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An Italian Oven Maker Expands Amid the Euro Crisis

June 13 (Bloomberg BusinessWeek) -- The past few years should have been tough on Paolo Bertazzoni. As chief executive of Bertazzoni, a maker of high-end kitchen appliances in the northern Italian town of Guastalla, he has watched as the financial meltdown and euro crisis battered his key markets. Yet even as appliance sales in Europe’s biggest countries stagnate, Bertazzoni remains bullish, expecting revenue growth to top 18 percent this year, to €70 million ($88.5 million), after jumping 23 percent in the first quarter. “We’re optimistic,” Bertazzoni says. “There is a significant group of customers whose aspirations and lifestyle give a central role to cooking for the family. Our products are made to respond to this desire with style.”

The 130-year-old company has managed to keep growing in large part by looking to new markets, especially the U.S. Bertazzoni has redesigned some products to suit American tastes, including super-sizing ovens so they can accommodate massive Thanksgiving turkeys. Since Bertazzoni entered the U.S. in 2005, sales there have grown to about a fifth of the company’s revenues. “We have developed a product that is suitable for the American market, yet with a strong Italian identity,” Bertazzoni says.

That identity is grounded in a sense of design. The company’s ovens and stoves come in eight bright colors, including top sellers inspired by Lamborghini’s yellow and the signature red of Ferrari. The latter is headquartered in Maranello, just 40 minutes (or less in a Ferrari) from Bertazzoni’s headquarters. “Proximity to the world of luxury cars allows us to access special suppliers,” Bertazzoni says.

Last year Bertazzoni introduced high-definition touch screens about the size of an iPhone to control its ovens. The screens let users control “the Assistant”—software with a bank of cooking sequences such as dehydration, turbo, and Shabbat mode. “Producing and selling a product that is well-designed or badly designed costs exactly the same amount of money,” says Bertazzoni, the fifth generation of his family to run the company. “Style is part of the products we manufacture.”

One big hurdle has been soaring prices for raw materials. While profits still rose last year, their growth slowed as purchases of stainless steel, aluminum, and copper “strongly weighed” on expenses, Bertazzoni says. To make up the difference, Bertazzoni analyzed his prices and concluded that a few items, such as professional ranges, had enough of an advantage over rivals’ products that he could charge as much as 8 percent more for them. For other products with less differentiation from competitive offerings, he bumped prices up by 3 percent or less. Further savings came after a team of employees examined the company’s operations and figured out how to cut waste by 30 percent, helping to bring overall production costs down by 2 percent, Bertazzoni says.

A bigger issue may be the ability of Bertazzoni’s key markets to grow if the euro crisis deepens. With continuing troubles in Europe starting to hurt the U.S. economy, the outlook for the appliance industry is “quite negative,” says Lorenza Della Santa, an analyst at Euromonitor International in London. “Premium, luxury players are indeed much better positioned than rivals addressing low-end appliances, but they’re in a niche market,” she says. “They’re not completely sheltered from the recession, even if they’re better placed to face it.” And Bertazzoni is facing increased competition for that high-end market from bigger rivals such as Miele, Viking, Thermador, Gaggenau, and Wolf.

Bertazzoni’s strength, says Paolo Morosetti, a professor of corporate strategy at Milan’s Bocconi University, is that it has tapped into the tradition of fine food and precision engineering of northern Italy. The company benefits from “a clear vision of the business by the owner family, who’s personally involved in the management,” Morosetti says. Bertazzoni’s children, Valentina and Nicola—the sixth generation in the business—respectively serve as brand manager and sales chief.

Francesco Bertazzoni, an engineer making precision scales for dairies and pharmacies, founded the company in 1882 to make wood-burning cooking stoves, which were starting to replace fireplaces. In the early 1900s, the company built its first factory with money from Paolo Bertazzoni’s grandmother, who came from a family of Parmesan cheese producers. (Guastalla lies just 20 miles from Parma, the city that gives the cheese its name.) In the 1920s, Napoleone Bertazzoni, the founder’s grandson, introduced a nickel-plated luxury model, using production techniques he learned while working with Fiat (FI:IM) in Turin.

Bertazzoni has been hiring through the recession. The company today employs about 300 people at its two-story brick headquarters in Guastalla, up from about 220 in 2005. In the main workshop, laborers dressed in blue working clothes fit together parts, churning out roughly 15,000 appliances a month—everything from single ovens starting at €2,000 to the €7,000 Heritage gas range with six-burners, electric griddle, and two ovens.

Now, Bertazzoni says, it’s time to turn his attention back to Europe and to countries such as India, Russia, Brazil, and China. To do that, he’s investing €9 million through 2015 to expand his 18,000 square meter (194,000 square feet) plant by 60 percent so he can boost capacity and add new products. “Europe has a lot of potential, even if the situation is very difficult,” Bertazzoni says. “Emerging markets are becoming increasingly important and this has helped us, boosting sales and creating footholds in parts of the world that are growing very fast.”

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