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ZUCCHI LEADS EUROPEAN MARKET IN HOUSE LINEN AND LOOKS TO THE FAR EAST


ZUCCHI LEADS EUROPEAN MARKET IN HOUSE LINEN AND LOOKS TO THE FAR EAST It is the European leader in the production and distribution of house linen. It features leading brands such as "Zucchi" and "Bassetti" in Italy - whose export share is around 20% - and "Jalla" and "Descamps" in France - that export 25% of their production. The Zucchi Group (www.gruppozucchi.it) has been through some difficult times in the past few years but it is regaining lost ground thanks to a corporate restructuring which is giving its fruits ahead of what was foreseen by the 2006-2008 business plan. Indeed, in its latest half-year report the company announced that it will be back the black by the end of 2007. We asked CEO Matteo Zucchi about the strategies and the characteristics of a difficult business, exposed to the general distress of the textile and clothing industry, but which is in general less profitable.

Is it a stretch to say that yours is a niche business?

I wouldn't say so, and the numbers confirm this: the average per capita expense on house linen is around 25 to 30 euro a year, twenty times less than the textile-clothing market. House linen purchases are generally planned and are almost never the result of impulse buying. Furthermore, low numbers correspond to a low buying frequency: once or twice a year. We try to counteract these habits by offering a wide range of products for every area of the house: from the bedroom to the bathroom, from the living room to the kitchen.

Given this premise, identifying strategies to increase buying frequency becomes a priority. Is the Zucchi Group also moving in this direction?

It is paramount to identify opportunities to increase buying frequency: offering customers higher brand quality and a kind of post-sales service could be worth exploring. On the other hand, we believe it is strategically important to expand our product range, through our retail channels, to domestic and casual clothing, adding textile-and non-textile items which complete our portfolio and encourages impulse and unplanned buying.

Even if you expand your product range, attracting customers and simultaneously change their purchasing behaviour, even playing on 'emotional' factors is still a challenge. To this end, an efficient distribution system can go a long way. What are your distribution channels?

About 30% of our profits come from own-brand or multi-brand stores selling only Group brands. These can be managed directly by the owner, or by the franchisee, or through outlets. The remaining 70% is divided up between multi-brand retailers, wholesalers and large-scale retailer chains. The weight of each channel in the two main markets varies according to each distribution model. In Italy, the retail channel still holds 35% of the market share, while in France the larger retailers represent the majority of our distribution channels in terms of volume.

You mentioned markets. What is your profit spread?

In 2006 our turnover was just over 300 million euros: 260 million came from sales in finished products and 40 million euros from factory sales, where textile ennoblement for third parties guarantees interesting volumes and profitability. Half the profits was made in Italy, one fourth in France and the rest in other countries. Overall, we are present in approximately 30 countries, especially in Germany and Spain (28 million euros in total turnover for 2006), Greece and Switzerland. Mascioni, a Zucchi-controlled company, operates in the US, where it registered a turnover of approximately 13 million euros in the past year.

In emerging economies, on the other hand, are there interesting developments ahead, at either a commercial or a production level?

We believe that we could find new opportunities by establishing our presence both in small retailers as well as in the larger commercial spaces, potentially through "on-shelf" formulas or via dedicated areas (corner or "shop in shop") in department stores. Today we already have about 400 corner/shop in shop spaces in the European market, which, together with our own-brand stores, allow us to adequately communicate the value of our brands. In China and India, where large-scale retail chains are going through an accelerated development process, we would prefer the department store solution - perhaps coupled with own-brand stores - in terms of market coverage. As far as production strategies are concerned, our presence in Asia today mostly consists of purchasing semi-finished and finished goods; but we are studying other forms of cooperation and alliances (not excluding joint ventures) which would allow us to more efficiently manage our supplies, as well as penetrating these new and interesting market segments.
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