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INTERVIEW:Lacoste Expects China To Become Biggest Market

By Lena Lee -  DOW JONES NEWSWIRES

BEIJING (Dow Jones)--French clothing maker La Chemise Lacoste SA expects to make China its biggest market in 10 years time, now that a lengthy trademark dispute is behind it, the company's chairman said Friday.

"In 10 years, I would like China to be our No. 1 market in the world (contributing) perhaps 20% revenue," Bernard Lacoste told Dow Jones Newswires in an interview.

The mainland now accounts for 4%-5% of the company's approximately $1 billion in wholesale revenue worldwide.

"Our target is to reach $1.5 billion to $2 billion in 10 years...and a lot of that will be coming from China," he said.

That would be a substantial turnaround for Lacoste, a unit of Devanlay SA, which has struggled to establish its world-famous brand in China not least because of a dispute over its trademark with Hong Kong's Crocodile Garments Ltd. (0122.HK).

Both companies reached a settlement Wednesday in their four-year-long squabble that will result in Crocodile Garments adopting a new logo in China that is less like the smiling reptile used on Lacoste-branded products.

Freed of that burden, the French company aims to achieve its ambitious growth targets by becoming a "way of life" for consumers in China, Lacoste said.

"We want to offer to consumers not only clothing, but shoes, sunglasses, toiletries," he said.

Lacoste set up its first, now-defunct China boutique a decade ago on Shanghai's famed shopping avenue on Nanjing Road.

But faced with widespread counterfeiting and rival crocodile logos, the company has lost "millions of dollars," Lacoste said.

The settlement of the trademark dispute should help turn things around, he said.

"The settlement will allow us to develop without suffering from what I consider unfair competition," Lacoste said.

It also means the company can safeguard its legitimate retailers in China by better protecting the Lacoste brand.

Lacoste has 140 boutiques and other outlets in China and 3,000 to 4,000 full-time employees there, out of a total work force of 25,000 worldwide.

                     The War Against Fakes

As part of its expansion efforts, Lacoste plans to add a second manufacturing plant in Pudong, Shanghai, in the next three to four months, giving it two plants in China.

Up to 70% of China-made Lacoste garments, including those produced by about 50 contracted factories, are now exported, Lacoste said.

Securing the exclusive ownership of its right-facing crocodile emblem, which it registered in China in 1980, also will help the company step up its fight against counterfeit goods.

Lacoste said he estimates there are currently more than 100 counterfeiters of the company's products operating in China, although it is difficult to quantify how large a slice of its market share has been stolen by the pirates.

The company also bears the additional expense of hefty fees for lawyers and private investigators who it has enlisted in the war against counterfeiters.

Yet, Lacoste remains optimistic, saying that "2004, I hope, will be the cleanup year of the Chinese market. Then in 2005, we can launch in a cleaned-up situation."

He said China is paying "a lot of attention" to the protection of intellectual property rights and that the situation is improving, though slowly, year by year.

"This is normal. Many other countries took a very long time to get things done," Lacoste said. "In countries like Turkey, Thailand...we had tried for years getting our rights protected."

China entered the World Trade Organization in 2001 promising to improve the protection given to intellectual property rights. It has passed legislation to bring its trademark, patent and copyright laws into line with international standards, although the level of enforcement is still questionable.

Lacoste, who chairs the Committee on Intellectual Property Rights for the World Federation of Sporting Goods Industry, said it is important for China to step up efforts to safeguard intellectual property rights ahead of the 2008 Olympic Games in Beijing.

"Every time there is an Olympic Games in one country, counterfeiters like to take that opportunity to try to sell junk to the tourists or local people," he said.

Company Web Site: http://www.lacoste.com