MILAN, Italy — It’s not always easy running the family business, especially when that business is an Italian fashion powerhouse, operating in 120 countries around the world and earning more than 2 billion euros in annual revenue from its more than 4,000 directly-operated and franchised store locations.
That’s exactly what Alessandro Benetton, 47 year-old scion of the Benetton fashion dynasty has been doing for the past few years. He returned to the family fold as Executive Deputy Chairman in 2007 after earning an MBA at Harvard, putting in a few years in M&A at Goldman Sachs, and successfully running his own private equity fund, 21 Investimenti S.p.A, which today has over 1.2 billion euros in assets under management.
The Benetton brand was in great need of new energy from someone who could navigate the family dynamics, but also bring an outsider’s expert perspective. In the context of increased global competition from the likes of Zara, H&M and Uniqlo, and rising raw materials prices, Benetton Group operating profit has fallen from €145m in 2007 to €102m in 2010, on total revenues which have remained flat.
Now firmly esconced in his role, Mr. Benetton is looking to re-assert the company’s position as source of high-quality fashion basics, while further emphasising Benetton’s ethical operating principles and provocative and colourful marketing strategies. To drive this creative repositioning, Benetton announced in June that You Nguyen, formerly of Levi Strauss & Co., would become chief merchandising officer and creative director.
I chatted with Mr. Benetton by phone from Milan to learn more about his vision for reshaping Benetton for the 21st century.
BoF: I wanted to start by asking you about returning to the family business. You’ve had a very successful career in other business areas, including private equity. What was it that motivated you to return to the family business in 2007, and why at that particular point in time?
AB: It was a completely unexpected move. In order to be an entrepreneur, you need to be on your own. After I graduated from business school, instead of joining the family business, I went into the world of private equity and things went well. I was expecting to move on with my career, seeing my little baby, the private equity company, grow.
But in 2007 something unexpected happened. Since the beginning of this century, maybe earlier, the middle of the 90s, our family company started diversifying. My family has always been very active in new ventures, a new phase; discovering. If you move into new fields it’s much better to have a strong management. It is the beginning of a new era for our company. In the end, my family asked me. It was not my decision.
BoF: Did it take a lot to convince you, because I can imagine that as difficult as it is managing a two billion euro business, it’s even more complicated managing a two billion euro business in which you share ownership with members of your own family.
AB: I think the real question for me, the way I interpreted it was, that I was taking some time off from my private equity activity. I have to do this for the family. Why? Because Benetton is at a new stage.
BoF: Has Benetton always been run by a Benetton?
AB: Yes, up until today, where we have two strong Managing Directors, it was always run by the family.
BoF: Now, Mr Benetton, it’s been a few years since you’ve come back into the family business. What were your impressions of the business when you returned, and what was your strategy for reinvigorating this incredible, historic business, with such a huge global presence?
AB: I think it took a couple of years to understand a map of the situation. My approach was that if you write a new chapter of the same book you always have to get started from the last line of the previous chapter, so a sense of appreciation, a sense of recognition, and look for the point of strength in the company was my first part of analysis. You must always start from your strengths.
At the same time there was an analysis of our weaknesses. In a changing world, Benetton has written the history of franchising, and colours and communication. But at the same time the environment is changing. So I think the hardest part has been to develop new projects that could start by respecting the past but imagining the future.
BoF: I grew up wearing Benetton. The things that were really on offer were lots of knitwear, lots of colour, in a way it was a basic approach to fashion. Then there was a fashion element to it as well, really rooted in an Italian aesthetic.
Now on the High Street we see two things happening. On one end of the spectrum, I see companies like Zara and H&M which are operating at this extremely fast pace in regards to refreshing fashion assortments. And then there are businesses like Uniqlo, which are really about basics. Where in this spectrum of the High Street do you see Benetton today? And how has that changed from where Benetton might have been in the past?
AB: I guess this is another part of discussion. What we want with [Mr Nguyen] is to bring back this image and perception to the consumer. Go back to basics, trendy, Italian, fashion orientated, colourful at a democratic price.
The question is, did we lose a bit of that over the last few years? I don’t think we have lost it, I think what has happened is that our business model has not allowed us to show entirely, all these values.
We see Benetton where it belongs, which is a company that wants to have a psychological communication, an emotional dialogue with its consumer, which is a sharing of a point of view, which has some social implications, which means our campaigns mean something. We do it because we have been doing it for 30 years. This so-called disposable fashion is not for us. We have reached a point where consumers prefer to throw away a garment after using it three times because taking it to the dry cleaner would cost more.
I think fashion, colour, the natural fabrics, stylish. This is where Benetton belongs.
BoF: When you talk about Benetton being a socially responsible company what does that mean to you in practice?
AB: I could give you a list of the very many things we do, but just to give you an indication, we had air conditioning in the factories 50 years ago, we have been recycling paper within the company for more than 25 years, we’ve had underground parking lots since the 80s in order to respect the [land]. We even check the source of energy of some of our suppliers in order to give a judgment of how they operate their own companies. What I like about what my father and his brothers have done is that everybody is conscious about this issue. It’s not just a marketing tool, it’s not a gimmick, it’s something that has always been a part of this company.
BoF: I find this so fascinating because I am a pretty savvy consumer of fashion, and this is such an amazing story you are telling me, but it’s not something that instantly comes to mind for me as a consumer when I think about Benetton. Why is that?
AB: Yes. I think you’re right. I think we may have lost partially the perception of being a socially conscious company. One possible explanation is that we have missed the change in media technology and we have been leveraging our ability to communicate social issues, but have not been able to capitalise enough on the changing manner of communication as the new media era began. It’s just speculation, I’m not sure.
BoF: One thing that comes to mind for me when I hear Benetton is those extremely provocative ads from the 1980’s and 1990’s where Benetton owned the consumer space for provoking interesting debate and conversation. I think there is potentially a huge amount that can be done with digital strategies and approaches to regaining that position again of being the company that is socially responsible but also understands how to provoke conversations that lead to interesting discussions with consumers…Is digital what you’re looking at, can you tell us a little bit about your plans for that?
AB: I launched a programme where I would love to see 80 percent of our communication be digital within the next, let’s say three years. I have encouraged our managing directors to create a new division for new media. I think it would be an efficient tool to reaffirm many of the topics that you and I have underlined today. The social aspect and the courage to be out of the scheme, are values we can share with our consumer.
Imran Amed is founder and editor of The Business of Fashion
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed.