Fashion up in flames: why Burberry burned unsold stock worth R506m
Luxury British fashion house Burberry destroyed hundreds of millions of rands worth of its fashion and cosmetic products over the past year to protect its brand.
The company burned unsold clothes, accessories and perfume worth around R506-million (£28.6 million), according to its annual report, in a practice now common across the industry to guard against counterfeiting.
Retailers describe it as a measure to protect intellectual property and prevent products being stolen or sold at discounted prices.
"Burberry has careful processes in place to minimise the amount of excess stock we produce," the company said in a statement.
"On the occasions when disposal of products is necessary, we do so in a responsible manner and we continue to seek ways to reduce and revalue our waste."
Among the products destroyed were around R184-million (£10.4-million) worth of beauty items, which Burberry said was a one-off related to a licence it agreed with beauty company Coty last year.
The firm - which announced a slight rise in annual profits in May to about R5.2-billion (£294-million) - has said it takes its environmental obligations seriously and harnesses the energy from burning the items.
It also pointed to partnerships with organisations such as the Ellen MacArthur Foundation that work to reduce waste in the industry.
But news of its destruction policy drew flak in Britain.
Lawmaker Tim Farron, environment spokesman for the opposition Liberal Democrat party, said: "It is outrageous that Burberry think setting fire to their unsold stock is an acceptable solution."
Noting recycling was "far better for the environment", he added: "As a leading British fashion brand they should be leading the way in sustainable fashion."
BURBERRY NOT ALONE
Since last week, when that piece of information buried in Burberry's 200-page report came to light, the brand has come under scrutiny on social and news media for the practice.
But industry experts say Burberry is far from alone.
"It is a widespread practice in the fashion industry, it's commonplace," said Arnaud Cadart, a portfolio manager at Flornoy and Associates who has previously followed the luxury industry as an analyst.
He said very few luxury brands hold sales to get rid of stock and instead destroy unsold products. Fashion items with short lifecycles increases the amount of leftover stock and items destroyed.
"Once you do some private sales to employees and journalists, it's dumping," he said.
French luxury giant LVMH said in its latest annual report that "provisions for impairment of inventories are ... generally required because of product obsolescence (end of season or collection, expiration date approaching, etc.) or lack of sales prospects."
Hermes' annual report also spoke of product "obsolescence (notably finished seasons or collections)".
Clear indications of the amount of products destroyed were not provided.
'NOT SOCIALLY RESPONSIBLE'
"It's clear this isn't going well" in terms of public opinion "because this isn't a 'green' practice and perhaps not socially responsible as there are people who don't have clothes to put on their backs," said Cadart.
"Yes, there is a moral, ethical question as well as protecting the environment," said Boriana Guimberteau, a specialist on intellectual property law at the FTPA law firm.
"But from a legal point of view, the brands are destroying genuine products which they own, products that are at the end of their life or the season, and they can do what what they want" with them, she said.
A tenet of maintaining brand image is that exclusive products should be sold in exclusive distribution networks and that markets shouldn't be flooded with end of season products
Guimberteau said a tenet of maintaining brand image is that exclusive products should be sold in exclusive distribution networks and that markets shouldn't be flooded with end of season products.
The manufacturers association Unifab, which defends intellectual property rights and combats counterfeiting, said there are different reasons firms destroy their unsold goods.
These can include a desire to ensure they don't enter other sales channels, while products such as perfumes and cosmetics have sell-by dates after which firms destroy them to ensure consumer safety.
Firms also destroy unsold goods "to protect its intellectual property, which is an asset," said Delphine Sarfati-Sobreira, Unifab's general director.
She deplored the witch hunt against Burberry, saying that a "firm which destroys its products will certainly produce others, thus giving work to some of its staff".