The Beretta family's sporting life
After 475 years in the gun business, the Beretta clan has mastered the high-end collectible market -- lock, stock and barrel.
(Fortune) -- On a crisp November morning Pietro Gussalli Beretta watches as a white spaniel points at a tangle of underbrush. The setting is a cornfield on a northern Italian estate near the banks of the Po.
Suddenly, there is the thrum of birds' wings as two pheasants explode from their cover. Coolly, Beretta brings his 12-gauge shotgun to his shoulder. He pivots to the right and takes the first bird -BAM - then swings his tweed-encased torso back to the left and drops the second. In shooting parlance, this is what's known as a double - the equivalent of bowling a strike or putting for an eagle.
Hitting a double may be easy when you are a Beretta, but what's challenging for the 45-year-old Pietro; his father, 70-year old Ugo; and his 43-year-old brother, Franco, is making sure that the family business, which dates back to 1526, remains a vibrant one. Their dealmaking must be state of the art, while their corporate culture has to remain true to their heritage.
Even though the company is still based in the same valley near the Italian Alps where their ancestor Bartolomeo Beretta once hand-hammered musket barrels for the doge of Venice, the modern corporate landscape in which the company operates is markedly different.
Over the past decade many fabled gunmakers have been bought out by conglomerates or private equity firms - for example, Remington (by an affiliate of Cerberus Capital Management last year). Beretta, however, remains privately held and family-owned.
"What's happening in private equity doesn't affect us. Those bankers make a deal every day. We have been building a company over centuries," says Pietro, explaining the value of tradition in an ever-changing world.
Pietro oversees the holding company and is the strategic thinker in his generation. He is also a bit of a paradox - an old soul who collects modern art.
A business example of how the past informs the present at Beretta would be the way the family continues to emphasize the hunting over the military market (the latter accounts for only 7% of their consolidated balance sheet). The lesson that wars come and go is one the family learned some time ago - when orders from Napoleon's army dried up post-Waterloo.
Another modern-day challenge is that some blue-state residents equate being a gunmaker with being a merchant of death.
Pietro begs to differ. "The way I see it, we are similar to an automaker. Sometimes there are crazy people who drive cars too fast and destroy families. Those people are breaking the law, not the car or the automaker. After a tragedy like a school shooting, it is very easy to point fingers at gun manufacturers. But people seldom talk about the case when one of our guns saves the life of a policeman or a soldier. So if you want to be objective, you need to look at the whole picture."
"My father was very strict on two subjects: My brother and I both had to graduate from university and we had to complete our military service, but we weren't forced to work here," explains Pietro's younger brother, Franco. Blond and outgoing, Franco oversees the manufacturing of the guns as well as the marketing of the family name, which in recent years has involved selling apparel through boutiques - Beretta Galleries.
Their father, Ugo, still runs the show and is the majority shareholder. All three work out of an old stone house that was the family's residence until 1984. The house in Gardone Val Trompia is connected to factories, where roughly 1,000 workers produce about 1,500 guns a day. Less than a mile away is an office park known as Beretta II, where master engravers work on the premium guns - bespoke shotguns and rifles that start at $12,000 (compared with $1,800 for mass-produced ones).
When Franco began working at the company while still in college, his great-uncle Carlo, who was then CEO, had him apprentice with the chief engineer, who had been at the company since he was 16.
"He taught me not just technical things, but he also explained to me that if a family takes care of its workers, the workers will take care of the family." This brand of paternalistic capitalism sounds antique to American ears, but there is little staff turnover, which ensures quality craftsmanship.
Beretta's expansion into the U.S. during Carlo's tenure as CEO is another reason the company continues to flourish - half its $35 million in 2007 revenues came from the U.S. During the same period, Beretta Holdings posted $627 million in sales.
Franco can remember the day in 1985 when Beretta's new 9mm pistol beat out seven competitors to replace Colt as the sidearm of all American soldiers. Under his father, Beretta continued to press its advantage as American gun manufacturers wrestled with nasty unions and antiquated machinery.
In the '90s, Franco's brother, Pietro, advocated that Beretta grow through acquisitions funded out of cash flow, and the company rolled up the Finnish rifle firm Sako and the Colorado-based optics company Burris, among others. Beretta Holdings is still in the hunt today, currently working with the boutique investment bank Watch Hill Partners on several acquisitions.
Growth is important because rivals, including Smith & Wesson (SWHC), would like to wrest Beretta's profitable military contracts away from it. While the Department of Defense has no immediate plans to replace the Beretta 9mm, U.S. soldiers in Iraq and Afghanistan have complained of jamming and expressed an interest in having a handgun with greater knockdown power, such as the Glock .45. Beretta has developed a special magazine called Sand Proof to address the jamming issue with its 9mm but has yet to produce a .45 the U.S. military wants.
As the pheasant shoot winds down, Ugo strides toward an old farmhouse for lunch. Inside, as the red wine from the family vineyard begins to flow, Pietro regales the table with a tale of how during his military service he awoke on his first morning in a panic: Having grown up with servants, he had never made a bed before.
Ugo's eyes light up when the conversation shifts to the 16th generation of Beretta, his grandson Carlo Alberto Gussalli Beretta. Franco's son will turn 11 later this month. It is too early to tell whether Carlo will blossom into a hunter, but as Ugo points out with pride, "He got six birds the last time I took him."
And while a boy cannot be hammered, forged, or bent to the will of his elders, one suspects that his grandfather, his uncle Pietro, and his father will approach Carlo's education in the family business with the same care that Beretta's engravers bring to their guns.