Ermenegildo Zegna SpA

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Ermenegildo Zegna SpA

5 Via Forcella
20144 Milan
Italy
Telephone: 39-0258-103-787
Fax: 39-0258-103-921
Web site: http://www.zegna.com

Private Company
Incorporated: 1910
Employees: 5,000
Sales: EUR 661.3 million ($828 million) (2002)
NAIC: 315222 Men's and Boys' Cut and Sew Suit, Coat, and Overcoat Manufacturing; 315223 Men's and Boys' Cut and Sew Shirt, (Except Work Shirt) Manufacturing; 315224 Men's and Boys' Cut and Sew Trouser, Slack, and Jean Manufacturing; 315993 Men's and Boys' Neckwear Manufacturing

Ermenegildo Zegna SpA is the world's leading luxury men's suit maker. Based in the mountain village of Trivero, Italy, near the Swiss border, Zegna is a vertically integrated business, producing more than two million meters of fabric, more than 350,000 finished suits, and another two million shirts, ties, sportswear, and accessories per year. Zegna develops its own fabrics from the world's finest wools—although the company does not itself own sheep herds, it works closely with breeders and farmers in Australia, South Africa, and Mongolia to ensure its supply of top-grade cashmere, mohair, and merino wool. This commitment to top quality enables the company to produce fabrics from threads as fine as just 11 microns. Eschewing the "mass market" approach of rival Armani, which does not produce its own suits, Zegna has developed an exclusive clientele throughout the world. More than 85 percent of the company's sales is achieved outside of Italy, primarily through the company's own store network. Zegna is present in more than 380 shops throughout the world, of which 135 are full-scale retail stores owned by the company, while the others operate as boutiques within department stores. Europe is the company's largest market, at 38 percent of sales, followed by North America, at 33 percent of sales. The company also has a strong presence in the Australasia region, which accounts for 25 percent of its sales and includes China, one of the group's fastestgrowing markets. Zegna also has launched an extremely exclusive line of "vintage" clothing, made from the year's finest wool, for which the client chooses his own colors and styles. Ermenegildo Zegna, named for its founder, remains wholly controlled by his family, now represented by its fourth generation, cousins and co-CEOs Ermenegildo and Paolo Zegna. Other members of the Zegna family play active roles in the company.

Top-Quality Fabrics in the 1930s

Ermenegildo Zegna was just 20 years old when he took over his family's small wool-producing business in Trivero, a village in the Biella region of the Italian Alps, in 1910. This region had long been an important center for Italy's fabrics and wool industry, in large part because of the abundance and purity of its water. The low mineral content of the water played a primary role in the important wool finishing process, enabling the creation of softer and finer fabrics.

At the time, the men's luxury suit market was dominated by British wool makers and tailors. Zegna set out to emulate his English counterparts, adopting their production techniques. Nonetheless, Zegna maintained many of the traditional weaving techniques, such as using thistles to comb his wool. Zegna's quest for quality soon brought him to look beyond his own region, and by the 1930s, Zegna himself was traveling around the world in search of the finest wool herds. It was during this period that the company formed relationships with cashmere breeders in such far-flung places as Mongolia, South Africa, and Australia.

By the beginning of the 1960s, Zegna had won recognition for his high-quality and innovative fabrics. Zegna also had displayed an aptitude for wedding new technologies with traditional hand-crafting techniques. In the process, Zegna had expanded the company into a vertically integrated operation. This feature enabled Zegna to maintain control over nearly every aspect of the production process, from the selection and purchasing of raw wool through to the marketing of the final finished fabric. At the same time, Zegna contributed greatly to the region, in particular through the planting of more than half a million trees and other plants along the region's barren hillsides. That project, including the building of a panoramic road named after Zegna, later resulted in the establishing of the "Zegna Oasis" in 1993.

Zegna, who died in 1966, turned over the leadership of the family business to his sons Angelo and Aldo in the 1960s. The new generation remained committed to their father's tradition of quality, yet became determined to establish the Zegna name beyond the fabrics production. While the company continued to act as a major supplier of high-quality fabric, in the 1960s Zegna began producing its own clothing. The company targeted the men's suit market. Rather than move into the mass consumer categories, Zegna instead became determined to capture a strong share of the rising Italian luxury men's suit sector.

Into the 1970s, Zegna established its own men's collection. By the end of the decade, the company had begun producing a full range of clothing, including knitwear, accessories (including highly prized ties), and sportswear. Zegna also quickly recognized the potential for establishing an international presence to back up its growing export business.

