Marzotto S.p.A. - Company Profile, Information, Business Description, History, Background Information on Marzotto S.p.A.



Largo S. Margherita, 1
36078 Valdagno
Vicenze
Italy

Company Perspectives:

Marzotto Group currently covers the full scope of yarn, fabric, and apparel sectors. The company does not have a vertically organized structure; rather, it is arranged in a network of companies that literally "mind their own business." The Marzotto network aims at satisfying its customers, creating lasting wealth, and gaining a competitive edge. Marzotto's success rests on the following factors: an efficient and exclusive clientele in leading world markets; continuous innovation of its products and services; "state of the art" technology; a solid financial structure.

History of Marzotto S.p.A.

Italy's largest textile manufacturer, Marzotto S.p.A. is a vertically integrated producer of fabrics, yarns, and clothing with operations around the world. Though the company's origins are in fabric manufacture--it continued in the mid-1990s to be Europe's largest producer of wool and linen--its future success appeared to be pinned to its growing apparel operations, which ranked second among Europe's clothing companies. In addition to its own labels--Principe by Marzotto, Ciao, and Accento, among others--the company also produces apparel under license from such well-known designers as Gianfranco Ferrè and Missoni. The company's controlling stake in German menswear house Hugo Boss generated nearly half of global sales in the mid-1990s. Private-label clothing rounds out the line. Once the company's sole business, textile operations had by this time shrunk to about 36 percent of annual revenues. Over 70 percent of sales are made outside Italy. Throughout its more than 160 years in operation, the company has been led by five successive generations of Marzotto men, with Pietro Marzotto in the role of chairman in the late 1990s. The family continued to own a majority stake in the firm through this period as well.

Mid-19th-Century Origins and Early 20th-Century Development

The firm was founded in the town of Valdagno in 1836, before the collection of independent states later known as Italy had even achieved nationhood. Members of the nobility, the Marzottos were by no means poor; Luigi Marzotto established his woolens mill with a capital of 2,000 Venetian Lire, the equivalent of nearly $100,000 in the mid-1990s. He handed the business over to son Gaetano in 1842. The unification of the kingdom of Italy in 1861 opened new markets to the company, and its location in the northeastern region of the nation--which made the transition from an agrarian to an industrial economy more quickly than southern Italy--gave it an advantage over its competitors to the south. By 1866, 200 employees worked the company's carding, spinning, and dyeing machines and weaving looms. An 1880 expansion took the Marzottos to nearby Maglio, where Gaetano built a new spinning factory. The wool industry had by this time become one of Italy's largest, in terms of both employment and production, and enjoyed protective tariffs of up to 40 percent in the waning years of the nineteenth century.

By the turn of the century, Marzotto's payroll had risen to over 1,200. When Gaetano died in 1910, the company was split in two; son Vittorio Emanuele, who has been credited with leading the company into the export business, inherited the Valdagno operations, while Gaetano's grandsons took over the Maglio mill. Despite inflation, high unemployment, and rampant strikes in the period between the two world wars, the Marzotto group continued to grow. In fact, Vittorio was able to open another worsted wool mill during this period. By the time Gaetano Marzotto Jr. inherited the Valdagno mill from his father in 1921, the company employed over 2,000.

A company history characterizes Gaetano Jr. as "an authentic founder of the family business." His efforts at modernization and expansion during the fascist-dominated 1920s strengthened the company to the extent that it not only survived the Great Depression without being nationalized, but also reacquired the family mill in Maglio. The leader capitalized on continental textile manufacturers' difficulties during this period, expanding exports to Eastern Europe, Latin America, and throughout the Mediterranean region. Experiencing difficulty in finding suitable lodgings during his nationwide travels, Gaetano Jr. also established the Jolly hotel chain, which the Marzotto family would continue to own and operate throughout the twentieth century.

Transformation Begins in 1950s, Accelerates in 1970s

Although the company came under government control during World War II, Gaetano resumed ownership at the conflict's end. He capitalized on Italy's "economic miracle"--a period of currency stabilization and exuberant industrial growth from the mid-1940s to the mid-1960s--by diversifying into the manufacture of traditionally-styled, private-label menswear during an early 1950s downturn in the core textile business. Though inflation and subsequent wage indexing (quarterly increases that corresponded to the rate of inflation) regularly increased hourly pay, worker unrest began in the late 1960s and continued throughout much of the 1970s. In 1969, striking laborers demolished a statue of patriarch Gaetano Marzotto in the middle of what had become the "company town" of Valdagno.

