The full story: Scotch & Soda one year after the Bluestar takeover
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Business |EXCLUSIVE
The European branch of Scotch & Soda, S&S Europe B.V., has been declared bankrupt. The stores and webshop will remain open. The cause of the bankruptcy is logistical problems after the restart in 2023 and the resulting ongoing losses. Bankruptcy has not only been filed in the Netherlands, but also for the branches in Germany, Belgium, Luxembourg and Austria. In total, this involves 92 stores and 721 employees in these five countries, of which 28 stores and 320 employees are in the Netherlands. A restart is being worked on, according to the press release. "It is expected that within 2 weeks the sales activities will be continued by another party in consultation with brand owner Bluestar Alliance."
Scotch & Soda has now been in the hands of American investment company Bluestar Alliance for over a year. The rescue of the Dutch brand was welcomed with relief in early 2023, but since then it has been quiet around the brand. The fourth bankruptcy report was published this week by the administrator. FashionUnited investigated and gathered everything we know at the moment. Like: international activities, expansions of the collection, new ambassadors and additional insolvency proceedings.
Back to the beginning: From the first bankruptcy report of Scotch & Soda it appears that in November 2022 it already became clear that the company needed liquidity to continue its operational activities. The financiers behind the company are not willing to provide additional financing, so a process is started to look for additional capital. Within a few months it turns out that such a process is pointless, according to the bankruptcy report, so a sales process is started.
The sales process focuses on the solvent parts of the Scotch & Soda Group. However, there is a deadline attached to it, the process must be completed by March 10, 2023, because after that date the group will no longer be able to pay its debts. In order to prevent unrest, a request is made to appoint a 'silent administrator', but this does not immediately lead to a solution. During this administration, an 'insolvent transaction' is already taken into account, i.e. a transaction from an insolvency procedure. Although the new sales process under the administrator is still ongoing, the directors of the fashion group are forced to file for bankruptcy for the company and its subsidiaries on March 20. At the time of the bankruptcy, however, there are still four parties interested in Scotch & Soda, including Bluestar Alliance. This is described by the administrator in the first bankruptcy report. However, further negotiations and elaborations of a possible transaction are still necessary. [It is striking that the BVs involved in Scotch & Soda Europe, a franchise branch of Bluestar Alliance, are already established one or two days after the bankruptcy, while a restart is only realized a week later.] Scotch & Soda finds a new home at the end of March with Bluestar Alliance . The investment company pays 60 million euros for the Dutch chain and in return receives the company assets, inventory, intellectual property rights, the group's shares in the Netherlands, Benelux, Germany and Austria, the cash in the stores, all IT systems and the goodwill.
Bluestar Alliance describes itself as a company that “acquires, revitalizes, manages and enhances brands.” Research into Bluestar Alliance shows that the company often sells brands in its portfolio again within a few years, after expanding product categories and distribution channels. An acquired brand is usually sold again within three to seven years.
Scotch & Soda’s international activities are temporarily scaled back
After the acquisition, Bluestar Alliance immediately entered into a partnership with S&S Europe, now the European branch of Scotch & Soda and United Legwear Apparel. This means that S&S Europe will continue the acquired branches in the Netherlands, Germany, Belgium and Austria. To this end, S&S Europe is also signing a license agreement for the relevant intellectual property rights. The activities in the United States are being continued by Bluestar Alliance itself, while the stores in the United Kingdom are closed. Scotch & Soda does not have many stores in the area, only seven. In France, Belgian Groep Alain Broekaert will take over. The Belgian group is taking over Scotch & Soda Retail SAS. This gives it control of the retail activities in France. Groep Alain Broekaert is an old acquaintance of Scotch & Soda, as the company was the founder of Scotch & Soda Belgium and is active in Belgium and Luxembourg with the brand.
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However, things are not going smoothly at the French branch, as evidenced by a later bankruptcy report from Scotch & Soda. Due to financial problems, insolvency proceedings are being requested in France. The receiver of the Dutch bankruptcy indicates that a sale of certain French stores is being considered, but more information is not available at the time of publication of the fourth bankruptcy report in June 2024. The bankruptcy reports show that operations in Canada, China, Denmark, Italy, Norway, Spain and Sweden have been discontinued. A few months after the bankruptcy, it turns out that Scotch & Soda CEO Frederick Lukoff has moved to another company. Lukoff takes on the role of CEO at fashion brand Casablanca. An announcement for a new CEO of Scotch & Soda is not forthcoming, but some research shows that former CFO Thomas Bervoets is now the CEO of the European branch of the brand. He is also the sole shareholder of a holding company above operating companies S&S Europe and S&S Europe Holdco BV.
Bluestar deploys familiar strategy at Scotch & Soda: expanding category and distribution channels
After the acquisition by Bluestar Alliance, it remains quiet. Getting in touch with the parent company in the United States is difficult and the European branch refers to Bluestar Alliance. When contact is possible and written questions can be asked, no answer is forthcoming. Little is also coming out online from Scotch & Soda. The company only publishes two advertorials on fashion platform WWD. The messages it publishes on WWD make it clear 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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The advertorials also describe how the brand is expanding its product categories, with a focus on womenswear. Dresses are mentioned as “a big growth opportunity.” Matching mother-daughter and father-son sets are also part of the collections for both women and men. Bluestar Alliance is also looking for licensing partners to help expand Scotch & Soda’s product categories, WWD reported in early February. “The company is currently seeking partners for cold weather, small leather goods, fragrance, handbags and a U.S. footwear licensee,” the outlet reported. The brand’s chief product officer said in the advertorial that the brand’s portfolio should be diversified by entering the lifestyle and accessories categories. The strategy that Bluestar Alliance is known for — buying a brand, expanding it and selling it again — thus seems to be underway. Scotch & Soda has also signed a high-profile ambassador: musician Joe Jonas. Jonas is involved in creating a capsule collection that is set to launch in fall 2024.
FashionUnited has reached out to Bluestar Alliance, S&S Europe and Scotch & Soda affiliates multiple times in 2023 and 2024. Requests for information on strategy, store count and other pillars were declined or went unanswered. The various parties also referred to each other. This article was created using the FashionUnited archive, bankruptcy reports from administrator, Dutch Chamber of Commerce extracts and press releases.