In 1973, Zegna established its first production facility outside of Italy, opening a plant in Spain. The company continued to develop its Spanish presence, creating a number of subsidiaries over the following decades. In the meantime, Zegna also established a manufacturing presence in Switzerland as well, starting in 1977. Zegna also moved to strengthen its supplier relationships, as well as increase the quality of its raw materials, by launching a series of yearly competitions among its breeder suppliers. These efforts helped the company succeed in developing wool threads as fine as silk. At the same time, Zegna began strengthening its international distribution network, adding sales and marketing operations in France, Germany, the United Kingdom, the United States, and elsewhere. These efforts helped introduce the company's brand to a number of the world's high-end department stores and retailers.

By the end of the 1970s, Zegna had begun preparing the next phase in its evolution: that of directly controlling its own retail network. In 1980, Zegna launched its first retail store, in Paris. The success of the format—in which the company claimed that a man could enter the store in his underwear and leave with a complete wardrobe—led the company to expand its network through the 1980s, opening stores in such key cities as Milan in 1985, and in London, before moving to a broader presence. The company's retail development involved the opening of a number of franchised stores, as well as boutique shops in department stores such as Neiman Marcus. Zegna developed a strong network of stores directly owned by the company as well.

High-End Men's Suit Leader in the New Century

Zegna turned toward boosting its U.S. presence at the end of the 1980s. The company established a dedicated subsidiary there, Ermenegildo Zegna Corp., and began scouting for a suitable location, targeting New York City initially. The company succeeded in finding a site, on that city's Fifth Avenue, opening its first U.S. store in 1990. Zegna also had begun producing designer-labeled clothing for other designers. As part of this effort, the company formed a number of partnerships, including those with Romeo Gigli and also Spanish designer Antonio Miro. In 1990 the company formed a joint venture with Versace to produce and distribute a new line of V2 men's sportswear.

The company continued to roll out new stores, including stores in Mexico City, Istanbul, Tokyo, and elsewhere. By the end of 1990, the company already operated 16 stores, in addition to a network of more than 150 in-store boutiques. The following year, the company opened its first store in China, in Beijing. Russia, and particularly Moscow and St. Petersburg, became company targets as well. Zegna by then already claimed a 30 percent share of the world's luxury men's suit market, with sales of more than $350 million per year.

The new generation of the Zegna family, including Aldo and Angelo's nine children, were by then assuming positions of greater importance within the family business. Taking the lead were cousins Ermenegildo, known as Gildo to differentiate him from his grandfather, and Paolo. With business school backgrounds, the cousins now set out to boost production and control costs. Among other initiatives, the company sought to drastically reduce its production lead times. By the mid-1990s, Zegna had succeeded in cutting back its production cycle from eight months to just four—and then set its sights on cutting that in half yet again by the end of the decade. As part of that effort, the company continued to adopt new technologies, such as computerized ordering and cutting systems.

Company Perspectives:

Dating from 1910, the Ermenegildo Zegna group is a family business that still remains true to the ideals of its founder: our grandfather, Ermenegildo.

All our efforts converge on the attainment of utmost quality. every step of the way, from selection of the finest raw materials to development of innovative customer relations.

Our grandfather built a series of vital infrastructures for his fellow citizens, from roads to schools. He always took a concrete interest in the welfare of his wool mill's work force. And his sense of social responsibility—his commitment to people—endures as a basic principle of our family.

We have assimilated and enlarged upon Ermenegildo's environmental awareness. The group is presently involved in a number of major conservation projects, expression of the good corporate citizenship that has distinguished the company throughout its history.

Inspired by our grandfather's legacy, the new generation of Zegnas is carrying on his work—weaving the future on the loom of the past.

Into the mid-1990s, Zegna developed a new, more aggressively customer-focused strategy, stepping up its level of service. As part of that effort, the company began a new store-opening drive, including plans to open stores in five new U.S. cities, as well as a drive into the South American and Canadian markets. Supporting that effort was the acquisition of Mexico's Tarsa, which produced men's wear and also operated its own retail network, in 1995. While Zegna continued expanding its range of in-store boutiques, its primary retail focus increasingly turned to developing its own Zegna-branded network. In the mid-1990s, the company opened a number of company-owned stores in Lisbon, Vienna, Shanghai, and Barcelona, while also adding franchise stores in Hong Kong, Jakarta, Kuala Lumpur, and elsewhere.

