Focus: Italy's luxury groups set aside rivalries to keep it local

Ermenegildo Zegna NV

14/07/2023 07:00

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      'Going it alone' out of fashion as challenges grow
    

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      Protects 'Made in Italy' reputation, craftsmanship
    

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      Italy does not have the big luxury giants of neighbour
France
    

  
    By Elisa Anzolin
       MILAN, July 14 (Reuters) - Italy's luxury fashion
groups, which for decades jealously guarded their independence,
have started teaming up to protect their supply chains and the
Italian roots of smaller companies, showing a new spirit of
collaboration.
    Control of the supply chain has become increasingly
important for luxury brands, ensuring products get to shops on
time and avoiding reputational risks linked to sourcing of raw
materials or labour conditions.
    Italy's patchwork of specialist artisan workshops and
family-owned labels offer particularly rich pickings for larger 
companies with the cash to cement relationships through
investment.
    In this spirit, Prada  1913.F  and fellow Italian fashion
brand Ermenegildo Zegna  JN0.F  in June acquired a minority
stake in knitwear company Luigi Fedeli e Figlio, based in Monza,
just north of Milan.
    The family-owned company, which has a focus on cashmere and
jumpers, was founded in 1934 and is distributed in 13 own-brand
boutiques and around 400 multi-brand stores worldwide.
    Prada and Zegna had previously invested jointly in Filati
Biagioli Modesto S.p.A. in 2021, acquiring a majority stake in
one of their suppliers, specialised in the production of
cashmere and other luxury yarns. 
    "We invested in Biagioli to relaunch a company that was in
crisis, while for Fedeli it's a case of helping the company to
grow," Patrizio Bertelli, leading shareholder and chairman of
Prada Group, told Reuters. 
    Bertelli, 77, added that smaller Italian companies have in
the last two decades had to juggle the handover from one
generation of the family to the next with more complex issues
such as expanding in new markets.
    "Italian brands have wanted to go it alone for too long, and
then suddenly they realise you can't always go it alone and you
start to look around," he added.
    
    SMALL MANUFACTURERS APLENTY 
    Italy is home to thousands of small manufacturers that cover
50-55% of the global production of luxury clothing and leather
goods, consultancy Bain calculates.
    "Biagioli and Fedeli are two different examples of caring
about 'made in Italy' and helping to strengthen the Italian
supply chain either directly or indirectly," said Gildo Zegna,
67, chairman and CEO of Ermenegildo Zegna.
    "Bertelli and I want to preserve the 'made in Italy' jewels
and keep the know-how in the country," Zegna added.
    The Italian groups are facing competition from French luxury
giants such as LVMH  LVMH.PA  or Gucci-owner Kering  PRTP.PA ,
which have also bought suppliers in Italy over the years,
especially in the leather industry. 
    LVMH announced in May it had taken a majority stake in Nuti
Ivo Group, an Italian company that has specialised in making
leather products since 1955. 
    Private equity firms have also sensed an investment
opportunity and started combining suppliers into larger
entities.
    Kering managing director Jean-Francois Palus said the luxury
group is increasingly looking to bring production in house. 
    It's an issue of traceability but also of quality, sourcing
of materials, shorter lead times to produce goods and get them
to the market and competition for specialist artisans among
brands, he said.
    
    FORGING CLOSER RELATIONS
    There have also been other examples of Franco-Italian
cooperation such as a deal whereby Chanel bought a stake in
cashmere yarn company Cariaggi Lanificio in partnership with
Brunello Cucinelli  BCU.MI .
    "Italy has not created a (major) luxury hub, but we have
entrepreneurs who have the ability to activate the right
relationships at the right time," said Stefania Lazzaroni,
general manager at Italian luxury industry association
Altagamma. 
    "The approach has changed, (it is) much more collaborative -
to face more complex challenges," she said.
    Indeed, Prada and Zegna's decision to invest together was
born out of a friendship strengthened by recent hard times.
    "We got to know each other better during the COVID pandemic,
in a difficult moment for the industry, when we needed to
support each other," Zegna said, adding that a fundamental role
was played by the meetings held at industry body Camera
Nazionale della Moda.
    Roberto Costa, head of Global Luxury Investment Banking for
Citigroup, said closer working ties reflected a more confident
and outward approach from Italian brands.
    "Italian groups are now more managerialised, more organised
and also stronger, which makes them more open to thinking
together," he said. But he did not necessarily see big deals in
the offing.
    "There is a greater ability to talk to each other, but this
does not mean that there will necessarily be mergers," he added.
    Zegna and Bertelli now sit together on the board of Fedeli
and Biagioli, leaving scope for more investments lower down the
supply chain.
    "If new opportunities arise we will grab them. Whether we do
it together or not remains to be seen," Zegna said.

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 (Reporting by Elisa Anzolin, additional reporting by Silvia
Aloisi, editing by Keith Weir and Jane Merriman)
 ((elisa.anzolin@thomsonreuters.com; 0039 0266129692;))