What went wrong with Wedgwood?
Was it the management, the organization, or just the business?
“For centuries, Waterford Crystal has captured light time and again. In the hands of artists consumed by their craft, light has embraced, danced and cascaded across beautifully cut crystal,” explains the (April) annual report. of 2008.
According to information on the site, Waterford Wedgwood plc was established in 1986 with the merger of (Irish) Waterford Glass Group and (British) Wedgwood. The mission statement
the site reads: “Continue to be the world’s leading portfolio of luxury lifestyle brands with a focus on tabletop, giftware and home.”
When did that mission become impossible? The company has been struggling to survive since 2001. In the context of the bridal market, which was the dominant market for the company’s products (crystal and porcelain), wasn’t the marriage of crystal and porcelain perfect?
Or did it make the bridal business more vulnerable? A package in which, as in the financial parallel, companies want to offer everything, but where customer preferences are changing.
The situation in 1986 is quite different than it was in 2008. In 1986, the long-term boom had just begun and luxury came into fashion where companies like Gucci entered the stock market.
It is not curious that the best years were at the height of the Internet bubble in 2001. Everything was still possible.
But preferences and market structure have been changing ever since. The final blow came from the last three months of 2008 where the credit crunch and reliance on a single credit provider (Bank of America) wiped out the last hope.
The former CEO steps down after delivering the 2008 financial report due in April and David W Scully is appointed as the new CEO in August.
David W. Sculley Group CEO (62), is a partner at the investment firm Sculley Brothers. He joined the Group as a Director in 1997. He sits on the boards of several private companies. Mr. Sculley graduated cum laude from Harvard University with a bachelor’s degree in economics. Before forming Sculley Brothers, he was a senior executive at Heinz, where he served as a director.(1)
From the annual report, the CFO acknowledges that the initial evidence of a return to the financial health declared in last year’s results was premature.
The annual report is quite open about the problems that have been faced. The financial results for the year ended April 5, 2008 are very disappointing, as the Group reported a pre-exceptional loss of EUR31.6 million at the EBITDA level (earnings before interest, taxes, depreciation and amortization) compared to a profit of EUR15.0 million in the prior year. Loss for the year was EUR232.8 million compared to a loss of EUR71.2 million in the prior year. The two main divisions decreased their sales: the glass division by 15% (170 million euros) and the ceramic division by 8% (462 million).
In the same report, the risks and uncertainties were defined:
- Luxury goods, typically discretionary purchases…sensitive to trends in the general economy.
- strong competition… manufactured in countries with significantly lower labor costs.
- currencies other than the euro (US dollars, British pounds and Japanese yen).
- the strength of brands… protecting intellectual property rights.
- the need to manage the portfolio of brands, patterns and designs… alone and through collaboration and through brand extensions and licensing agreements.
- inventory management is critical for sales
- Dependence (time to market/quality) on suppliers of raw materials and outsourced products to meet our delivery requirements.
- complementary distribution channels instead of traditional department stores
- efficient and effective management of manufacturing facilities
- the possibility of accessing additional financing.
These risks show that the changing factor of the market played a decisive role in the fall of the results.
This is also what journalists (reports) seem to indicate: “Ireland’s Waterford Wedgwood, whose lavish tableware was once a mainstay on wedding registry lists around the world, has called recipients…” (2 )
The debt burden made it impossible to continue in a financial market where cash is king: Waterford crystal is one of Ireland’s most famous brands.
It is especially a pity to know that the owner “of the British potter Wedgwood was founded 250 years ago by Josiah Wedgwood
— one of the fathers of the industrial revolution”.
According to the report, the group has some 8,000 employees worldwide: … 1,900 in manufacturing in the UK, 800 in Ireland… 1,000 workers at German-based porcelain manufacturer Rosenthal.
It was trying to modernize its product range “just as the economic downturn in its main markets, the UK and the US, and the strength of the euro hit earnings, while the credit crunch made talks with lenders difficult”…
The shares have been in decline since 2001 and the site shows the share price in decimals: 0.01 cents…
A pity for those who value craftsmanship (as professional competence) and tradition in a market where there is little room for style.
The other day I was watching the concert of the year on the news on TV and I saw a lot of people wearing only a sweater, and not the traditional costume. People do not know how to value a tradition; who is lost here; the market or the artisan?
It seems all too clear a sign of the changing times in which we live.
