MILAN — In these uncertain times, Italian entrepreneurs are following their North Star, increasingly turning to what they are confident will provide a competitive advantage — i.e., strengthening their companies’ manufacturing pipeline and supply chain.
There is no reason to question whether this will continue in 2022, as the increasing price and scarcity of raw materials, shipment issues and political tensions weigh on companies’ bottom lines and inventories.
Zegna’s first day of trading in New York on Dec. 20 was certainly newsy enough in itself, but chairman and chief executive officer Gildo Zegna was asked again and again about potential acquisitions, given the additional financial muscle provided by the public listing. The response once again was Zegna’s reiterated interest in continuing to build the company’s Made in Italy platform. “I am a firm believer that nothing in the world compares to Italian craftsmanship and quality, and our goal is to create and have access to the best fabrics, textiles and other materials through our platform,” he contended. “We need scale.”
Last summer, Zegna and Prada CEO Patrizio Bertelli also made headlines with what was surely a major new partnership between two of the most respected companies in Italy, one that could pave the way for more of the same in the industry.
As reported, Zegna and Prada joined forces to acquire a majority stake in cashmere specialist Filati Biagioli Modesto SpA, and Bertelli at the time said: “We need more skills and to be stronger. There are no doubts the luxury market will grow — it’s evolving and we are adapting our industrial organizations to offer more service.”
Both Zegna and Prada have over the years built remarkable production platforms, but their leaders realize more needs to be done in such a competitive sector and to respond to the needs of increasingly savvy and demanding customers.
Protecting the pipeline also factors into these deals through the injection of new capital into small and medium-sized companies that can at times struggle to be competitive, preserving the unique skills of artisans who have contributed to the success of the Made in Italy label and supporting the transition into more sustainable practices, which will be increasingly key.
“We see the integration of different companies and M&A activities as a positive and encouraging sign,” said Claudia D’Arpizio, a partner at Bain & Co. in Milan. “They help companies evolve and get managerial structures, which are crucial to face present and future challenges.”
One such example is Gruppo Florence, the luxury production pole established in 2020 by industry veteran Francesco Trapani through private equity fund VAM Investments together with Fondo Italiano d’Investimento and Italmobiliare. Its goal is to supply high-quality Made in Italy products to major luxury fashion brands by acquiring family-owned, small and medium-sized Italian companies. However, Trapani believes it is key for Florence to rely on the founders and leaders of these companies to stay on, safeguarding their technical and cultural know-how but helping them to guarantee prompt and flexible deliveries and solutions.
Trapani is eyeing additional acquisitions after taking stakes in companies ranging from jersey specialist Manifatture Cesari to outerwear manufacturer Giuntini and knitwear firm Mely’s. These are all solid and technically advanced firms, which “are starting to understand it’s good to be part of a bigger group,” said Trapani, and whose small and medium size can represent a risk for the established and large brands Florence works with and that need to feel safe, the executive contends, warning against a possible fragmentation of suppliers.
To be sure, luxury brands rely on the Italian manufacturing pipeline, which covers all product categories and production steps, and the level of service they demand is becoming increasingly more sophisticated, which leads to the requirement for a more structured organization.
Mauro Grange, partner of the Made in Italy Fund, which is managed by Quadrivio and Pambianco and invests in wine, food, beauty, fashion and furniture, believes entrepreneurs are now more open to investors because they want to be helped to respond to these demands and not simply sell their companies. The fund, which has invested in companies ranging from Dondup and GCDS to Ghoud and Autry, operates with a long-term view. Its objective is to preserve the brand, working with the owners. Former Gucci and Golden Goose chairman Patrizio di Marco has also become an investor in the Made in Italy Fund and was named president of Ghoud and Autry.
Grange believes the fund can help by “providing a vision and a support to make bold decisions [that the founders of a company] perhaps would not make on their own. Very often they need to see things from a different perspective and we offer an outside point of view.”