Columbia to take 60 percent stake in Chinese distribution

Columbia Sportswear announced a deal Wednesday that will give the Portland, Ore-based company a 60-percent stake of its products’ distribution business in China starting in 2014.

The company signed a joint-venture agreement with its current Columbia and Mountain Hardwear distributor Swire Resources Ltd., which has been handling the Chinese market independently, yet exclusively, for the past eight years. Financial terms of the deal were not disclosed.

Swire sells to a network of retailers in 135 cities, including 530 stores carrying Columbia product and 45 stores carrying Mountain Hardwear items. The distributor also operates more than 70 Columbia-branded retail locations. Swire’s Columbia sales totaled $123 million in 2011.

“They’ve been a great distributor for us, but it’s always been somewhat at arm’s length,” Columbia Senior Director of Corporate Communications Ron Parham told SNEWS. “From a pure business standpoint, we will take a 60 percent stake in the business. That’s additional revenue and income and gives us a more active role in China. From a retail and consumer standpoint, it will bring a more consistent presentation of the Columbia and Mountain Hardwear brands and expand the retail network over there.”

The deal has a 20-year term with a mutual option for Columbia to buy out Swire’s stake at the end of five years. The new joint venture will go into effect on Jan. 1, 2014, and will be headquartered in Shanghai. Revenue, profit and losses will be split on a 60-percent Columbia/40-percent Swire basis. Officials anticipate the new joint venture will employ about 650-700 current Swire employees and contractors.

The joint venture in China is unique to Columbia, Parham told SNEWS. Usually, once a country’s independent distribution becomes significant enough, Columbia will convert it to a direct subsidiary, as it has in more than 30 countries, mostly in Europe, Canada, Japan and Korea. But the Chinese market is a lot more complex, particularly on the regulatory end, so a joint venture was the next logical solution, he said.

“It takes Swire’s expertise and combines it with our financial backing,” Parham said. But, there also could be some hardships with a joint venture — such as decision disagreements between the two different owners, Columbia officials noted in a public filing.

Columbia continues to do business through independent distributors in about 100 countries — the largest, following the close of this deal, will be Russia.

–David Clucas