The name needed to have a good international sound while being easy to pronounce and remember , visually distinctive and able to communicate the brand’s values

International competition

A choice made between several hundreds of names

Evaluation from different markets; feedback

When comparing the logotypes of the names , we observed the values communicated by CHR/Evermen brand: warmth, naturalness, self-confidence, joy of life and reliability

The name needed to have a good international sound while being easy to pronounce and remember , visually distinctive and able to communicate the brand’s values

CHR/Evermen became…

Baltika Lietuva 1993. First “Baltman” shop in Kaunas. 1996. “Christine Collection” and “Respect” brands for ladies clothing in “Baltman” shops; 2002. Launched new fashion brand and retail chain “Monton”. 2003. Launched new fashion brand and retail concept “CHR/Evermen”. 2006. Re-branding of “CHR/Evermen” to “Mosaic”. 2007. Launched new fashion brand and retail concept “ I vo Nikkolo”.

1993. First “Baltman” shop in Kaunas.

1996. “Christine Collection” and “Respect” brands for ladies clothing in “Baltman” shops;

2002. Launched new fashion brand and retail chain “Monton”.

2003. Launched new fashion brand and retail concept “CHR/Evermen”.

2006. Re-branding of “CHR/Evermen” to “Mosaic”.

2007. Launched new fashion brand and retail concept “ I vo Nikkolo”.

Baltika Lietuva shops

Why Mosaic? Each item or object that we see has been pieced together from smaller pieces that connect with each other forming a whole entity. On an emotional and personal level, each human being is an individual comprised of different ingredients - character, thoughts, behavior, upbringing, preferences etc. Part of this individuality is clothing, which is an integral part of creating an impression. Clothing and the other components must harmonize to achieve equilibrium between outside and inside

Each item or object that we see has been pieced together from smaller pieces that connect with each other forming a whole entity.

On an emotional and personal level, each human being is an individual comprised of different ingredients - character, thoughts, behavior, upbringing, preferences etc.

Part of this individuality is clothing, which is an integral part of creating an impression. Clothing and the other components must harmonize to achieve equilibrium between outside and inside

Mosaic target customer Age 35 years, majority of buyers should be 30-40-year-old MC client: woman, man, a person with family (children) and encoded sense of loyalty and traditions; Occupation: middle level manager, specialist s (incl. private and public sector, doctors, teachers , white collar workers etc); Mindset: stability, conservativeness, responsibility, respect for traditions, but still professionally and socially active and searching for harmony both at work and personal life; member of different professional and social organisations . Need: stylish clothing for feeling good at work and after 5 p.m. Important: style, quality and comfort

Age 35 years, majority of buyers should be 30-40-year-old

MC client: woman, man, a person with family (children) and encoded sense of loyalty and traditions;

Occupation: middle level manager, specialist s (incl. private and public sector, doctors, teachers , white collar workers etc);

Mindset: stability, conservativeness, responsibility, respect for traditions, but still professionally and socially active and searching for harmony both at work and personal life; member of different professional and social organisations .

Need: stylish clothing for feeling good at work and after 5 p.m.

Important: style, quality and comfort

USP, differentiation and values USP is built upon clients’ needs : stylish clothing for work at a competitive price targeted collection USP - contemporary stylish apparel for feeling good in the office and after 5 p.m. Keyword s – style , comfort, quality Values: Warm Natural Happy Confident Reliable

USP is built upon clients’ needs :

stylish clothing for work at a competitive price

targeted collection

USP - contemporary stylish apparel for feeling good in the office and after 5 p.m.

Keyword s – style , comfort, quality

Values:

Warm

Natural

Happy

Confident

Reliable

Mosaic launch Objective: Keep the current clients and attract new clients to the stores Strategy: 2006-1 transition period to connect CHR/Evermen to Mosaic 2006-2 new brand communication

Objective:

Keep the current clients and attract new clients to the stores

Strategy:

2006-1 transition period to connect CHR/Evermen to Mosaic

2006-2 new brand communication

Communication Solutions for the transition period Idea Maintaining strong developmental linkage between the old and n ew names – clearly demonstrating that CHR/Evermen is going to be Mosaic Used: In retail outlets of the Baltika Group In media channels ( depending on the country )

Idea

Maintaining strong developmental linkage between the old and n ew names – clearly demonstrating that CHR/Evermen is going to be Mosaic

Used:

In retail outlets of the Baltika Group

In media channels ( depending on the country )

Transition period communication in shops Wall behind the cash desk Stickers on the window Plastic bags T-shirts for sales assistants Catalogues Additional paper labels on every garment

Wall behind the cash desk

Stickers on the window

Plastic bags

T-shirts for sales assistants

Catalogues

Additional paper labels on every garment

Mosaic Shop During the Transition Period

Plastic bags

T-shirts

Catalogue (examples of different pages)

Additional label on products

Transition period communication in media channels Prind advertisements Outdoor TV clip

Prind advertisements

Outdoor

TV clip

Mosaic marketing communication Objective: to become a strong international brand in our own targeted niche and with our own focus Very important : shop environment, marketing communication and customer service (staff training + set-based compatibility) The customer is more conservative -> lower speed of achieving desired results -> need for better targeted channel s and stronger communication : Image of styling brand – Mosaic will help you look great – advice for stylish wardrobe together with cosmetics, perfume etc: Style Editor – styling advice through one person, stylist Testimonials of the clients (famous and ordinary) – local opinion leaders Local strong co-operation projects (communities, forums, www, events) through local opinion leaders and by word of mouth Marketing communication on different levels – brand, market, city.

Objective: to become a strong international brand in our own targeted niche and with our own focus

Very important : shop environment, marketing communication and customer service (staff training + set-based compatibility)

The customer is more conservative -> lower speed of achieving desired results -> need for better targeted channel s and stronger communication :

Image of styling brand – Mosaic will help you look great – advice for stylish wardrobe together with cosmetics, perfume etc:

Style Editor – styling advice through one person, stylist

Testimonials of the clients (famous and ordinary) – local opinion leaders

Local strong co-operation projects (communities, forums, www, events) through local opinion leaders and by word of mouth

Marketing communication on different levels – brand, market, city.

“ Mosaic” development

Thank you!