Asia luxury distributor Bluebell Group has forged a joint venture (JV) with Swiss premium cigars manufacturer Oettinger Davidoff AG by selling 25.1 percent interest in its cigar business to Davidoff after selling 25 percent interest to the cigar maker a year ago. The transaction was effective on 1 January 2016.
Bluebell Cigars has a series of Davidoff stores which have been opened all over Asia except for mainland China, selling dominantly Davidoff products as well as a range of nonexclusive cigars and accessories from other brands.
“We started the cigar business in 1977 when the first Davidoff store was launched in Hong Kong. It was the first cigar store that opened in Asia with proper walk-in humidor,” Laurent de Rougemont, Managing Director of Bluebell Cigars told Retail in Asia on Friday.
As Davidoff’s exclusive distributor in Asia (except mainland China), Bluebell has built a distribution network throughout the region. Now Bluebell Cigars has 20 stores across Asia including the markets of Japan, Korea, Taiwan, Thailand, Singapore and Malaysia. With six retail stores, Hong Kong is the biggest market for Bluebell’s cigar business.
Davidoff store in Hong Kong’s Peninsula hotel
The luxury distributor has been using multiple distribution channels to distribute Davidoff’s products which include its own retail stores, wholesale, duty free shops as well as e-commerce.
“The sales of the retail stores contribute the largest part to our income. Through wholesale channel, we are able to sell Davidoff’s products to hotel, bars and casinos. We also work with duty free operators to sell our products at shops in airports, border and seaports,” said Rougemont.
Since launching the first store, Bluebell has been distributing Davidoff’s products for almost four decades. “We were very happy with our distribution agreement. However, the problem with any distribution agreement is that it was due to expire, and in our case this was within the next four to five years. Rather than having to continually go through the process of renegotiating it, we decided it would be easier to forge a joint venture,” said Ashley Micklewright, CEO of Bluebell Far East Ltd.
The two companies started talking about converting the business from a distribution agreement into a joint venture about four years ago. “We have been spending quite a bit of time negotiating the terms and conditions to move from a distribution agreement into a joint venture, as well as setting up the foundations on which to build,” noted Micklewright.
Davidoff gondola at airport duty free shop
It takes three steps to set up the JV according to Micklewright. “First of all, we had to put all the cigar businesses into a separate entity which is where the Bluebell Cigar came from. Then Davidoff bought 25 percent of the business, thereby becoming a minority shareholder. Now they access the right to purchase another 25.1 percent.”
After the latest transaction, Davidoff will own 50.1 percent interest of the JV and Bluebell will own 49.9 percent. “Even though Davidoff has a slight majority share of the JV, we will run it like we have an equal partnership,” Micklewright pointed out.
Bluebell Cigars will be renamed Davidoff of Geneva (Asia) Ltd. and will continue to be led by Laurent de Rougemont who has been named Senior Vice President Asia of the JV.
In a Distributor-Principal relationship, the distributor normally is under the pressure to sell more products and open more stores to meet the expectations of the Principal. However, under a joint venture, both parties become more strategic and commercially allied.
Rougemont believed that creating a joint venture will help the two companies to better develop the cigar business in Asia. “Now we are able to integrate the business from the production to selling to the end consumer. Together, we can work on the product development so that we can launch new products in the market faster. We will have more strategies allied, more innovation, and bigger marketing projects.”
“What’s more, the new partnership allows us to strengthen the digital aspect of distribution. Now we can work on the global platform to sell cigars online in Asia,” he added.
“We are more committed to each other now,” said Micklewright when asked to comment on the new partnership. “It’s like we have gone from being engaged to married, though I agree we were engaged a rather long time!”
Bluebell is the owner of retailinAsia