Monday, Sep. 29, 2008

A Zegna Meditation

The descendants of Italian textiles entrepreneur Ermenegildo Zegna run the $1.27 billion family group—including the family wool mill their grandfather took over in 1910 and the men's luxury ready-to-wear label created in the 1960s—from a range of posts. But whether it's chief executive Gildo Zegna discussing emerging-market strategies at Zegna's sleek new headquarters in Milan, or Gildo's cousin Laura Zegna explaining the family's environmental-conservation projects on the mountain above the mill in Trivero, Italy, or his sister Anna Zegna pulling down giant handwritten ledgers in the company's archives nearby, the smell of the mill always comes up.

Past the grand entrance, worthy of a statehouse, and halfway down the stairs to the factory floor, the intoxicating, vaguely animal odor suddenly leaves visitors gasping for breath. The smell is not unpleasant, like the much stronger, more humid and astringent air of the dyeing rooms at one end of the main corridor. Here it's the sensation of dryness that's surprising, the feeling that one's mouth and nose are stuffed with cloth and sand.

"We were jumping in the wool as children. This family business was our lifestyle," explains Anna, Zegna's director of image and store development, as she walks the grounds of the mill, pointing out a rooftop promenade where she and her cousins skated and learned to ride bikes, and the villa where they lived until they were well into elementary school. (Today the villa houses the company's archives, and the promenade has recently been lined with flapping flags, an installation by French artist Daniel Buren.) "After 50 years of smelling certain smells and touching the fibers, I think we have a holistic feeling for what we're wearing. You know, we're terrible—the whole family," she says, laughing. "We're at a party and always touching the jackets, rubbing up against the guests."

Ermenegildo Zegna's start was ordinary. His family, like many others in the Biella Alps region between Milan and Turin, had a small wool concern. The soft water in the area was ideal for washing wool. After founding his company in 1910, Zegna developed it over the next two decades by adopting an innovative approach. He went to England and invested in the best technology, then imported the machines and looms to Italy. He chose to specialize in high-quality wool fabrics and was energetic about finding the best sources and pushing breeders in Australia and New Zealand to improve their wool. He also invited ranch owners to Italy to see the manufacturing process up close so they could better understand the company's demands. He was searching for longer, stronger fibers that could be turned into long-wearing fabrics, which would become finer as technology improved—and the quest continues today.

In a business in which Italian manufacturers considered themselves middlemen, faithfully and quietly supplying tailors who sometimes became well known to the public, Zegna wove his name into the selvage of his fabric bolts for the end user to notice. Later, in the 1930s, in a surprising move for a wholesaler, he launched a consumer advertising campaign featuring a series of signs along Italy's railways that linked his name and the message of high quality in travelers' minds. During World War II, when wool-fiber imports were interrupted, Italian tailors regularly remade clients' suits, taking them apart and repiecing them so they could be turned inside out to look new, and Zegna's quality stood out, says Anna.

Zegna was determined to expand through exports, and in the 1930s he traveled to the U.S. to sell his goods directly to the best American tailors. After some hesitation about the cost, he threw a banquet in New York City for the top tailors. "He wrote to his wife, 'It's a big investment, $100, but I think it's worth it,'" says Anna. Today the nature of the business has changed, but the U.S. is Zegna's largest market.

The grandchildren remember their visionary grandfather as a gentle, somewhat remote man who liked to have them read him the newspaper, but their memories are sketchy. "I 'discovered' him in the archives," says Anna. She pulls down years of giant ledgers, in which he recorded in impeccably elegant longhand the details of orders. There are also books and boxes of samples of every fabric the mill ever produced—and he cataloged them in duplicate, with a complete set kept at his house above the mill in case one was lost in a fire.

It's interesting to contrast that maniacally orderly, disciplined approach to business and record-keeping with the imagination required for Zegna's craziest scheme: the reforestation of the bald mountain behind the mill. In addition to building a community center, school and clinic for Trivero's residents (1,200 of whom were employed in his mill), Zegna ordered and planted 500,000 evergreens and rhododendrons on the mountain and built a scenic road to the top. "His idea was that the quality of his product could not be developed unless the people also lived and understood the same values," says Anna.

