Where has Italian Capitalism Gone?

Editorial • 30/10/18

Where has Italian Capitalism Gone? If there is one country that makes stylish billionaires, Italy is it. Silvio Berlusconi, Giorgio Armani, Miuccia Prada, Patrizio Bertelli and Diego Della Valle to name just a few self-made billionaires. Whilst it may seem rosy at the top, “he who wears the crown must bear its weight”. This reference comes in light of the dynastic Italian powerhouses seeing deaths, acquisitions and millennial consumer demands force change.

Wanda Ferragamo the woman behind Salvatore Ferragamo passed away last week. “Signora Wanda” as she was know by her 70 descendants, embodied Italian capitalism. In the era of the 1960’s Wanda Ferragamo inherited an artisan business teetering on bankruptcy and the management of six children after the passing of her husband. She was 38 years old, she was poor, originally from Naples and she managed to grow Salvatore Ferragamo into the 3.5 Billion Euro brand we know today. On the day of her funeral another significant patriarch Gilberto Benetton of Benetton died at his home in Treviso.

So what does this mean to the brand?

The boom era of the 1980’s and 1990’s has ended in the advent of the digital era. Technologies, startups scaling in record time with significantly less capital and operational expenditure are upending industries and putting immense pressure on the world of high fashion. The pressure naturally means change, but this change has often been seen in acquisitions or stakes being sold. The most recent notable company is Versace. At one time under the 1980’s reign of Gianni Versace, felt like the opulence was never ending. And to be fair to Donatella Versace, she still flourishes in this department but now she contends with the external aforementioned pressures and the state of Italy’s economy coupled with the need to both unique and relevant. So what happened? Michael Kors bought Versace for $2.12 Billion. As such providing financial leverage to secure the future.

News travels fast and this is not just a one off event. Brands are looking closely at options and private equity firms are snapping at the heels. Take Rosita Missioni, her sale of 41% of Missoni to Italian private equity firm FSI, in her view is the decision the 87 year old made for the sake of her children. “I am happy, I see a better, stronger future for my children.”  

Whilst family dynasties rest comfortably and live well, the question is what happens when a major change happens at the top. In the case of Ferragamo family, the matriarchs grip might have loosened yet there are a several independently hungry children for power and further wealth. Initially there will be a family bond that will deny any sell off, but only time will tell with further disruption arising, no family is safe from continuing conservatively.  

Italy is no safe-haven either, the stock market provides continued volatility, the country remains against big businesses and fuels scepticism surrounding Europe. Further drama for Italy, sees Essilor of France acquire Luxottica, creating 50Bn Euros revenue in the process, yet Italy takes a major blow in losing the company from the stock exchange.

As such companies outside the fashion industry, US Fiat Chrysler is still one third owned by John Elkann of the Agnelli dynasty and recently its last remaining Italian car component subsidiary was sold to a Japanese business for $7.1Bn. Further Italian capitalism prevails in wineries from Frescobaldi to Antinori however they have yet to feel the technological bite, but I am sure entrepreneurs and innovation will come and probably aggressively.

No one is safe, being big is both positive and negative, the question is to understand how heavy footed these brands are and their receptiveness to change. And whether nepotism will prevail in the digital age.

 

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