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Veneto Region Market Analysis

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Veneto Region Market Analysis Project co financed by the European Union through ERDF – New Neighbourhood programme Interreg/CARDS/PHARE “FACILITY FOR SMEs AND CAPACITY BUILDING” VENETO REGION MARKET ANALYSIS WOOD, METAL, AGRO-FOOD PROCESSING, TEXTILE AND FOOTWEAR This publication has been produced in the framework of the Project “Facility for SMEs and Capacity Building” (Cod. 30), co financed by the EU through ERDF New Neighbourhood programme Interreg/CARDS/PHARE. The contents are the sole responsibility of authors and can under no circumstances be regarded as reflecting the position of the EU. Project co financed by the European Union through ERDF – New Neighbourhood programme Interreg/CARDS/PHARE 1. Wood processing industry Overview Veneto is an Italian region and one of the most dedicated areas with a long tradition in the sector of wood, woodworking and furniture production. The Venetian wood sector comprises various types of products: from highly artistic and skilled ones to the most standardized ones. Within the borders of the region it is possible to purchase several kinds of different products as for instance carved tables made in the best tradition of the ancient handicraft style, modern stuffed furniture, highly technological kitchens and high-end design furniture. Wood processing activities are concentrated in three different district areas: Bassano del Grappa (province of Vicenza) specialized in highly artistic furniture production; the Venetian plain area (district areas of Verona, Padua and Rovigo) specialized in classic furniture production and finally the river district area of Alto–Livenzana–Piave specialized in the woodworking/wood furniture. This latter district covers two different areas: the province of Treviso (in the region of Veneto) and the province of Pordenone province (in the region of Friuli). The woodworking industry in these areas suddenly boomed in the 70’s thanks to a closed network of small and medium size enterprises and family-owned firms fully integrated with the territory. Veneto presently accounts for 30% of the entire Italian furniture production. The major strengths of this sector are represented by a large number of very dynamic companies including a few very large Groups holding a leading position in their sector and numerous small and medium size firms specialized in specific market niches. At the end of 2007 the Venetian wood sector counted almost 14,000 companies, that is: 12.5% of the whole Italian industry (4,732 companies in woodworking and 9,204 companies in furniture production). 78.2 % of such companies are handicraft firms. In the last few years this sector has been marked by the entry of new manufacturers capable to work with low labour cost. The reduction of domestic consumption rates accompanied by an increased demand for customized products, a strongly differentiated market demand and a concentration of the distribution activities in the hands of a few companies caused a loss of competitiveness of the Venetian wood sector. In fact, some 2000 companies in this sector (1,327 in woodworking and 732 in furniture production) closed down in the last decade (1997-2007). According to Federlegno-Arredo 75,000 operators worked in the Veneto in the wood sector in 2005 (about 25,000 in the woodworking and 50,000 in furniture production) which meant nearly 30% of the all workers employed in this sector in Italy and an average distribution of 5.7 employees per company. In 2006 the exports of Venetian wood/furniture enterprises amounted over 2.2 billion Euros out of which 58.5% from the Province of Treviso only. These figures show that Veneto covers 20% of the overall Italian wood/furniture export activities and is the second largest exporter nationwide. Veneto export supremacy is registered in the furniture sector with the main export markets being Germany, France, United States and UK importing altogether nearly 50% of all Veneto exports. In 2000-2006 the wood/furniture exports increased by +0.4% per year against an average imports growth by +3% per year. Clearly we are still looking at a positive export/import ratio even though the trend is slightly negative. Breaking down these figures into the different production areas one should notice that Veneto followed the National trend with a highly competitive furniture production industry Project co financed by the European Union through ERDF – New Neighbourhood programme Interreg/CARDS/PHARE (average annual exports in 2000-2006: +0.8%) and a wood sector experiencing a consistently bad conjunction (average annual exports in 2000-2006: -1.9%). Due to market globalisation, the Venetian wood/furniture industry went through important changes such as: reorganisation and relocation of the production, style evolution and development of new technologies as well as an increased number of competitors and consequently an ongoing urge to implement new production and marketing solutions. At the same time, the industry experienced a greater attention to customers’ requirements and as a consequence– in some cases – to the social and liability issues. Many local companies introduced the following changes in their production process in order to meet with this new and highly competitive environment and with the new consumers’ requirements: • Company acquisitions aimed at a broader product range and therefore new commercial and financial benefits. This included pooling of different companies in sometimes even very small Groups concentrating significant production shares “in one hand”. • Fostering and implementation of technological innovations focused on automation of the production processes and increased quality control leading to increased production figures and differentiated offer thanks to the introduction of new raw materials; • More focus on design and product customization strategies as well as improved customer service including shorter reaction times to customers’ complaints and implementation of new more sophisticated IT systems. Strengths The wood/furniture sector is one of the most popular and best established sectors in Veneto. Mostly small – medium size enterprises are working in this sector often with a high degree of specialization in one or more production steps and a tight collaboration among each other. Moreover this sector encloses a high extent of resources, expertise, culture and handcrafting traditions that are the real value and distinguishing feature of this branch in Veneto. The enterprises in this sector are very innovation-oriented and committed to a consistent technical research for more flexibility, throughput, quality-to-price ratio as well as increased capability to quickly adjust to market change and new consumers’ requirements and taste. The Venetian wood/furniture industry is a worldwide leader in this sector with a lot of new potential export markets opening up in the developing countries. Weaknesses The sector is presently confronted with difficulties linked to the bad global conjunction (less purchase power of the traditional customer groups) and to the structural changes effecting the furniture demand (high rate of consumption variation and more demanding consumers). The majority of the enterprises in this sector is small size, family owned companies often lacking sufficient human and financial resources with inadequate management skills and difficult generational turnover. The capacity of fostering innovation and developing new products away from the traditional ones is often lacking. Moreover, these companies often pursue self-acting strategies preventing possible reorganisation strategies, teamwork and strategy sharing policies. Project co financed by the European Union through ERDF – New Neighbourhood programme Interreg/CARDS/PHARE The difficulties in recruiting skilled workers, particularly in production, has been slowing down the companies growth process and keeps preventing continued operation of a large number of firms. The difficult shift of production skills to the new generations and the scarce, decreasing concern of the new generation for this sector are the main future weaknesses that one can presently forecast for this branch. Opportunities The creation of new communication, marketing and publicity strategies is a requirement for increasing the visibility of the product quality and for promoting Venetian products worldwide. Meeting customers’ needs for flexibility, timely delivery and product customization is now a priority. In order to increase the competitiveness of the sector, the operators should act in synergy so as to more effectively reach mutual goals and set up local cooperation networks in such areas as fostering: technical, scientific and economical research at local universities; new styles and design at industrial design schools; training of human resources at company level; organizational skills at local Associations and Authorities and finally decision-making and visibility within the territory at Public Offices. Threats The strong competition by countries that produce at lower cost is susceptible of threatening Venetian enterprises who cannot compete with their retail prices and sales organisations. International competitors impose a strong degree of production skills and a very high, consistent throughput for which hardly convertible technologies and production methods are required. The lesser purchase power of the traditional customers, the small increase of the domestic market demand, the high differentiation of the demand and more refined sophisticated customers may be some reasons of a possible serious
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