Exceptional Financing Opportunity in Prestige Vicuña Fiber

Creating a strong peruvian

supplier for the World most

Prestigious fiber - Vicuña !

By Swiss Corpoarte Advisors SAC

February 2014

Executive Summary

February 2014

1. Vicuña Sector in Perù: Perù produced 70% of the World Vicuña fiber output in 2012. The country

hosts 140’000 wild vicuña animals and breeders are local family workers. 8 companies has the State

license for Vicuña exploitation and two main luxury Groups controls 35% of the purchases of Vicuña

fiber. In consequence, Perù still suffer from disrupted production and manufacturing bottle-necks.

Emergence of new players will boost the development of the sector and create a new dynamism within

the yarn & textile manufacturing industry …

2. The Company: It is a new Peruvian corporation which collects, purchases and sells Vicuña fiber to

Peruvian and international manufacturers, based on “Fair Trade” agreements. The new corporation is a

local and well introduced entity, managed by local personalities which will be located in Ayacucho city,

in the central region of Perù…

3. Market opportunity: World personal luxury goods industry, in particular menswear enjoyed strong

growth and this trend is expected to continue up to 2020. Italy, France and USA accounts 71% of the

world luxury brands. Italy is the leader in manufacturing prestige menswear and supplies the major

Groups and brands. Vicuña fiber is perceived as the most exquisite fiber for prestige menswear. Only

tow Italian prestige brands are sourcing Vicuña fiber directly from the Peruvian breeders. But, not all…

4. Company development project: The corporation will be one of the very few Vicuña entity which

offer long term “Fair Trade” agreements to the Andean community, securing decent revenues for their

family. With collection of over 60% of all Vicuña fiber production in Perù, the new entity will stabilize the

market offer. This development project request a financing of USD xxx xxx, for interested partners of

the luxury industry, in order to benefit of a reliable high quality Vicuña fiber and become the “Supplier

of Choice” for Vicuña fiber in Perù. In this regards, partnerships, Joint-Ventures and strategic alliances

are welcome…

1. World Vicuña production

1.1 World production of Vicuña The world production of Vicuña fiber was 3’500 kilos in 2012. Perù is the leading Vicuña fiber

producer. It represents 71% of the world output. Since 2006, Peruvian exports of Vicuña increased

by 154% or 22% yearly !

8%

Source: SCA/Minagri Perù

February 2014

Source: SCA/Minagri

1. Peruvian Vicuña sector

1.1 Vicuña supply-chain & market size Peruvian Vicuña sector is unstructured: The family breeders (Production of raw fiber) and very few

specialized yarns mills (Manufacturers I) both represent an equivalent of 99,3% of all Peruvian

Vicuña products exported in 2012. The manufacturing sector does not exist.

2,4 mio Market size 8,3 mio 32 mio 61 mio

Vicuña

Perù

Source: SCA

February 2014

1. Peruvian Vicuña sector

1.2 Vicuña production Over 780 communities produced 6’450 kilos of fiber in 2012. These families are selling raw Vicuña

fiber (called “sucia”) at an average of USD 390 per kilo to producers associations, independent

traders or directly to international brands. With 175 animals, breeders have poor incomes. Raw fiber

represents a market size of USD 2,4 million. Zegna (35% and Loro Piana 5%) are the major buyers.

The Vicuña fiber is sold in 3 various conditions, a) “Sucia” (raw, uncleaned and unconditioned) at

USD 350/kg, b) “Pre-desherbado” (pre-conditioned for cleaning) at USD 450/kg and c)

“Desherbado” (cleaned) at USD 650/kg. Natural monocolors, such as very rare “white” are much

more expensive. Conditioned fiber represents a market size of USD 4,6 mio. Peru directly exports

99,3% of its Vicuña raw fiber to international luxury Groups (Zegna, LVMH) without transformation !

1.3 Vicuña manufacture I & II There are 2 mills which can manufacture Vicuña yarns in Perù. These two mills are concentrating

100% of the manufacturing sector I. Both are located in Arequipa. Price of 100% Vicuña yarns

reaches up to USD 1’200. Yarns market size represents USD 8,6 million. Peru exports only 0,5% of

Vicuña yarns, du to a lack of highly specialized know-how and rare skills.

The specialized mills are using yarns for their production of own Fashion textile brands (“Kuna” and

“Sol Alapca”) and selling yarns to very few international niche brands. These manufacturers are

selling finished clothes to national and international markets under their own brands. They do not

supply external brands. Finished Vicuña textile products represents a market size of USD 32 million.

Peru only exports 0,2% of Vicuña fabrics and textiles. The 2 recognized brands, Kuna (Inka Group)

and Sol Alpaca (Grupo Mitchell) are not relevant in Peruvian exports (0,2%) and luxury industry.

February 2014

1. Peruvian Vicuña sector

1.4 Production opportunity statement Unfortunately, the Peruvian Vicuña sector remains very small and underdeveloped, ineffective in

production, inexistent in manufacturing and suffers from a lack of local private players to revitalize

the internal market and the Peruvian exports.

