Italian fashion groups put aside their rivalries to preserve “Made in Italy”

Controlling the supply chain has become increasingly important for luxury brands, ensuring products reach stores on time and avoiding reputational risks related to raw material sourcing or working conditions. .

Italy’s patchwork of specialist artisan workshops and family-run labels offers a particularly rich selection for large companies with the cash to cement relationships through investment.

With that in mind, Prada and Italian fashion label Ermenegildo Zegna acquired a minority stake in the Monza-based knitwear company Luigi Fedeli e Figlio in June, just north of Milan.

The family business, which focuses on cashmere and sweaters, was founded in 1934 and is distributed through 13 own brand boutiques and around 400 multi-brand stores worldwide.

Prada and Zegna had previously jointly invested in Filati Biagioli Modesto SpA in 2021, acquiring a majority stake in one of their suppliers, which specializes in the production of cashmere and other luxury yarns.

“We invested in Biagioli to revive a company that was in crisis, whereas for Fedeli it is about helping the company to develop,” Patrizio Bertelli, the main shareholder and chairman of the Prada group, told Reuters.

Bertelli, 77, added that over the past two decades Italian small businesses have had to juggle passing on from one family generation to the next with more complex issues such as expanding into new markets.

“Italian brands have wanted to go it alone for too long, then suddenly they realize that you can’t always go it alone and you start looking around,” he added.

Small makers galore

Italy is home to thousands of small manufacturers who cover 50-55% of 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, directly or indirectly,” said Gildo Zegna, 67, president and CEO of Ermenegildo Zegna.

“Bertelli and I want to preserve ‘Made in Italy’ jewelry and keep the craftsmanship in the country,” Zegna added.

Italian groups face competition from French luxury giants like LVMH or Kering, owner of Gucci, which have also bought suppliers in Italy over the years, particularly in the leather industry.

LVMH announced in May that it had taken a majority stake in Nuti Ivo Group, an Italian company specializing in the manufacture of leather products since 1955.

Private equity firms also sensed an investment opportunity and began consolidating suppliers into larger entities.

Kering chief executive Jean-Francois Palus said the luxury group was increasingly looking to bring production in-house.

It’s a question of traceability but also of quality, sourcing of materials, shorter lead times to produce goods and get them to market, and competition for specialist craftsmen between brands, he said.

Forge closer relationships

There have also been other examples of Franco-Italian cooperation such as an agreement by which Chanel bought a stake in the cashmere yarn company Cariaggi Lanificio in partnership with Brunello Cucinelli.

“Italy hasn’t 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, chief executive of the Italian luxury association. the Altagamma luxury industry.

“The approach has changed, [it is] much more collaborative – to deal with more complex challenges,” she said.

Indeed, the decision of Prada and Zegna to invest together was born from a friendship reinforced by the last difficult moments.

“We got to know each other better during the Covid pandemic, in a difficult time for the industry, where we had to support each other,” said Zegna, adding that a fundamental role was played by the meetings held at the industry body Camera Nazionale della Mode.

Roberto Costa, head of Global Luxury Investment Banking for Citigroup, said closer working ties reflected a more confident and open approach to Italian brands.

“Italian groups are now more managerialized, more organized and also stronger, which makes them more open to thinking together,” he said. But he didn’t necessarily see big business in sight.

“There is a greater ability to talk to each other, but that doesn’t mean there will necessarily be mergers,” he added.

Zegna and Bertelli now sit together on the board of Fedeli and Biagioli, making room for more investment lower down the supply chain.

“If new opportunities arise, we will seize them. Whether we do it together or not remains to be seen,” Zegna said.

By Elisa Anzolin and Silvia Aloisi; Editors: Keith Weir and Jane Merriman

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