Ermenegildo Zegna is joining the ranks of Hermès, LVMH, and Kering, among others at the truly upper echelon of the luxury goods industry. The $1.3 billion Italian suiting company has acquired an ownership stake in Achill, a 6,100-acre farm about 40 minutes east of Armidale, Australia, complete with 10,000 sheep that have been bred to produce some of the finest merino wool on earth.
As noted by Bloomberg, “Since Zegna began as a textile business in 1910, all of its fabrics have been made with Australian wool; the company even sponsors a competition that awards some of the finest fibers grown on the continent. That wool is then used in Zegna’s high-end apparel, including the $25,000 Vellus Aureum suit, of which 60 to 80 are made to order per year.”
The hope is that the farm will become a primary supplier for its suits, which are sold in more than 500 stores internationally. “It gives us legitimacy,” Gildo Zegna, the chief executive officer of the company and grandson of the founder, says. “This new breed of sheep is a good investment for us.”
Controlling the Supply Chain
The acquisition is far from a completely out-of-left field move. In 2014, in an effort to better control its source material, Zegna formed a partnership with Charles Coventry, the fourth-generation farmer, who runs the Achill property. Zegna purchased 60 percent stake as part of a strategy it calls “sheep to shop.” While the company is the first Milanese luxury clothier to take such an ownership role in the research and development of the wool it uses, it is hardly the first to make an acquisition in this general realm.
In fact, the Zegna move comes several years after the announcement that Hermès had begun breeding its own crocodiles on farms in Australia in an attempt to meet demand for its pricey Birkin and Kelly bags. Hermès Cuirs Précieux, the tannery division of Hermès International, has since acquired Tannerie d’Annonay, a calf leather specialist located in Annonay in France, and French calf leather specialist Tanneries du Puy – all as part of its ongoing policy of bringing its suppliers in-house.
Other rival houses and conglomerates have been on a similar path over the past several years. In 2011, LVMH Moët Hennessy Louis Vuitton bought into Heng Long, a Singapore-based crocodile tanning company; LVMH and Heng Long maintain ownership stakes of 51% and 49%, respectively.
Two years later, Chanel bought a lamb hide tannery, France-based tannery Bodin-Joyeux, which had long been responsible for providing the iconic design house with a portion of its leather. (Note: The house that Coco built actually began its acquisitions years ago, buying into Desrues, a button maker in 1984; Lesage, an embroidery company, in 2002; and Barrie, a Scotland-based cashmere manufacturer, in 2012).
Around the same time as the most recent Chanel acquisition, luxury conglomerate, Kering, which owns Bottega Veneta, Gucci, Alexander McQueen, and Balenciaga, among others, acquired a majority stake in French tannery France Coco for an undisclosed sum. "This acquisition will allow Kering's brands to further secure a sustainable supply of high-quality crocodilian skins," a company spokesperson said.
The following year, in 2014, Prada entered into a deal to gain a controlling interest in France's Tannerie Megisserie Hervy, which specializes in lambskin tanning, in particular soft plonge nappa leather. Prada also entered into the venture with Tuscan tannery Conceria Superior, a long-time industrial partner of the Milan-based brand.
Still yet, let us not overlook Loro Piana, the world's largest producer of both baby cashmere yarns and fabric, which LVMH acquired in July 2013. A direct competitor of Zegna’s, Loro Piana does not own any sheep farms in Australia or New Zealand, the world's primary and most reputable apparel wool region. Instead, the 92-year old firm, which was founded in 1924, focuses its attention on vicuña — an incredibly soft, light, rare and very expensive yarn – which is sourced from the central Andes.
In 2013, the company has bought a sixty percent stake in Sanin SA, an Argentinean firm, that owns 330 square miles of high altitude grassland and mountain peaks in Argentina, which is home to 6,000 vicunas. Additionally, Sanin maintains the right to shear the wild vicunas for their precious wool, the rarest natural fiber in the world, yet another rarity given rather longstanding ban on trade in an attempt to protect these diminutive animals from poachers.