■ Lack of investments in industrial production infrastructures for breeders to care animals, to

increase capacity and to enhance quality of raw fiber of Vicuña.

■ Ineffective and costly organisation system of raw fiber collection between family breeders,

independent agents and international companies, where prices increase sharply without

providing any added-value to the product.

■ Lack of players for specialized Vicuña mills in Perù to support substantial R&D activities

and to be able to offer constant innovative high quality yarns in selected volume to the

international prestige brands / Groups.

■ No manufacturing capacity, know-how and skills of Vicuña fabrics & textiles to provide

serious supply alternatives and offer significant Vicuña product diversification to national and

international customers.

The is an opportunity for a new strong local Corporation to

(re)organise and stabilize the private Peruvian Vicuña sector

February 2014

2. Company profile

2.1 The selected Corporation It is a Peruvian registered corporation, with offices in Ayacucho, Perù. It will be operating in 2014 by

a local engineer with wide and significant expertise within the Camelids sector in the region. The

Director has more than 25 years experience working with the Andean communities who grow

Vicuñas in the Ayacucho region and use to visit them very often.

The Corporation will purchase raw Vicuña fibre directly from family breeders and local associations

of producers in the centre of Peru. It will participate to Chakus and collect directly from the breeders

all Vicuña raw fiber available. It will centralise the regional production of the fiber and sell it to the

local manufacturers and international textile companies.

Presently the Corporation has its own access to family breeders, and collection logistics within the

Ayacucho region. In addition, the Corporation will implement a complete health program dedicated

to the wild Vicuña animals, in order to enhance animals health condition and increase production of

fiber by 60% over a 9 to 12 month period. Consequently, production of Vicuña fiber in the Ayacucho

region can reach from 1’400 kg to 2’250kg, and so represents 70% of the national production or

approx. 50% of the World output.

The Corporation will commercializes a limited variety of Vicuña fiber (“sucia”, “per-desherbada” y

“desherbada”) to national and international manufacturer, in particular to World prestigious brands

and luxury Groups.

February 2014

2. Company profile

2.2 Infrastructure, collect & animal care The Corporation will be one of the few specialized

Vicuña association with State licence for collecting and

commercializing Vicuña fiber in Perù. It will have direct

access to breeders families and communities, develop

a complete logistic infrastructure for transportation of

the fiber and have significant financial capital to

purchase and invest in future production of breeders.

It will be the only significant Corporation of Vicuña fiber

to be established in the centre of Perù with a dedicated

collection logistics and purchase capacity (Ayacucho).

It is also the heart of the Andean region where the rare

population of wild Vicuña lives (Vicuña is only 2,5% of

the total Camelids). Commercializing rare Vicuña fiber

shall request substantial investments and shall offer a

reliable source of supply for demanding customers.

It will develop advanced social responsibility programs

for family breeders in the region, in providing medical

services to the wild animal population and social

support to the poor Andean communities who are

working with the Vicuña. Other fair trade programs are

planed for future implementation. Source: SCA Vicuña in Perù

February 2014

2. Corporation profile

2.3 Corporation opportunity statement The specific location of the Corporation will be Ayacucho and its surroundings, at only 3 hours drive

from Ica offers the Corporation an exceptional opportunity of development. The central region of

Perù - heart of wild Vicuña territory -, even more than the country in its whole suffers from:

■ Limited investments in animal health treatments, production infrastructures for

breeders to increase capacity and to enhance quality of raw fiber of Vicuña.

■ Ineffective organisation of raw fiber collection between family breeders and the

Corporation, where prices increase without providing any added-value to the product.

■ Lack of Vicuña mills and absence of Vicuña yarns production capacity in the central

region of Perù,

■ Absence of manufacturing capacity of Vicuña fabrics & textiles to provide a

differentiated supply and to offer innovative Vicuña fashion collections to demanding

national and international customers.

There is a rare opportunity for the Corporation to support

communities , care the animals, and to optimize the collection

of Vicuña production in the central region of Perù,

which can produces 70% of the country output

February 2014

3. Market Opportunity

3.1 Vicuña natural fiber as prestigious raw material Vicuña fiber is an extremely rare natural raw material, and benefits of exceptional qualities and

considerations to be the most prestigious raw material in the textile industry, Vicuña is simply:

■ EXTREMELY RARE: It has a very limited production capacity, due to the region

where Vicuña animal can live, due to the protection of Vicuña wild animals and

due to the low rate of top quality fibers each animal produces every 2 years.

■ EXEPTIONALLY FINE & COMFORTABLE: It offer an exceptional high level of

clothes comfort, because the fiber is extremely fine, soft, warm and elastic. Its

texture has a silky touch. It very resistant to humidity, fire and other micro-

organisms. Clothes keep their appearance and shape over the time.

■ AUTHENTIC, NATURAL & WILD: Vicuña is a

natural fiber, produced by authentic wild animals in

comparison to synthetic fibers. Its fiber colours are

natural and clothes made without chemical treatments.

