SPIEGEL Interview with Luciano Benetton Can Benetton Survive in the Global Village?
Luciano Benetton, co-founder, major shareholder and president of the Italian clothing manufacturer talks about falling revenues, the end of provocative advertising, and the growing competition from Asia.
President of the Benetton group Luciano Benetton: "I'm not worried about shrinking revenues."
Signor Benetton, two years ago, you announced that you were pulling out of the daily operations of your family company. Now, shortly before your 70th birthday, you are back. Why?
Benetton: Was I ever really gone? Sure, when we installed a new company management in 2003, my siblings and I decided that we wanted to withdraw from the spotlight a bit. This company's managers have never had the comprehensive powers they have today. But that doesn't mean that we have completely stepped down, even if I am the only family member who's playing an active role, as president of the supervisory board. One could say that I am the only one remaining among the four siblings.
SPIEGEL: Apparently, you want to show who, next to the managers, the true head of Benetton really is.
Benetton: When it comes to the daily operations, the answer is: No. But if you are talking about positioning Benetton with all of its history, then the answer is: Yes. In that respect, it's simply necessary that you have someone who has knows about more than just the last two years...
SPIEGEL: ...years in which Benetton has seemed to lose some of its shine, particularly in clothing manufacturing, the segment where Benetton got its start 40 years ago. The revenues are shrinking, and the outlook for 2005 is gloomy.
Benetton: I am not worried about shrinking revenues. Not even the profit losses bother me, as long as I know that we are close to our customers -- and that is the case. We are currently investing millions of euros in the expansion of our stores and into growth in other parts of the world.
SPIEGEL: But that doesn't explain your company's current slump.
Benetton: We are currently experiencing an era of stagnating consumer budgets. At the same time, people have an incredible number of options for spreading themselves -- and their money -- around. That's why both imports and the diversity of products on offer are growing. It's only logical, then, that our own revenues will shrink by a few percent. Our home market, in essence all of Europe, will hardly develop over the next few years. I am not expecting any growth there.
SPIEGEL: How are you responding to that?
Benetton is eyeing increased expansion to China and India.
SPIEGEL: There are many critical voices, though, that view these states as threats. Your industry is hurt by pirated copies and cheap textiles. The European Commission recently announced an investigation into the dramatic increase in textile imports from China. Is Asia an opportunity or a threat?
Benetton: It can be both. But there is a third perspective: A country such as China can also be seen as a challenge. What you have here is a complete country, with its population of over a billion people, entering the global market as a new competitor. It's quite possible that we'll start changing our own thoughts and habits. I am not worried about that -- on the contrary. Outside of Italy, some 2,000 companies are already investing in and with us. This type of economic reciprocity is an important aspect of our work. Steady change is part of the game.
SPIEGEL: What does this global Monopoly game look like?
Benetton: Let me give you an example: Thirty-six years ago, we opened our first Benetton store outside of Italy. That was in Paris, and it was a huge step for us. In France, we were dealing with a new environment, different lifestyles, and a mentality that's difficult to compare to our own. We didn't enter the French market with the arrogant notion that we would force our products upon others. We wanted, and had to learn how, to understand a new world. And in the end, that also changed us.
SPIEGEL: A lot of changes must have happened then. After all, Benetton is now present in about 120 countries around the world.
Benetton: Exactly. And a European company that's not present in China or India in the future will have to be labeled as provincial. That's just the way I see things. Companies wanting to be "global" cannot limit themselves to Europe, North and maybe South America. We need to play the trump card of globalization. That means going back 36 years, remembering taking our first steps, and then embarking down that same road again.
SPIEGEL: And that means....?
The opening of a Benetton mega-store in Shanghai in 2002.
SPIEGEL: The fact remains, though: Your competitors Hennes & Mauritz and Zara are growing much faster. What are they doing better?
Benetton: First and foremost, everyone should worry about hisown company, focusing on its culture and on necessary changes. Benetton has been in the business for 40 years. We have never experienced an economic crisis. And that's why we refuse -- and are unable -- to compare ourselves with companies that have a different tradition and other goals than Benetton.
SPIEGEL: But it's possible to learn from competition, too.
Benetton: Anyway, I'm not interested in getting into a price war with others. We want to maintain our high level of quality, even though, at the same time, we are producing a very industrial product. That's the approach we use.
