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Luxury Rising

Canali is setting in motion a series of initiatives aimed to grow the brand and capitalize on its insider credibility.

SOVICO, Italy — Ask any high-net-worth man which tailored clothing brand he’d most likely tout at the yacht club and three times out four you’ll get one answer: Canali.

According to a recent study by New York–based Luxury Institute, 75 percent of respondents polled said they’d be most willing to recommend the high-end Italian brand to their nearest and dearests, beating out tony competitors like Ermenegildo Zegna, Brioni and Armani. And even with a limited ad budget, it still managed a reputable fourth on the Institute’s Luxury Brand Status Index. (Brioni came in first.)

Canali’s cachet has always been its word of mouth, but now the family-run company, based just outside of Milan, is setting in motion a series of initiatives aimed to grow the brand and capitalize on its insider credibility.

“Our philosophy has always been to do things step by step, never jump or take too many risks but establish steady growth and maintain a solid family business,” says Giorgio Canali, president of Canali’s North American operations, during a wide-ranging interview at the company’s HQ here late last year. “But now it’s time to give the business a little push.”

If Canali has seemed to lag behind certain market movements, it’s only because the family—now being guided by both the second and third generations—evaluates every move, almost to a fault, before pouncing.

“Our motto has always been, ‘piano, piano,’” Giorgio says, with a chuckle, using an Italian phrase, which roughly translates to “slowly but surely.” He adds, “But not too piano, piano.”

Don’t expect Canali to reach Formula One speeds quite yet but 2008 is shaping up to be an important year for the company, which was founded by Giorgio’s grandfather and great uncle, Giovanni and Giacomo Canali, in 1934.

Canali, after years of product extension, including the most recent introduction of socks and footwear, is in the midst of an identity transformation and is keen to complete its move from stellar manufacturer—it has one of the most impressive quality controls this side of the Alps—to lifestyle brand.

It’s embarked on celebrity placements, dressing top athletes and, most recently, outfitting George Clooney’s character in Michael Clayton. And while Hollywood may seem sweet, the family agrees directly owned retail outposts are key to building Canali’s image.

This year, the family will inaugurate a New York flagship on Wall Street and two other units, at The Palazzo in Las Vegas and in South Coast Plaza in Costa Mesa, Calif., respectively. The company currently owns two stores in Beverly Hills and in Coral Gables, Fla. “Retail stores are probably one of the best vehicles to better communicate our image, create a bigger presence, get our name out there and really showcase the entire collection in a complete way,” says Giorgio.

“Our own stores really allow us to communicate in an unequivocal manner,” adds Elisabetta, Giorgio’s cousin, and head of image, marketing and communications. “You have much more control over image and message.”

Control is also something the family is looking to exert over sportswear. While the category has been a success in Canali stores worldwide, it has proven problematic in the U.S., which represents close to 35 percent of Canali’s sales. Revenue last year rose 8 percent to 190 million euros, or $260.3 million at average 2007 rates.

Stripping out the effect of the currency, sales would have jumped 13.6 percent to 200 million euros, or $274 million. Giorgio said he expected double-digit growth for 2008.

“We feel a need to have a greater presence in sportswear in the U.S.,” says Giorgio. “We are growing in that category worldwide but we need to do better in the U.S., and we are hearing from our clients that we have an opportunity to do a bigger business.”

To wit, the company is overhauling its entire sportswear project, from design to delivery, to tailor fit the U.S. market.

Giorgio tells DNR that the company has tapped industry veteran Simone Eisold to head up the new North American–specific sportswear line, which will bow for spring ’09.

Eisold has more than 16 years experience with Hugo Boss and Ermenegildo Zegna, and was a fundamental player in establishing what is today’s Zegna’s upper-casual category.

“The collection will specifically target the North American market, in terms of styling, concept, fit and deliveries,” says Giorgio. “We’ve learned that it’s not the easiest thing to create a sportswear collection in Italy that targets the U.S. in the best way.”

Giorgio declined to give a sales forecast for the upcoming launch but says he “expects a big growth” in the first season.

Growth is a vital word for Canali and to further assist it the family has commenced an internal restructuring. A board of directors is being put together and, while it will only consist of family members, Giorgio points to it as a solid way to expedite decisions.

Outside the family, the company has started to hire regional and product managers. “As we grow in terms of product categories and markets, we are obviously looking for experienced people to help facilitate growth.”

While new markets and a redesigned sportswear collection are sure to pump up the top line, Canali is also seeing impressive gains in its recently launched “Exclusive” category, which features precious fabrics and thus allows the company to trade up.

Giorgio says “Exclusive” now accounts for about 10 percent of sales worldwide but, in some areas, like Russia, the percentage rises to 25 percent.

Of course, Canali’s bread and butter continues to be its tailored clothing, which industry insiders continually cite as one of, if not, the best garments for quality/price.

“Canali makes an incredible product that has a level of style and quality that speaks for itself,” says David Witman, executive vice-president of men’s wear at Nordstrom. “We’re extremely pleased with the response that our customers have had to the brand. The entire company is an incredible partner and that really begins with the Canali family themselves. We think they are one of the best organizations to work with in the industry.”

This week at Pitti Uomo all eyes will be on Canali, especially since its top competitor, Zegna, is gone. Canali is often portrayed as the David to Zegna’s Goliath and that’s fine by Giorgio. “Zegna is obviously much bigger but as long as we stay in that league, I feel good,” says Giorgio.

Yet he feels even better about Canali’s commitment to remain in Italy. All seven of Canali’s production facilities are based here and are currently operating at capacity, producing 1,400 hand-finished canvas suits and some 1,600 trousers daily.

Giorgio adds that a plan for a new Italy-based facility is on the table. “As more and more [brands] leave Italy for Eastern Europe or Asia, we’re doing completely the opposite,” he says. “Yes, we think twice before making a decision and ‘piano, piano’ is still a valid motto, but not too slowly. We’re ready to grab opportunities.”