All is not bene among the united colours

Andrew Gumbel reports from Rome on unaccustomed pain for the clean, bri ght success story called Benetton

Benetton is not used to bad news. In the 30 years since it first introduced its clean, bright, affordable clothes to the world, it has only really gone in one direction, and that is up.

The family business started by Luciano Benetton with his two brothers and sister in an obscure corner of north-eastern Italy in March 1965 has become a multinational success story, spawning 7,000 shops around the world, diversifying into sport, agriculture and food retailing, and generating a turnover approaching 9,000bn lire (£3.8bn) a year.

And yet not all appears to be well at Benetton. Call it the price of success, or a patch of recessionary blues, but the company is generating an awful lot of negative publicity. First, of course, are the advertisements, those deliberately shocking imagescrafted by Oliviero Toscani that have caused such a rumpus that a handful of Benetton store owners in Germany have rebelled against the parent company by refusing to pay for goods received from the factory.

But there are less glamorous causes for concern, too. The company's share price has lost 35 per cent of its value on the Milan Stock Exchange since last May. Growth in profits has virtually ground to a halt, hit by an aggressive pricing policy aimed at combating the recession, with figures for the first six months of 1994 showing an increase of 2 per cent - nothing by Benetton's high standards.

Most recently, the company's general manager, Aldo Palmeri, stepped down after more than a decade at the helm, to be replaced by Carlo Gilardi, a career banker, sparking gossip about rivalries at the top and disagreements about Benetton's future direction.

The company is proving remarkably touchy about the aspersions cast on its good name. One official, Marina Gallanti, admitted being in a "very bad mood" after seeing the relentless press coverage of the German shop-owners' revolt. "The story is being toldas though an Islamic crusade was being waged by a big bad multinational against some poor helpless small businessmen. The whole thing is completely ridiculous," she said.

According to her, the store-owners were using the provocative advertising as an excuse. It is certainly true that Toscani's images - even the most tasteless ones showing AIDS victims and the clothes of a dead Croatian soldier - appear to have done no harm to Benetton's sales, which even in recessionary 1994 grew 12 per cent to record highs, and of course increased the company's profile thanks to the gossip they have generated.

"What we're talking about is a lawyer's trick to use a cause celebre as a peg on which to hang every kind of grievance. It's not even true that the adverts are unpopular in Germany. These store-owners may not like them, but the Frankfurt Museum of ModernArt has them on permanent exhibition," Ms Gallanti said. "Legally they don't have a leg to stand on. We are suing for non-payment of goods received and in many cases already sold to customers."

Behind the spat lie some deeper questions about the way Benetton operates. The company built its success on a special kind of licence for its stores, quite distinct from the more usual franchise system. Instead of demanding royalties in exchange for guaranteeing the security of the stores, Benetton has developed a looser relationship under which the stores are almost autonomous and stand or fall on their own profitability.

In good times, this means Benetton stores can make far more money than their high street counterparts. But in bad times, they may suffer or even go under. In the United States, for example, the number of Benetton outlets fell from 750 in the mid-1980s to120.

It is almost certainly the recession that sparked the revolt in Germany, Benetton's biggest export market for clothes - with 616 stores, second only to Italy itself. Sources inside the company have suggested that the licensing system may be due for a review.

Another potential problem, that may help to explain Mr Palmeri's second departure from the Benetton helm in less than five years, is the continuing close involvement of the quartet of Benetton siblings in the running of the business as the company diversifies and grows ever more powerful.

Although Mr Palmeri has always insisted that his relationship with them is good, there have been reports, for example, that he did not agree with the decision by Benetton's parent company, Edizione Holding, to invest in the Euromercato supermarket chain and a number of motorway restaurants - fearing that Benetton was getting too deep in an area in which it had no solid experience.

Mr Gilardi comes to the general manager's job with previous experience in financial administration and a solid background at both the Bank of Italy and the Banca di Roma - suggesting that the company feels it needs to inject some financial structures after the rapid growth of the past few years. The company blames the general atmosphere of recession and political uncertainty in Italy for the drop in its share price. It will be up to Mr Gilardi to prove that the problems go no deeper.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat