PARIS (Reuters) - Burberry (L:BRBY) is to take over one of its leather goods suppliers in Italy as the British group seeks to boost its handbag business in a drive to take its brand more upmarket.
Burberry, which is seen as punching below its weight in handbags and leather accessories compared to its peers, said it will be taking a team of around 100 leather goods specialists in-house as part of the deal agreed with CF&P, one of its longstanding suppliers. It did not say how much it would pay for the deal.
Luxury goods firms tend to make the largest chunk of revenues from high-margin leather accessories, and many seek where possible to cut out the middle-man, giving them more control over costs and turnaround times.
CF&P, which is based in Scandicci just outside Florence, focuses on developing propotypes and works with other brands. A small part of its business will remain independent following the deal with Burberry.
The acquisition comes as Burberry Chief Executive Marco Gobbetti pushes to transform the brand known for its camel, red and black check designs into more of a top-end luxury player, in part by shaking up the product range.
"The challenge for Burberry in launching its new medium-term strategy to climb back up the luxury pyramid has been the fact that it is inherently weak in a core product area: leather goods," analysts at Jefferies said in a note, adding that the Italian deal was a welcome move.
Burberry, which reports preliminary results on Wednesday, has also brought in a new designer, former Givenchy star Riccardo Tisci, and overhauled several layers of management.
The brand does not break out how much of its manufacturing process is internal, though it is known to produce some of its trademark items, like its trench coats, in Britain.
Rivals are also making similar moves to tighten control over suppliers. Italy's Gucci, owned by the Kering (PA:PRTP) luxury conglomerate, earlier this year inaugurated a vast leather goods facility in Tuscany, with some 800 employees.
The Gucci ArtLab will be focused on prototyping as well as research into new materials and techniques.
Some other brands like LVMH's (PA:LVMH) Louis Vuitton or Hermes (PA:HRMS) have long had full control of their leather goods manufacturing, but are also looking to cut lead times as they look to meet thriving demand.