Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Ferraris Kept a Family Business Alive Through Five Wars
Transcript
- Lucas: There's a family business in the foothills of the Italian Alps that has survived five wars, two world depressions, the rise of fast fashion, and the death of the Italian tailoring industry. And it's not Ferrari the carmaker. It's Ferrari the textile mill. Luna: I think most people hear Ferrari and immediately think of the red sports car. But this is a completely different dynasty. A woollen mill in Biella that's been weaving cloth since 1872. Lucas: Exactly. And the reason I wanted to talk about them today is because they represent something almost extinct in modern business: a family that deliberately chose small, profitable, and durable over big, leveraged, and fast. And they've done it for 154 years across six generations. Luna: Before we get into the details, I want to mention something. These episodes take a lot of research, and we deliberately don't run ads on them. If you find value in these stories and want to support keeping them ad-free, the link is buy me a coffee dot com slash fexingo. No pressure, just an option. Lucas: Yeah, it's a small way to keep this independent. Now, back to the Ferraris. The key moment I want to focus on is a single decision in 1954. The third-generation owner, Umberto Ferrari, was approached by a large American retailer. They wanted to place a massive order for mid-range wool fabric. Luna: And he turned it down? That sounds almost reckless for a small mill trying to rebuild after World War Two. Lucas: He did. And the reason is fascinating. Umberto knew that the American retailer would demand price concessions, volume commitments, and eventually push them to lower quality. He said no, and instead doubled down on the highest-end woollen cloth for Italian tailoring houses. Luna: So he bet on craftsmanship over scale. That must have been terrifying when your competitors are chasing volume. Lucas: It was. But here's the thing: that decision became the family's strategic anchor for the next 70 years. They never built a factory in a low-cost country. They never took on debt to expand. They just kept making the best woollen cloth in a small town called Pray, which is about an hour from Biella. Luna: Pray. That's an ironic name for a business that survived so many crises. Lucas: Right. The town's name is actually the Italian word for 'prayer', which feels fitting. But the real backbone of the family's longevity is something they call the 'family charter', which was first drafted in 1921 by the second generation. Luna: A family charter sounds like a modern governance tool. They were doing this a hundred years ago? Lucas: Yes. The 1921 charter laid out rules that still govern the business today: only family members who work in the mill for at least five years can become shareholders. No outside investors. Dividends are capped at 30% of profits, with the rest reinvested. And any family member who wants to sell their shares must first offer them to other family members at a fixed formula price. Luna: That's remarkably disciplined. The five-year work requirement alone filters out a lot of entitlement. Lucas: Exactly. And it's not a rubber stamp. I read about a fourth-generation cousin who tried to join the board after working in marketing for three years. The family said no. He left and started his own fashion label. The charter held. Luna: That must have created some tension at Christmas dinner. Lucas: I imagine so. But the charter also has a dispute resolution mechanism: a family council that meets quarterly, and if they can't agree, they bring in an external mediator from the local chamber of commerce. They've only needed that mediator twice in 70 years. Luna: That's a stunning track record. Most family businesses fracture over succession within two generations. Lucas: Which brings me to their succession philosophy. The Ferraris have a rule that no one is forced into the business. Each generation, they identify two or three interested cousins early, around age 16, and they start mentoring them. But there's no presumption that the oldest son takes over. Luna: So they're actively selecting for aptitude, not birth order. Lucas: Correct. The current CEO is a fifth-generation woman named Elena Ferrari, who took over in 2018. She's the first female CEO in the family's history. And she didn't get the job because she was the eldest. She got it because she spent 12 years in the mill, starting on the factory floor sorting raw wool. Luna: That's a powerful image: the CEO started sorting wool by hand. How did she handle the transition from the previous generation? Lucas: Her father, Giovanni, stepped down when she was 42. He stayed on the board for two years but deliberately took a back seat. He moved to a small apartment in town and started teaching part-time at a local textile school. He wanted to show that he wasn't hovering. Luna: That's incredibly intentional. Most founders can't let go. Lucas: Right. And Elena has had to navigate a huge challenge: the collapse of formal Italian tailoring. In the 1980s, there were 40,000 tailoring shops in Italy. Today, there are fewer than 5,000. The mill's traditional customer base shrank by 80 percent. Luna: So how did they survive? Did they pivot to something else? Lucas: They did pivot, but slowly. Elena began producing a small line of high-end woollen accessories directly to consumers — scarves, throws, blankets. But they never put the Ferrari brand on them. They sell under a different name, 'Lana del Biella', because they didn't want to dilute the mill's reputation as a fabric supplier. Luna: So they protected the B2B brand while experimenting with D2C on the side. That's a smart hedge. Lucas: It is. And recently, they've leaned into sustainability as a differentiator. The mill uses only wool from local Piedmontese sheep, and they've invested in a closed-loop water recycling system. That's rare in the textile industry, where water waste is massive. Luna: Are they B Corp certified or anything like that? Lucas: They are not. Elena told a trade publication that she doesn't want a certification because she thinks the standards are too generic. Instead, they publish an annual 'sustainability ledger' with specific metrics: water usage per meter of fabric, energy per kilogram, waste diverted from landfill. They've reduced water use by 40 percent over the last five years. Luna: That's impressive. And it's totally consistent with their identity: do the work, don't chase the label. Lucas: Exactly. And that brings me to the most recent test: the pandemic and the raw material shock in 2021. Wool prices spiked 60 percent. Many mills bought cheaper synthetic blends to maintain margins. Ferrari didn't. They absorbed the cost and raised prices to their tailoring clients by 12 percent. They lost about 15 percent of their customers, but the remaining ones are fiercely loyal. Luna: So they traded volume for loyalty. It's the same logic Umberto used in 1954. Lucas: The same logic. And that consistency is what I find most remarkable about this family. They have a decision-making DNA that repeats across generations. It's almost like a genetic algorithm for business strategy. Luna: I want to ask about the sixth generation. Are there any in the pipeline? Lucas: Yes, there are three sixth-generation members working in the mill right now. Two are in their late twenties, one is in her early thirties. Elena has said publicly that she expects one of them to take over in about eight years, but she's not naming names yet. They're all on the factory floor for at least two years. Luna: So the charter's work requirement is still enforced. Lucas: Still enforced. And one of them, a guy named Marco, actually started as an apprentice to the mill's master weaver, who is 73 and has been with the company for 55 years. That knowledge transfer is something you can't buy. Luna: That's a real competitive advantage. Most companies have lost that depth of institutional memory. Lucas: They have. And the Ferraris are proof that you can build a durable business without scale, without debt, without outside investors, and without chasing trends. You just need a clear set of rules, the patience to follow them, and a family culture that values the business over individual egos. Luna: It's a quiet kind of success. Not the kind that makes headlines, but the kind that makes a 154-year-old mill still operating in the same town where it started. Lucas: And still weaving cloth that costs 200 euros a meter, by the way. Which brings us back to the 1954 decision. Umberto said no to mass retail, and that one no shaped everything that came after. Luna: Sometimes the best strategic move is knowing what to turn down.