In its push to expand its customer base, Zegna also began designing new clothing lines to attract a younger clientele. In 1992, for example, the company introduced two new lines, Zegna Soft and Zegna Sportswear, which offered more casual clothing styles. The company also introduced its own cologne in 1993. In Japan, in 1997, Zegna launched a new, Japan-only line, E.Z. That brand was also the company's first to be produced outside of Europe and under contract. Then, in 1998, the company introduced a new brand and retail format, Zegna Sport.

For the most part, Zegna had maintained a policy of conservative growth, marked by a low-key marketing program. Yet in the late 1990s, the company found itself in the spotlight when, during the scandal involving President Bill Clinton and Monica Lewinsky, it was revealed that Lewinsky had given the president a Zegna tie as a gift. The controversy helped boost awareness of the Zegna brand, sending sales of its clothing, and especially its ties, soaring in the United States.

As it entered the 2000s, Zegna had built up a strong international sales network, with more than 380 sales points—including 135 directly owned by the company. The company also launched a second retail format, Zegna Sport.

Acquisitions also marked the company's development at the dawn of the 21st century. In 1999, Zegna acquired Lanerie Agnona SpA, a maker of luxury women's wear. That purchase was followed by the acquisition of a controlling stake in Prato, Italy-based Master Loom, a maker of fabrics, in 2001. In 2002, Zegna bought most of Guida, another Italian company, which owned the Longhi brand of leather goods. That year, also, the company continued to extend its range of clothing and accessories with the formation of a joint venture company with Italian footwear group Ferragamo. The new company, called ZeFer, placed the Zegna brand on a line of footwear and leather accessories.

China represented one of the company's fastest-growing markets by then. In 2003, the company strengthened its position in that country through the purchase of a 50 percent stake in Sharmoon, based in Wenzhou, founded by the Chen family at the beginning of the 1990s. That purchase gave Zegna access to three factories, more than 1,000 employees, and an additional ten retail stores, as well as the strong Sharmoon clothing brand.

Zegna meanwhile continued to build its own branded business. In the 2000s, the company launched a new brand concept, called Napoli Couture. The new suits featured the company's exclusive fabric, Vellus Aurem Trophy. The 2003 "vintage" produced just 75 kilos—enough for only 500 suits, at a price of some $7,500 each. At the other end of the spectrum, the company stepped up its efforts to attract a younger, more modern clientele. In October 2003, the company unveiled a new brand, Z.Zegna, with a full-scale rollout slated for the Fall 2004 collection. With more than EUR 680 million in sales in 2003, Zegna remained firmly at the top of the world's luxury menswear market.

Principal Subsidiaries

AGNONA SPA; Artema S.p.A.; Consitex (Switzerland); Ermenegildo Zegna Corporation (U.S.A.); GUIDA; IN.CO. S.p.A; Ismaco (Turkey); Italco (Spain); Italvest (Spain); LANERIE AGNONA S.p.A.; Lanificio Ermenegildo Zegna & F. S.p.A; Master Loom; Matex; Orsini S.p.A.; SAVIT S.p.A; SAVIT S.p.A.; Solteco (Spain); Tarsa (Mexico); ZeFer (50%).

Key Dates:

1910:: Ermenegildo Zegna establishes a textile business in Trivero, Italy, and develops a vertically integrated, luxury fabrics business.
1960:: Sons Aldo and Angelo Zegna take over leadership of the business and launch the company's first men's clothing line.
1973:: Zegna opens its first international production plant in Spain.
1977:: The company opens a production facility in Switzerland.
1980:: The first retail store opens in Paris.
1985:: The company opens an Italian showroom in Milan.
1990:: The company opens its first U.S. retail store in New York; the company forms a joint venture, V2, with Versace.
1992:: Two new brands, Zegna Soft and Zegna Sportswear, are launched.
1995:: The company acquires Tarsa, a Mexico-based clothing manufacturer and retailer.
1998:: A new brand and retail format, Zegna Sport, is launched.
1999:: The company acquires luxury womenswear maker Lanerie Agnona SpA, in Italy.
2001:: The company acquires majority control of fabric maker Master Loom.
2002:: The company acquires majority control of Guida, and its Longhi leather goods brand; a 50/50 joint venture, ZeFer, is established with Ferragamo.
2003:: The company acquires 50 percent of Sharmoon, a menswear producer and retailer in China.
2004:: The new Z.Zegna youth-oriented brand, slated for the fall season, is launched.