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How are things going at Scotch & Soda a year after the Bluestar acquisition?

How are things going at Scotch & Soda a year after the Bluestar acquisition?

Updated Wednesday, June 12 at 3:30 p.m

The European subsidiary of Scotch & Soda S&S Europe BV has been declared bankrupt. Stores and online store remain open. The reason for the bankruptcy is logistical problems after the restart in 2023 and continued losses as a result. The bankruptcy application was not only filed in the Netherlands, but also for branches in Germany, Belgium, Luxembourg and Austria. In total, there are 92 stores and 721 employees in these five countries, including 28 stores and 320 employees in the Netherlands. The focus is on rebooting, according to the press release. “A third party is expected to continue sales activities within two weeks in consultation with the brand owner Bluestar Alliance.”

Scotch & Soda has been owned by US investment firm Bluestar Alliance for more than a year. The rescue of the Dutch brand was welcomed with relief in early 2023, but since then it has remained quiet around the brand. The fourth bankruptcy report was published this week by the curator. FashionUnited has investigated and gathered everything we know at the moment. Consider: international activities, group expansions, new ambassadors and additional insolvency proceedings.

Back to the beginning: Scotch & Soda’s first bankruptcy report shows that in November 2022, it will already become clear that the company needs liquidity to continue operational activities. The financiers behind the company are not willing to provide additional financing, so a process of searching for capital is initiated. Within a few months, it becomes clear that such a process is meaningless, according to the bankruptcy report, and the sale process begins.

The sale focuses on the solvent portions of the Scotch & Soda range. However, there is a deadline: March 10, 2023, and the process must be completed because the group will not be able to pay the outstanding debts after that date. To prevent unrest, a request is made to appoint a “silent administrator”, but this does not lead to an immediate solution. During this administration, the “insolvency transaction”, i.e. a transaction resulting from the insolvency proceedings, is actually taken into account. Although the new sale process is still ongoing under the supervision of the official, the directors of the fashion group are forced to submit an application to declare bankruptcy for the company and its subsidiaries on March 20.

However, at the time of bankruptcy, four parties were still interested in Scotch & Soda, including the Bluestar Alliance. This is what the curator described in the first bankruptcy report. However, further negotiations and clarifications are still needed on a potential deal. [Opvallend is dat de bv’s betrokken bij Scotch & Soda Europa, een franchise tak van Bluestar Alliance, al een of twee dagen na het faillissement worden opgericht, terwijl een doorstart pas een week later wordt gerealiseerd.]

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Scotch & Soda will find a new home at the end of March at the American Bluestar Alliance. The investment company pays 60 million euros for the Dutch chain and in return receives operating assets, shares, intellectual property rights, group shares in the Netherlands, Benelux, Germany and Austria, cash in stores, all IT systems and goodwill. .

Bluestar Alliance describes itself as a company that “acquires, restores, manages and increases the value of brands.” Research conducted on Bluestar Alliance shows that the company often sells the brands in its portfolio within a few years, after expanding product categories and distribution channels. The acquired brand is usually sold again within three to seven years.

Scotch & Soda’s international activities have been temporarily curtailed

Following the acquisition, Bluestar Alliance will immediately enter into a partnership with S&S Europe, the existing European subsidiary of Scotch & Soda and United Legwear Apparel. This means that S&S Europe will continue the acquired subsidiaries in the Netherlands, Germany, Belgium and Austria. For this purpose, S&S Europe also signs a license agreement for the relevant intellectual property rights.

Bluestar Alliance itself will continue its activities in the United States, while stores in the United Kingdom will be closed. Scotch & Soda has not only that many stores in the area, but seven. in France Belgian player Alain Brockert was discussed. The Belgian group acquires Scotch & Soda Retail SAS. This gives it control over retail activities in France. Alain Brockert Group is an old acquaintance of Scotch & Soda, the company was the founder of Scotch & Soda Belgium and is active in Belgium and Luxembourg with the brand.

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Credit: Scotch & Soda/Gap

However, things are not going smoothly at the French branch, as a subsequent bankruptcy filing from Scotch & Soda shows. Due to financial problems, insolvency proceedings are filed in France. The Dutch bankruptcy trustee indicates that the sale of some French stores is being considered, but further information is not available at the time of publication of the fourth bankruptcy report in June 2024.

Bankruptcy reports show that operations in Canada, China, Denmark, Italy, Norway, Spain and Sweden have been halted.

Just months after bankruptcy, Scotch & Soda CEO Frederic Lukoff appears to have moved on to another company. Lokoff takes over the role of fashion brand Casablanca. There will be no announcement of a new CEO for Scotch & Soda, but some research shows that former CFO Thomas Bervoits is now CEO of the brand’s European arm. It is also the sole shareholder in a holding company above S&S Europe and S&S Europe Holdco BV.

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Bluestar is using a well-known strategy at Scotch & Soda: expanding the category and distribution channels

After Bluestar Alliance acquired the company, things remained quiet. Contacting the US parent company is difficult and the European branch refers to Bluestar Alliance. When communication is possible and written questions can be asked, there is no response. Very little comes online from Scotch & Soda. The company publishes only two advertisements on the fashion platform WWD.

The WWD letters state that Scotch & Soda wants to open a store in London (Carnaby Street), but also in China, the Middle East, South Africa and Europe.

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Joe Jonas is the first ambassador for Scotch & Soda.
Joe Jonas is the first ambassador for Scotch & Soda. Credits: Scotch and soda.

The report also shows that the brand’s product categories are being expanded, with a focus on women’s fashion. Dresses was mentioned as a “major growth opportunity.” Within the collection for both women and men, there is also a focus on mother-daughter and father-son matching sets. Bluestar Alliance is also looking for licensing partners with which it can expand product categories in Scotch & Soda, according to a post in WWD in early February. “The company is currently seeking cold weather shipments, small leather goods, fragrances, bags and a footwear licensing partner for the United States,” the statement read. Scotch & Soda’s Chief Product Officer stated in the announcement that the brand’s portfolio needs to diversify by entering into the lifestyle and accessories category. The strategy that Bluestar Alliance became famous for – buying a brand, expanding it and selling it again – appears to have already taken off.

Scotch & Soda has also managed to attract an eye-catching ambassador – superstar Joe Jonas. Jonas will co-create a capsule collection that will be released in the fall of 2024.

FashionUnited approached partners Bluestar Alliance, S&S Europe and Scotch & Soda several times in 2023 and 2024. Requests for information on strategy, number of stores and other pillars were declined or went unanswered. The different parties also referred to each other. This article was created using FashionUnited archives, bankruptcy reports from curators, Chamber of Commerce excerpts and press releases.