When Gaetano Jr. died in 1972, his son Giannino and grandson Pietro inherited an essentially healthy but outdated business. Modernization, both of production and management techniques, intensified under Marzotto's fifth generation of family management. "Stagflation"--slow economic growth combined with hyperinflation--brought a sense of urgency to these efforts. Whereas increases in employment levels had previously been a positive indication of the textile group's condition, high labor expenses made a fat payroll a distinct disadvantage in the 1970s and beyond. Pietro reduced employment from 9,000 in 1976 to 4,500 by 1986 and simultaneously managed to refurbish the company's plants without incurring excessive debt. Having gone public in 1961, the company issued voting shares in 1981. Marzotto started selling its private label apparel to retailers in the U.S. in 1973 and by 1985, when the parent company established an American subsidiary, two-fifths of its L402 billion sales were made outside Italy.

Geographic and Product Diversification Via Acquisition Begins in Mid-1980s

The gradual, yet cumulatively revolutionary strategy that unfolded at Marzotto over the decade from 1985 to 1995 incorporated three key goals: reduction of overheads, upmarket expansion in apparel, and elimination of non-core or loss-plagued operations. These objectives were achieved through acquisitions, divestments, restructuring, and internal development.



In a March 1988 interview with WWD's Mark Ganem, Pietro likened his corporate acquisition strategy to a moderate diet, noting that "Even after the best dinner, a big dessert can ruin everything." To illustrate, the company acquired the FinBassetti Group, including its controlling interest in Linificio e Canapificio Nazionale, in 1985, but waited two years while integrating those operations before making a second purchase. The 1987 acquisition of Italy's Lanerossi increased Marzotto's total revenues by more than 72 percent, from L402 billion in 1985 to L691.5 billion in 1986. The L168 billion purchase, which catapulted Marzotto to the top of Italy's textile and apparel heap, was made over bids by competitors like Benetton, the Bertrand Group, and Cotonificio Cantoni. Furthermore, the addition of Lanerossi made Marzotto Europe's first fully integrated wool producer, incorporating everything "from the sheep to the suit," as Textiles General Manager Elio Lora Lamia told Daily News Record's Elizabeth Chute. Marzotto also acquired France's Le Blan & Fils, a yarn manufacturer, in 1989 and the Biella, Italy-based Guabello wool mill in 1991.

Internal growth was robust as well; even if acquisitions were excluded, revenue increases averaged more than 12 percent from 1983 to 1987. Sales flattened at about L1.5 trillion throughout the remainder of the decade, however, and net income actually declined from L59.7 billion in 1988 to L45.4 billion in 1990.

Marzotto also began to gradually shift its image upmarket in the mid-1980s by launching its own moderately priced men's fashion label, Principe by Marzotto. The company first penetrated the designer market with the 1986 launch of Missoni Uomo, later adding Laura Biagiotti and Gianfranco Ferre to its stable of licensed and house designers. A major turning point in this realm came in 1991, when Marzotto paid Japanese investor Akira Akagi L200 billion (US$165 million) for a controlling interest in Hugo Boss, Germany's largest manufacturer of menswear. The Hugo Boss purchase was considered a threefold success: it extended Marzotto's global reach, further strengthened its primary textiles business, and added a widely recognized, high-end brand.

Difficult trading conditions in the Italian economy as well as the global apparel market continued to depress Marzotto's fiscal results in the early years of the decade. Sales increased a cumulative 71 percent, from L1.4 trillion in 1990 to L2.4 trillion (US$1.5 billion) in 1995, but net income only rose about 25 percent, from L40.1 billion to L50.1 billion (US$32 million).

In response to this tough environment, Marzotto announced in 1992 that it would endeavor to transfer 40 percent of its clothing production overseas in order to reduce labor costs. The revelation that the company would relinquish the unique reputation enjoyed by luxury products "Made in Italy" came as a surprise to many observers. Marzotto cut about 600 jobs in its home country that year, closed a domestic clothing plant in 1993, and completed the purchase of a 90 percent stake in Czechoslovakia's Nuova Mosilana woolen mill in 1994.