Laura Zegna oversees the 24,710-acre (10,000 hectare) estate called Oasi Zegna on behalf of the family. Ten kilometers of scenic road were donated to regional authorities, but the family foundation maintains the land and develops controlled tourism, including new eco-sports, in the reserve. Currently there is a project to thin the original trees by 2020. In its largest stores, the company makes references to the founder's conservation philosophy. In the Milan flagship, shoppers climbing the stairs from the ground floor can view a lenticular photographic mural that rises two stories and shows the seasons changing at Oasi Zegna.

Growing Over Time
If many of the core values at Zegna come directly from the founder, each generation has significantly changed the company. The two sons of Ermenegildo Zegna threw themselves into developing Zegna's ready-to-wear. In 2007 clothing and accessories made up more than 90% of the company's turnover, while textile sales accounted for less than 10%. The grandchildren credit their fathers with developing exports, now 88% of total sales. "I was a kid the first time I heard my father say, 'One-third, one-third, one-third,'" says chief executive Gildo Zegna, 52. "Finally, last year we reached that: one-third America, one-third Asia, one-third Europe."

For the current generation, the push has been to develop Zegna as a global brand. That includes opening more stores (rather than selling through department stores and independent boutiques), such as the giant, carefully planned flagship locations in Milan and New York City. Gildo says the growth in emerging markets like India, Brazil and China has been wonderful for the men's business. "These new consumers want to have fun with fashion," he says. And the men in these markets, unlike those in more traditional ones, are uninhibited about spending as much as women do for clothes and accessories.

The boon of emerging markets for a company like Zegna cannot be overstated, says Paola Durante, director of Merrill Lynch's luxury group in Milan. In traditional developed markets, she says, the women's business easily represents 60% to 70% of the total. In new markets, however, the men's-to-women's share is closer to fifty-fifty. Durante notes that Zegna's determination to remain focused exclusively on the men's market is interesting to watch. "They are the leaders, with Hugo Boss, in their sector," she says. "We are all watching to see whether Hugo Boss can succeed as a menswear brand and also do women's."

Gildo says he's convinced that being unique will count with customers and therefore he won't stray from Zegna's roots. "Are margins in men's lower than women's? Yes, but so what? We are the only one dedicated to menswear," Gildo says. "We are a very masculine brand, and we are focused in what we do," he says. In 1999 the company acquired a small women's brand, Agnona, to test the waters. It has also created joint ventures to develop a shoe line and accessories.

Even if textiles no longer weigh as heavily in sales, Zegna continues to be a principal supplier of wools to the luxury-goods industry, producing in Italy and weathering competition from abroad by focusing on top-grade fabrics and capitalizing on in-house expertise. When you walk through the mill, it's fascinating to see the mingling of high tech and no tech. The raw material is prepared and then fed into sophisticated spinning machines, automated dyeing vats and noisy, lightning-fast looms. In quality control, suddenly the pace slows, as experienced Italians examine every piece of cloth. No machine can detect flaws as well as the human eye, executives claim. Some flawed pieces are sent for hand mending, and others are discarded. After several more steps, the fabric looks good but is disappointingly rough. The group of factory workers looking on laughs. "The most important is the finishing," explains one. "It gives the touch, the softness," says another. "It is the soul."

Besides the emerging markets, the excitement in the men's field will be in technological improvements in finishes for fabrics, says Gildo. At the design studio in Trivero, a merry band of fabric designers delights in showing off the new smart fabrics. One squirts ketchup, then soy sauce onto a suit fabric, and then wields a green highlighter pen before spritzing the material with water and sponging it clean. This treatment, used on the Micronsphere suit, is derived from an anticondensation technique developed for Lufthansa. Other treatments are designed to prevent clothing from wrinkling, even when slept in overnight on a plane. Some fabric finishes allow suits to be machine-washed rather than dry-cleaned. There's a black fabric, which, thanks to a step in the dyeing process, acts more like the color white, reflecting some of the sun's infrared rays rather than absorbing them. The designers are testing it by taking turns wearing a jacket that is half traditional black and half new black. It's a technology borrowed from the automobile industry.

Of course, even aerospace technology trickles down and becomes more widely available and easier to copy, but the experts at Zegna say the trick lies not in implementing the technology but in using it without compromising the feel of the fabric. That requires access to the best-quality raw materials and long-term know-how.

The researchers are working away, but the holy grail for the fabric designers is still a long way off. "Imagine we could promise tomorrow that this fabric will make you feel better," says Augusto Ferraris, head of design. "This is the future."