Italian home appliance firm De’Longhi’s robust family business credentials have helped it to flourish in the Middle East and China
If you have a kitchen, chances are you own a De’Longhi product. Maybe you enjoy a morning cappuccino brewed in one of the Italian home appliance firm’s signature coffee machines. Or, if you’re more of a tea person, perhaps one of the group’s chic kettles boils merrily on your worktop. In this writer’s case it’s a 1980s Kenwood Chef passed down by an ageing relative and still going strong after three decades of dicing and slicing.
In an interview at the company’s Italian headquarters in Treviso, I put it to Fabio De’Longhi, CEO of De’Longhi (which owns Kenwood), that such enduring quality might be a mixed blessing – at least from a bottom-line perspective. “Perhaps,” he reflects. “But then one day that food processor will break and you will go out and replace it with another Kenwood product for the next generation.”
As one of the leading family businesses in Europe, talk of the next generation is particularly resonant for the De’Longhi Group. For family businesses, succession – where responsibilities are passed on to younger family members – can be a tricky issue as upcoming generations choose to pursue different career paths, or simply fail to pass muster in the boardroom.
Asked if he always knew he would join the family firm, De’Longhi, who studied economics at the University of Milan, jokes that as a child he actually had ambitions to become a champion skier or a footballer. More seriously, he explains succession has, to date, not been a problem, with he and his sister, an account manager at the group’s London base, representing only the second generation of De’Longhi family employees. “I was fortunate to join the company when it was still relatively small. I had the opportunity to help the company grow and I grew with it. I think for future generations, we may have a different approach.”
De’Longhi attributes the group’s success to combining the strengths of the family-business model with those of conventional stock-listed companies. He highlights the fact that De’Longhi, which purchased the Kenwood brand in 2001 and the rights to make Braun-branded appliances in 2012, has not shied away from branching out.
“One positive aspect of family businesses is the continuity, but that can mean you also sometimes miss opportunities. You have to merge, you have to make acquisitions, and sometimes family businesses tend to avoid these activities. It can be down to a number of things: lack of capital and also the risk of losing control. But these activities can be crucial for long-term success.
“At De’Longhi, we mix the typical family rules around control, heritage and management values with aspects more typical of stock-listed companies. We’re results-driven in the short term and we have management from outside working with the family. It’s all about balance.”
The approach has paid dividends. Capitalised at US$2.9bn, trading strongly on the Milan stock exchange and enjoying market leadership in many of the overseas territories in which it operates, the group has come a long way since its modest beginnings, first in 1902, when it was a small industrial parts manufacturer, then in the 1970s when Fabio’s father, Giuseppe, today Chairman of the group, started selling oil-filled radiators from his own father’s metal components shop.
Employing more than 6,000 staff, today the company has a presence in virtually every international market, operating 13 production facilities and 30 international subsidiaries that support sales to 75 countries worldwide. It has enjoyed particular success in the Middle East, which also shares a strong culture of family-run businesses.
De’Longhi sums it up: “There is this real sense of entrepreneurialism combined with a long-term vision. You find that company values often reflect family values, especially, for example, when it comes to personal relationships.”
We’re results-driven in the short term and we have management from outside working with the family. It’s all about balance
De’Longhi directs its Middle East, India and Africa business from its Dubai office, which opened almost a decade ago and today employs 30 people. Fabio De’Longhi says the emirate’s location and strong transport links make it the ideal base for serving regional markets.
“Dubai is an international city in the heart of the region. It made perfect sense to base ourselves there. It gives us access to Saudi Arabia, which has grown very well over the years. We are also enjoying success in some less politically stable countries such as Egypt.”
Asia, says De’Longhi, offers further growth opportunities, fuelled in part by the world’s insatiable appetite for coffee. While in the 1990s, and even as late as 2000, De’Longhi coffee-makers notched up sales of US$50-60m, today that figure is closer to US$600m, representing more than a third of the group’s turnover.
“The growth in coffee has been phenomenal,” says De’Longhi. “We are seeing consumers in traditional markets, such as Europe, wanting better coffee – cappuccinos and lattés. And in parts of the world where people aren’t traditionally coffee drinkers, they are becoming exposed to those trends, and the culture is changing, albeit more gradually.”
One such market is China, where the company says it has stolen a march on competitors by focusing on heritage in a market hungry for the cachet of European brands. “Our philosophy is that the De’Longhi products we sell in China typify Italian culture, the Kenwood products typify British culture and with Braun it’s all about German heritage.”
Pressed to sum up each brand’s distinct attributes, De’Longhi contrasts the exuberance of De’Longhi’s product designs with the minimalism of the Braun goods and the reassuring functionality of Kenwood appliances.
“For Braun, the underlying design philosophy is ‘less is more’. It’s a philosophy that was embraced and reinvented by Jonathon Ive at Apple, who took inspiration from [celebrated German industrial designer] Dieter Rams’ Braun designs of the 1960s and 1970s.
“Similarly, Kenwood products have very simple lines. The design is all about ease of use and intuitive interfaces.”
By contrast, the De’Longhi aesthetic is far more dramatic. The company is, of course, celebrated for its design values, with De’Longhi Design Director Giacomo Borin named in 2006 as one of the 50 most influential designers in the world by one interiors magazine.
“The De’Longhi look is unconventional, rich, original and unexpected. You would never see a Braun logo on products like these. We use design to create emotion,” explains De’Longhi pointing to a series of images in a sumptuous coffee-table book of De’Longhi product designs.
But while design matters, quality, says De’Longhi, matters more. “At the end of the day, a product has to deliver. Good design teamed with poor performance is a recipe for disaster.”
On the day we speak, the news is full of headlines about conflict and failing economies. Is such volatility a worry for a global concern such as De’Longhi?
“No matter what happens,” reflects De’Longhi, “people go home, eat and relax with a coffee. The fundamentals are very strong because our business is intimately linked to everyday life.”