For Supreme, Why Pressure to Grow Quickly Could Come at a Huge Cost

What does trendy streetwear brand Supreme have in common with Dr. Pepper, Dunkin’ Donuts and vitamin maker Nature’s Bounty? If you’re scratching your head at that question, you’re not alone.

Supreme — a brand that built its reputation on hard-to-get releases, wrap-around-the-block lines and buzzy collaborations — confirmed on Friday that it has taken an investment from private equity firm The Carlyle Group, whose portfolio includes a range of consumer brands, including those listed above.

“We’re a growing brand, and to sustain that growth, we’ve chosen to work with Carlyle, [which] has the operational expertise needed to keep us on the steady path we’ve been on since 1994,” said Supreme founder James Jebbia, who confirmed the news to Business of Fashion exclusively. “Working with Carlyle allows us to concentrate on doing what we do best and remain in control of our brand as we always have.

The terms of the transaction were undisclosed, but reports suggest Carlyle took as much as a 50 percent stake in the label, with an investment of $500 million. A report from WWD further estimates that the once-niche brand now has a valuation of $1 billion — but that its founder may want to keep some of those numbers under wraps for fear of trading in Supreme’s cool factor.

Jebbia might have good reason to do so.

I don’t see how a brand can be street and corporate at the same time,” said Matt Powell, a sports industry analyst with The NPD Group Inc., suggesting that an alliance with private equity could sour Supreme’s street appeal.

What’s more, the strategies that a private equity firm could push in order to maximize its investments could put a lot at stake for Supreme and its core customer.

Private equity [firms] always wants to get their money out of these deals within short window,” Powell said. “A brand like Supreme has really been built around exclusivity and narrow distribution. When you have this private equity money and they’re saying, ‘We want you to grow,’ the only way you could really do that is to expand your distribution, sell to more retailers, make more product.”

And those tactics, Powell notes, are the antithesis of Supreme’s original vision.

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