Fashion Brands Plot Future of Made in Italy Pipeline

MILAN — The future of Italy’s supply chain relies on personal relationships forged through the years as much as on financial support.

A web of small and medium-sized manufacturers contribute to the strength of Made in Italy production, and C-suite executives are aware of the importance of protecting the network in any way possible. The need was intensified during the COVID-19 pandemic, spurring a wave of mergers and acquisitions, joint ventures, and the creation of new production poles, such as Gruppo Florence.

However, there is no defined rulebook or cookie-cutter strategy to protect the pipeline.

Brunello Cucinelli, for example, explained that taking a 40 percent stake in Cariaggi Lanificio — his longtime cashmere supplier — was an exception, a decision made to support a partner, as one of the two previous owners wished to sell his stake and control and day-to-day management of the company remains in the hands of the Cariaggi family.

Cucinelli works with around 400 small companies, for a total of around 7,000 artisans, mostly in the central Umbria region, Marche, Tuscany and Veneto, depending on each district’s specialty. Around 70 percent of the manufacturers work exclusively for Cucinelli, who believes “entrepreneurs, private equity funds, financial investors speak a different language from the mom-and-pop artisans that make up the pipeline, and whose priorities are taste and quality, rather than profit. It may sound absurd but that’s the way it is.”

Curbing this creativity and a free, productive exchange with artisans with pressing financial concerns is risky, continued Cucinelli.

Touting “a strong bond” with the artisans, Cucinelli said he has “told them again and again that, whatever they need, from new air conditioning to restructuring their plant, we are there for them, to improve their quality of life. But I never thought of taking over — to each their own job.”

The investment in Cariaggi helps guarantee the supply and quality of the cashmere Cucinelli uses, providing a future for the next generations of both his company and that of Cariaggi as the generational handover in Italy is surely top of mind.

“We are very much engaged in the future of production for a planned growth of the luxury segment. It’s always been an absolute priority for us,” said Fendi chairman and chief executive officer Serge Brunschwig.

Last year Fendi unveiled a shoe factory in Fermo and a new state-of-the-art accessories plant in Tuscany, in Capannuccia, Bagno a Ripoli, a 30-minute drive from Florence, creating 350 new jobs, which will double in the next five years.

In addition to helping Fendi increase its control over the pipeline, the executive underscored that the plant is part of an initiative to train new generations of artisans and to communicate to future ones that this can be “a job for life,” which can provide much satisfaction. Fendi is supporting the “Adopt a School” project in Scandicci for bags and in Fermo for shoes to train new artisans, noted Brunschwig.

Last week Fendi and its parent LVMH Moët Hennessy Louis Vuitton presented with the Camera della Moda and the Confartigianato association their new project, the “Maestri d’Eccellenza” award dedicated to local master artisans to raise awareness of the importance of Italian craftsmanship and its preservation; develop media attention around the cause, and offer financial aid to some of its exponents.

Brunschwig spoke of a recent meeting with Adolfo Urso, minister of enterprises and of Made in Italy. Previously called the Ministry of Economic Development, Urso changed the name to reflect the importance of Italian production and Brunschwig said the minister is “very receptive. It seems to me that the government has understood the message and is engaged in promoting the Made in Italy label.”

Fendi in October also acquired a majority stake in knitwear specialist Maglificio Matisse — the first M&A deal for the Rome-based luxury company and yet another sign of the changes taking place throughout the manufacturing landscape in Italy, where established brands are increasingly investing in supporting small and medium-sized companies to protect their craftsmanship and know-how.

Giorgio Armani was a pioneer in building a well-structured organization. The G.A. Operations SpA is entirely controlled by Giorgio Armani SpA and “represents the production heart” of the group, said the designer.

“It is a very important structure that at the end of 2022 counted more than 1,200 employees,” he noted.

Of these, almost 70 percent are employed in internal production and distributed over 10 plants, in Piedmont, Lombardy, Emilia-Romagna, Veneto, Trentino and Marche. “This structure reflects still today the specialized production expertise and the crafts of the former licensees that the Armani group has acquired over the years,” he said. An example was the acquisition of the storied jeans and sportswear manufacturer Simint SpA in the late ‘90s.

Renzo Rosso, founder of the OTB Group, parent of brands including Jil Sander, Marni and Maison Margiela, among others, believes in supporting the pipeline “through a token presence” in small and medium-sized companies, which “must remain in the hands of the owners, without distorting them.” 

Rosso said the luxury sector is expected to continue to grow and that to be well-positioned in “this global challenge, groups like ours must form alliances with the pipeline, guaranteeing operational continuity and creating new growth opportunities, with a strong attention to sustainability.”

Since 2013, OTB has flanked suppliers with the aim of supporting small and medium-size enterprises and safeguard Made in Italy production by guaranteeing easier and speedier access to credit through the C.A.S.H. program, which stands for Credito Agevolato [facilitated credit] Suppliers Help. At the end of 2022 the credit surpassed 450 million euros, made available to companies all along the supply chain, from those that provide raw materials and fabrics to those producing for the company and offering special processes, such as dyeing and washing.