SPIEGEL: Aren't today's consumers much less loyal to brands such as yours?
Benetton: That may be true for teenagers, who get bored quickly these days and don't want to wear the same clothes or shoes as their siblings. However, they're also not making their own money yet. They depend on their parents, a group that I feel is still loyal. But I also need to defend the consumers a bit. That they are less loyal to individual brands also is the result of the incredible brand diversity with which they are bombarded at a time when they hardly have more money to spend.
SPIEGEL: Luxury brands such as Armani and cheap-fashion makers such as H&M seem to be the ones making profits these days. Is there a danger that Benetton may get stuck somewhere in between?
Benetton: Do you buy your clothes exclusively at H&M and Armani? What I know is this: Each year, several million people are looking for new clothes. The fashion they are looking at cannot be too expensive, but it has to be stylish. And that's precisely what we offer.
Benetton became famous for its provocative advertisements.
Benetton: I think so. After awhile, the provocations were no longer provocative. And, by the way, the primary goal of our advertising never was "use provocation as a means to sell more products." It was supposed to provide a new definition of communication. We are still working on that today with many students and young artists in our "Fabrica." Traditional advertising bears the risk of working like a drug. That means: if you freeze the budget, the revenues shrink as a result. Our advertising is not intended to fuel the success of a few individual products. Instead, it is supposed to strengthen the name of our brand.
SPIEGEL: Twelve years ago, you yourself provoked the public in a Benetton advertisement with nude photos. What happened to Benetton the political activist?
Benetton: In the early 1990s, I briefly got involved in Italian politics. But that intermezzo lasted just two years and had little success. I also found politics emotionally empty. The work as a politician robbed me of too much time for my own job within the Benetton company.
SPIEGEL: Be honest -- do you think your country afford to keep Silvio Berlusconi around?
Benetton: The problem with the current Italian government is this: Thanks to a large mandate when it was first elected, it entered office with massive expectations. The government didn't really make good on its promises of reforms, but it's the same thing across Europe. There are elections all the time, it seems. No one wants to make unpopular decisions. Currently, the situation isn't particularly good in any of the large European states.
SPIEGEL: These days, your family holding no longer earns the biggest share of its billions through colorful fashion but through toll systems on the Italian highway system, the restaurant chain Autogrill, and a whole host of financial stakes. Down the road, can you picture your company completely without the clothing branch?
Luciano Benetton says the time for provocative ads has passed.
SPIEGEL: Your management announced that a new three-year plan would be presented in the fall. Is that type of activism supposed to appease the economic analysts?
Benetton: I believe in the underlying strategies of such plans rather than the time schedules as such. Our strategies are clear: Growth everywhere but primarily in India and China. We need to turn up the heat. We need to invest all of our energy.
SPIEGEL: These multi-year plans also resemble the approach used in communist states.
Benetton: Yes, that's correct. That's why trying to be too exact here probably makes no sense. It makes no difference to me if ideas pan out a little earlier or a little later. The important thing is that you've got to have ideas in the first place. And you need to have the passion to implement them.
SPIEGEL: Forty years ago, you rode your bike around to sell your sister Guiliana's knitwear. Nowadays, your clan is one of Italy's wealthiest families. Which period was more exciting for you -- fighting for the rise and growth of your company or undertaking the efforts to keep the empire together?
Benetton: Each period has its own appeal. These days we are taking advantage of the experience we gathered 40 years ago, when we started off with nothing at all. Without the mistakes and successes of those days we wouldn't be here today.
SPIEGEL: You and your three siblings have 14 kids. But only your son Alessandro is interested in Benetton.
Benetton: He will be named vice president of the supervisory board before the end of May. All other kids are pursuing their own plans. We have one consultant, doctors, housewives, entrepreneurs. When all of us sit down together at one table it's important to me that we can assemble a large group of people enlivened by the entrepreneurial spirit. It's important that we don't rest on our laurels, but that we make new experiences all the time. In this respect, each and every generation has to start over. The issue at stake here is intuition, not administering a heritage.
SPIEGEL: Is there a true revolutionary or rebel among your kids?
Benetton: Certainly not in the second generation. Maybe there will be one in the third generation. I just hope that the children don't just use everything up, but make their own contribution, instead.
SPIEGEL: Signor Benetton, thank you very much for this interview.
Translated from the German by Patrick Kessler