On March 14, Italian clothing brand Brunello Cucinelli announced the signing of its first acquisition since its creation 44 years ago: the acquisition of a 43% stake in its long-term cashmere supplier Cariaggi Lanificio SpA for more than 15 million euros.
The €15 million deal makes the acquisition one of the most high-profile investments in the supply chain of the Italian fashion industry in recent times. According to people familiar with the matter, all the funds required for the investment came from Brunello Cucinelli's own financing.
Just a day earlier, Brunello Cucinelli released its 2021 earnings report, showing that its full-year revenue increased by 30.9% year-on-year to 712.2 million euros in 2020, and its full-year net profit was 56.3 million euros – brunello Cucinelli was able to complete the deal on its own with a net profit for 2021 alone.
Brunello Cucinelli's Fall/Winter 2022 collection of womenswear pieces
Not long ago, on March 1, the brand officially entered the Tmall luxury platform and opened an official flagship store, which completely solved the problem of limited coverage of physical stores in the Chinese market. It is not difficult to see that Brunello Cucinelli, who has successfully bucked the trend under the influence of the epidemic, is ready for continuous expansion.
Brunello Cucinelli's Fall/Winter 2022 menswear collection
Headquartered in Cagli, an hour's drive from Solomeo, where Brunello Cucinelli is located, the acquiree Cariaggi is known for its top-quality cashmere, which Brunello Cucinelli himself calls "a jewel of Italian manufacturing, with superior product quality and exquisite craftsmanship, and is one of the important representatives of the Italian state and culture". According to Brunello Cucinelli himself, Cariaggi founder Aurelio Cariaggi gave him help and trust when he was only 25 years old and simply could not pay 20 kilograms of cashmere material: "Without Cariaggi, I would not be here. ”
Emotional considerations aside, the purpose of Brunello Cucinelli's acquisition is clear, as Brunello Cucinelli himself put it: "to ensure that we have a continuous and stable supply of raw materials for decades to come." In a decades-long collaboration, Cariaggi supplies Brunello Cucinelli with cashmere, which accounts for up to 95% of the ingredients needed for the latter's knitted products.
As a world-renowned high-end lifestyle brand, Brunello Cucinelli's clothing products are not known for their design and trends. On the contrary, most of its products are mainly basic models, and it is rare to create a huge amount of marketing momentum in operation, and the target group is mostly urban mature consumers who are low-key in appearance but have strict requirements for clothing quality. The core of the high positioning that can support the brand with an average starting price of 10,000 yuan is its exquisiteness on materials and craftsmanship.
Loro Piana's collaborative series with Hiroshi Fujiwara
The brand that has always been able to form a real competition with Brunello Cucinelli has been recognized as Loro Piana, who is also from Italy and is known for its luxurious cashmere material. After being acquired by the LVMH Group, the latter quickly adopted a radical youthful strategy, launching a capsule series in collaboration with Japanese fashion designer and music producer Hiroshi Fujiwara, becoming the official clothing supplier for the Ryder Cup European team, and working with European team captain Pádraig Harrington to create a series of clothing, updating and opening up the fragrance product line. According to WWD's internal statement, loro Piana's new CEO Damien Bertrand's main mission is to lead the brand to develop more new product categories and enter a new stage of development.
Loro Piana's fragrance products
In contrast to Loro Piana, Brunello Cucinelli's big move after a beautiful fiscal year is to stabilize the supply chain by acquiring a well-known supplier of raw materials, while further consolidating the cornerstone of the brand premium. This approach is also quite in line with the "steady and steady" style of Italian family businesses.
Building a moat for oneself through "buying upwards" to build supply chains and brand value is one of the most popular investment directions for Italian companies in recent years.
In June 2021, the Prada Group and the Ermenegildo Zegna Group joined forces to acquire a majority stake in Filati Biagioli Modesto S.p.A., an Italian manufacturer specializing in cashmere and other precious yarns, with the common goal of ensuring the superior quality of their products from the raw material side and building a stable "Made in Italy" production chain. Prior to this, the Zegna Group had acquired a 60% stake in Tessitura Ubertino, a well-known Italian manufacturer of high-end women's clothing fabrics, in order to further consolidate its competitive advantage in the textile supply chain.
Italian high-end cashmere manufacturer Filati Biagioli Modesto S.p.A.
Renzo Rosso, Group Chairman of OTB, also from Italy's luxury goods group, expressed to WWD his high approval of this acquisition of local specialist textile manufacturers: "This strategy enables the Group to become more solid and establish its own patented technology, thereby enhancing its core competencies." ”
In the 2021 financial report of the Ermenegildo Zegna Group, its revenue in the textile category grew to €102 million in double-digit percentages.
In fact, before Prada, Zegna and Brunello Cucinelli, there were already prescients from within the industry noticing the potential value of Italian ingredient manufacturers.
Back in October 2020, he served as an executive at Bulgari, Louis Vuitton and resigned as Tiffany & Co. in 2020. Francesco Trapani, a luxury management specialist on the Board of Directors, has partnered with Fondo Italiano d'Investimento and Italmobiliare through private equity fund VAM Investments to establish the luxury supplier group Gruppo Florence, with the goal of developing a platform that takes advantage of competitive prices. Providing the main luxury fashion brands with high-quality Made in Italy products, guaranteeing timely and flexible deliveries and solutions, while protecting the technological and cultural heritage of small and medium-sized Italian family businesses.
Luxury management expert Francesco Trapani
To date, Gruppo Florence has acquired three Italian manufacturers who have long worked for major international brands, including Giuntini, a well-known coat manufacturer founded in 1957, Ciemmeci Fashion, a manufacturer specializing in leather clothing founded in 1993, and Mely's Maglieria, a knitwear specialist founded in 1956.
In Francesco Trapan's view, today's luxury brands rely more than ever on highly specialized networks of suppliers who need to be protected over the long term.
Through these specialist manufacturers, Gruppo Florence works with big international brands to provide them with "supplier services that can be assured". Francesco Trapani expects the business to reach €170 million in 2021. Attila Kiss, CEO of Gruppo Florence, said: "All the big luxury brands understand that Italy is where they are looking for suppliers – it is the only country that covers all product categories and manufacturing steps, and is the best place for luxury to be born. These local vendors are their strategic partners because without them, people wouldn't see the final product. ”
At Brunello Cucinelli's earnings report, the company expects revenue to double in 2026. Jefferies equity analysts Flavio Cereda and Kathryn Parker have expressed a positive attitude towards this, believing that Brunello Cucinelli will continue to grow in 2022, as they believe that the brand's unique product image in the luxury clothing space will become an important asset for the brand, and consumers will continue to be willing to pay for the premium of their brand. If the high-end brand, which still maintains the style of operation of an established Italian family fashion company, can really achieve such optimistic expectations, the construction of value cornerstones and moats should be indispensable. WWD
Written by Ma Xiao Thorn
Editing By Lion, yalta
Image source brand official and online