Italy is key for the Tod’s Group, too, as its production network is firmly rooted in the country, in particular in the Marche region, and chairman and CEO Diego Della Valle has always been a firm supporter of Made in Italy production.

The group’s craftsmanship is a source of pride for Della Valle and, in addition to the headquarters in Brancadoro, near Civitanova Marche covering more than 1.8 million square feet, the group works with a number of highly specialized sites in towns such as Comunanza, Tolentino, Monteprandone and Arquata del Tronto. The latter, which produces shoes, was built by Della Valle after the deadly earthquake that hit the area in 2016 to help support the local population and create jobs.

Della Valle believes that “today there is an increased sensibility” as to the role entrepreneurs play in society. They “must not only manage their companies but also embrace and deliver a strong message of solidarity and support toward those in need,” he contended.

“I live where I was born and our companies are here,” he continued, noting that, while the group’s business is international, he is always able to return home. “This helps to keep the center of gravity on authentic and fundamental values in life.”

The group is now building a new plant that will cover more than 43,000 square feet in Pontassieve, Tuscany, which will be dedicated to the production of handbags.

Further building on a longstanding commitment to Italian craft, Bottega Veneta will soon open a new shoe atelier in Vigonza, in the Veneto region, a storied footwear manufacturing hub.

Covering almost 59,000 square feet, the atelier is on track to be certified with Platinum LEED green building status and will be inaugurated in early May. It will house Bottega Veneta’s complete shoe production process, from first sketch to final product, through design, product development, material research, and prototyping.

“To complement our extraordinary capabilities in leather goods, we are delighted to inaugurate a new shoe atelier in Vigonza. The atelier honors our founding values of craft and creativity while continuing to build upon the region’s exceptional shoemaking tradition,” said CEO Leo Rongone.

“Bottega Veneta has always been connected to outstanding Italian craft. It is in our name — Bottega Veneta means ‘artisan workshop from Veneto.’ This new atelier will contribute in the further development of our home region and in the artisanal skills that are at the heart of our brand. With it, we will significantly extend our shoemaking teams and continue to carry the same remarkable craft and creativity that defines our bags over into footwear,” he added.

In 2021, as a sign of an increased effort to protect the country’s unique supply chain, the Prada and Ermenegildo Zegna groups joined forces to acquire a majority stake in Filati Biagioli Modesto SpA, which specializes in the production of cashmere and other precious yarns.

But technology is also key to protect the pipeline, according to the Prada Group, which is investing in the development of innovative digital solutions to support its supply chain.

A new system for product lifecycle management is being implemented, having selected highly advanced software based on SaaS (Software as a Service) technology.

“It will enable a more agile and digitized monitoring of all collection development steps, from design to product end-of-life, from cradle to grave,” said the company in a statement. “Industrial departments in all product categories will benefit from greater efficiency, widespread control and faster time-to-market.”

More than 100 Prada experts are involved in the implementation of the new PLM, and it will be available to more than 1,000 users at Prada from the end of 2023.

Another focus is the wider adoption of advanced 3D design.

“Implemented in 2020 for ready-to-wear, 3D design is now being progressively applied to all product categories, including footwear and leather goods. Major advantages in design and prototyping are being combined with a significant reduction of time to market. Digital product twin can explore new opportunities in e-commerce and prototyping, also advancing in adopting more sustainable practices and processes. The integration of these technologies will allow even more room for creativity, freeing up energies for all true value-added artisanal product development activities,” concluded the statement.

Massimo Ferretti, executive chairman of Aeffe, which controls the Alberta Ferretti, Moschino, Philosophy di Lorenzo Serafini and Pollini brands, said he does not believe in the acquisition of small and medium-sized manufacturers. “Rather, we work with them as partners, in a preferential relationship, and we take action if and when there is a need for intervention.”

Ferretti said Aeffe helped its suppliers through the pandemic “giving continuity, paying in advance, and strengthening the relationships. There is a future if the management remains in place.”

This is a view shared by the funds that back the Gruppo Florence production pole — private equity fund VAM Investments, Fondo Italiano d’Investimento and Italmobiliare — which own controlling stakes in several companies, ranging from Metaphor, which produces high-end knitwear, and informal outerwear manufacturers Emmegi and Giuntini to jersey specialist Manifatture Cesari and Ciemmeci, a company that specializes in the production of leather and fur pieces, among others. The founding families and controlling shareholders have agreed to maintain minority ownership of the companies they run.

The project was spearheaded by former Bulgari and LVMH executive Francesco Trapani beginning in fall 2020. He explained at the time that Gruppo Florence would “represent an efficient response to the needs of fashion companies looking for quality, organizational efficiency, attention to sustainability and a more solid financing.”

MinervaHub SpA, spearheaded by president Matteo Marzotto, is also quickly emerging as a leading aggregator of small- and medium-sized makers of components for luxury brands. MinervaHub was established last year to protect a number of Italian manufacturers in the supply chain that help create garments and accessories. For example, it acquired a majority stake in Jato 1991, which specializes in delicate and sophisticated hand embroideries, working over the years for the likes of Givenchy and Dior, Valentino, Gucci and Lanvin, to name a few.  Their owners have been re-investing in MinervaHub.