Strategies for the Mid-1990s and Beyond

The company's grandest move to date came in the spring of 1997, when it announced that it would merge with compatriot HPI to form the world's largest designer clothing manufacturer, Gruppo Industriale Marzotto. The L8 trillion (US$4.7 billion) conglomerate would carry such names as Giorgio Armani, Valentino, Calvin Klein, Hugo Boss, and Gianfranco Ferré, and pose formidable competition to giants of the global luxury goods market like France's LVMH Moet Hennessy Louis Vuitton. Marzotto would have owned 12.4 percent of the new company, whose other leading stakeholders would have included Mediobanca (10.5 percent) and Fiat (17.3 percent). But by May 1997, Pietro Marzotto--who would have served as the new entity's chairman&mdashruptly pulled out of the deal, citing concerns over strategy, investment policies, and capitalization. Though the union with HPI fell apart, some analysts speculated that Marzotto might yet acquire HPI's GFT subsidiary, manager of the family of luxury brands.

Marzotto continued to evolve rapidly in the aftermath of the aborted HPI deal. Before the end of May, Pietro announced that he was turning day-to-day operations over to Jean de Jaeger, who two years previous had become the first non-Marzotto to be promoted to the chief executive office. With nearly 30 years at the company to his credit, the Belgian de Jaeger advanced to executive deputy chairman. Pietro Marzotto continued as chairman in charge of corporate strategy. The management troika envisioned continued acquisitions and joint ventures, further penetration of North America and Asia, and invigorated retail expansion.

Principal Subsidiaries: Marzotto International N.V. (Netherlands); Marzotto (U.S.A.) Corp.; Alicante S.p.A.; Marzotto France S.a.r.l.; Magnolia S.p.A. (99.81%); Larix S.p.A.; Lanificio Guabello S.p.A. (95.7%); Marzotto International Factor S.p.A. (80%); Nova Mosilana A.S. (Czech Republic).

Principal Affiliates: Vincenzo Zucchi S.p.A. (25%); Mascioni S.p.A. (28.3%); Hugo Boss Australia Pty. (35.25%); Lininpianti S.p.A. (44.26%); Paul Le Blan et Fils S.A. (France) (44.26%); Filature de Lin Filin S.A. (Spain) (22.13%).

Additional Details

Further Reference

Bannon, Lisa, "Marzotto Planning to Buy U.S. Clothing Manufacturer," Daily News Record, December 7, 1988, pp. 2--3.------, "Marzotto Automated Dyehouse Replaces 3," Daily News Record, June 7, 1989, p. 7.Chute, Elizabeth, "Marzotto: 150; Lanerossi: 1; Ferre: 000.1," Daily News Record, January 4, 1988, pp. A50--A51.Conti, Samantha, "For Marzotto's CEO: Timing Is Money," Daily News Record, November 19, 1996, p. 5.------, "Italians Streamline for Harder Times," WWD, February 26, 1997, pp. S10--S11.------, "Marzotto Plans to Hit Acquisition Trail," Daily News Record, May 28, 1997, p. COV.Forden, Sara Gay, "More Italy Producers Look Offshore for Less-Expensive Manufacturing," Daily News Record, June 29, 1992, p. 6.------, "Marzotto Makes a Move on Eastern Europe," WWD, October 21, 1992, p. 23.------, "Marzotto to the Market and the Market to Marzotto," Daily News Record, June 20, 1994, pp. 16--17.Forden, Sara Gay, and Samantha Conti, "End of the Affair: Marzotto-HPI Deal Suddenly Called Off," WWD, May 5, 1997, pp. 1--2.Ganem, Mark, "Marzotto 'Designs' a Future," WWD, March 30, 1988, p. 50.Gellers, Stan, "De Jaegher To Become CEO of Marzotto SPA on Jan. 1," Daily News Record, September 27, 1995, p. 2.------, "Sighs of Relief in U.S. Market as Marzotto-HPI Merger Falters," Daily News Record, May 7, 1997, p. 1.Gellers, Stan; Samantha Contin; and Miles Socha, "U.S. Retailers Give Marzotto, HPI Merger a Thumbs-Up," Daily News Record, March 12, 1997, pp. COV.Morris, Nomi, "Marzotto Completes Purchase of Boss," Daily News Record, December 19, 1991, p. 3."A New Breed for the New Money," The Economist, March 15, 1986, pp. 71--72.

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