Benetton, Much More than a Transgressive Advertising

Benetton is a peculiar company. It is one of the most popular clothing brands in the world, although much of that fame does not come from the clothing activity, but its advertising. However, we are talking about a company that has annual revenues well over €1.5 billion.

Who does not remember Benetton advertising! For years they have probably been the most famous ads. We have to admit its innovation, as it introduced a new approach to a corporate campaign, including social issues in their ads (the announcement of a thousand faces of people of different races and skin colors, the newborn…), resulting in a transgressive advertising, applying strictly the famous saying «Let them talk about me, even if it is bad» with political content (with ads when Obama and the late Venezuelan President Hugo Chavez kiss, to name just one example) or even with an obvious sexual content.

However, this article is not about advertising (which could fulfill several articles like this), but the group itself. Benetton is a giant of fashion in Europe and globally, with a network of 5,000 stores around the world, with annual revenues well over €1.5 billion, although recent years have not been easy for the company. The European crisis (from which comes most of its revenues) and increased competition from other industry giants (mainly Zara and H&M, but also Fast Retailing) caused a serious crisis in the Italian company. It has been forced to make a major restructuring in recent years, although finally it seems to be paying off.

The company based in Villa Minelli, a palace of the XVI century in the Italian town of Ponzano, near Venice, was adversely affected by several decisions taken in the years before the crisis. The main mistake was to try to extend its presence across all the value chain (supply and sales), which granted greater control over their operations but demanded a higher risk that ultimately took its toll, plunging profitability. During the crisis (between 2007 and 2012) it found strong competition from rivals like Zara, able to react more quickly to changes in fashion and do well at a much lower cost.

The decisions taken by the Benetton family included reducing the size of the group to improve profitability (reducing its presence in markets like the US) and remove the company listing (at that time it was worth at about €600 million, a fifth of earlier). In 2011 Benetton’s revenues were €2 billion, the same as a decade earlier, with an obvious problem of profitability.

Last year, Benetton family decided to turn around the situation. They named as CEO Marco Airoldi, who came from other company of the group. Airoldi implemented a rigorous cost-saving plan, which involved a debt refinancing, store closures (almost 1,000 less than the maximum), left dozens of countries and stopped making unprofitable brands focusing on only two: United Colors of Benetton and Sisley.

The latest figures from the company open the door to optimism. Improving sales, especially in Europe (thanks largely to the resumption of economic growth in the area), with growth rates close to double-digit so far this year, and even higher ratios in other parts of the world. It is still early to say that the worst is over, but the company is convinced, talking of a return to profit next year. It is still soon to talk of a way back to the stock market, but it would not be unreasonable to think that 2017 can start being a time to consider it whether the market trend helps.

Disclosure: The author is not responsible for the views expressed in the article. The text was written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.