Prestige clothes are “100% Vicuña” made.

■ EXCEPTIONAL IMAGE: Vicuña clothes was

reserved to the Inka royal families. Vicuña animal

transmits a beautiful image of wild and peaceful

animals living with total freedom in the wide regions of

the Andeans. Vicuña also stand on the arms of the

Peruvian national flag

February 2014

3. Market Opportunity

3.2 Prestigious fiber alternatives Vicuña is from far the World finest fibers, much finer than Guanaco, Mohair, Cashmere and Alpaca.

Vicuña fibers have an extreme thinness

From 10µ to 12µ, and is not easy to

spin and request highly qualified

skill to manufacture.

Prestigious brands are

offering fine Vicuña

products much more

expensive than

Cashmere

ones.

Source: SCA

February 2014

3. Market Opportunity

3.2 Prestige Vicuña and potential fiber alternatives Vicuña fiber are out of competition, it thinness is incomparable to any other luxury fiber. In

consequence, Vicuña products are simply out of access for any other luxury textile products.

■ Alpaca & cashmere

Alpaca (approx 4’900 tonnes/year) has similar production volumes with Cashmere (approx. 5’200

tonnes/year), as well as similar high quality fiber characteristics (Use comfort). Presently, high quality

Alpaca (USD 30) has prices 50% to 70% lower than similar Cashmere quality (USD 90 to 100).

Alpaca fiber is much less known by final consumers, even if image of Alpaca (Llama type) animal is

certainly much more attractive than Cashmere coats (Sheep type). Alpaca and Cashmere clothes or

products can be same or sold to the same consumers

■ Mohair & other natural quality fibers

Mohair is mainly use for its furs, even if thinness and softness is exceptional. Therefore, Mohair and

Cashmere are facing some hypoallergenic phenomenon which make more difficult for such products

to be sold. Mohair also suffers from Rabbit image. Rabbit are domesticated directly by end-users and

could affect relation between the product and the consumers.

February 2014

3. Market Opportunity

3.3 Luxury markets & menswear sector Luxury goods industry is one of the world fastest growing market, with 33% constant sales increase

during the last 7 years. Luxury & Prestige menswear sector was facing double digits growth, and this

trend is expected to continue up to 2020. Italy is the leading menswear industry with world recognition.

Major Italian luxury & prestige brands benefit from this positive growth and strong demand.

Source: Bain & Co Source: SCA/Bain & Co

February 2014

3. Market Opportunity

3.3 Prestige markets & menswear sector Hermès, Zegna, Loro Piana, Brioni, Corneliani, Kiton, Scabal, Namani …are finding in Vicuña fiber the

most exceptional textile raw material existing on Earth. It can offer bespoke models to its most

demanding clients. USA, Japan, Europe are the major exports markets, therefore strong growth comes

directly from emerging markets such as China, Russia… Other larger luxury fashion brands, most of

which belongs to world top Luxury Groups (LVMH and Kering in France) are facing similar trends.

Major prestige menswear manufacturers in

Italy, UK or USA are looking for new sources of

rare raw materials, who can provides consistant

quality with some volumes. Italian players are

presently looking for top-of-the-Art «suppliers»

of high quality fiber in their respective producing

countries (Perù/Argentina for Vicuña).

Prestige menswear (and also womenswear at

lower pace) is facing extremely strong demand.

Pressure is transmitted to producing countries.

Prestige menswear is highly fragmented, with

few world-known brands and so many small

independent companies - the bespoke tailors.

Source: SCA

February 2014

3. Market Opportunity

3.4 Market opportunity statement Prestige menswear is facing very strong World demand and is requesting reliable suppliers of rare raw

materials such as Vicuña. The prestige, in particular the menswear industry is

There is an exceptional opportunity for Perù

to create a strong local Corporation

which acts as reliable supplier of

the world major prestige brands.

■ Facing very strong 16% average grow rate since 2006, and it will continue up to 2020

! Prestige is crisis very resilient.

■ Prestige menswear brands are looking for strategic access to rare/unique raw

materials, in order to secure supply and keep exclusive differentiation potential from the

competition.

■ Vicuña offers a unique, extremely rare and prestigious raw material with high

potential of differentiation and with a positive image (wild, peaceful and free animal).

■ As major producer of Vicuña, Perù represents the right partner for prestige menswear

brands to purchase luxury fibers.

February 2014

4. Project of Development

…. Interested to know more

about the Project of

Development … ?

February 2014

5. Contact

February 2014

SWISS CORPORATE ADVISORS San Isidro, Lima

PERU

E-mail [email protected]

Phone +51 980 795 980

Skype Pseudo SwissCAD001

SWISS CORPORATE ADVISORS Geneva

SWITZERLAND

E-mail [email protected]

Phone Int’l +44 7 452 373 748

Skype Pseudo SwissCAD002

… Please contact :

The Way

to Success !