Interview

e me home."

t Wedgwood

chief executive Tony O'Reilly Jr

wants the company's growing range

of non-ceramic gift items to say to

^consumers. He tells Susan Fenton

| more about the brand extension

policy and defends the controversial..

decision to outsource-Johnson

Brothers prediction to Asia*«;

-

Where'sWedgwood?W

hen I took over," says Tony O'Reilly,"there was a suggestion that weshould move away from focusing on

the heritage of Wedgwood in order to becomemore contemporary. I said 'no, let's not forgetour heritage, let's embrace it as we develop".This policy of embracing the past whilemarketing to the contemporary market hasincluded keeping the Jasperware for which thecompany is perhaps best known, along withthe technique of lustring that was first usedcommercially by Wedgwood as long ago as theearly 18005. But contemporary has been thedirection, with a growing number of collabora-tions with 'name' designers like Jasper Conran,Vera Wang, Nick Munro and Kelly Hoppen.

It has also, notably, included a growingprogramme of brand extensions which havetaken Wedgwood far beyond its core productarea of ceramics and into crystal, table linenand even lighting. O'Reilly, the company's chiefexecutive, wants to see brand extensionstaking up a greater proportion of the whole.

"We want to maintain our leading positionas a tabletop supplier, but producingfive-piece place settings is not the only wayforward. Through brand extensions we havethe potential to take the business to greaterheights so we need a higher component ofgiftable, non-ceramic, items.

"Extensions are real opportunities for us.They say 'pick me up and take me home'. It

works because we have such a well-knownbrand name - the most difficult thing inmarketing is to create a-brand, and we arelucky because we already have one."However, says O'Reilly, it has been importantto keep the extensions within the values of thecore brand. "You can't just buy in products andstick a Wedgwood label on them. They have tobe developed so that they resonate with thebrand."

Extensions have varying success rates indifferent parts of the world. In Japan, forinstance, textiles are so popular that thenon-ceramic side is larger than the ceramicbusiness. This is nota pattern O'Reillyexpects to see inother markets. "Wewant to grow thenon-ceramic sidebut we don't see itas becoming largerthan the coreproduct, being asubstitute for ceramics."

At retail, Wedgwood plans to reduce itstotal number of stores, particulary in Japan,Australia and the UK. Those that remain willstock a higher component of non-coreproducts and focus on a 'lifestyle' presentationwith a 'decluttered' offering that makes a clearbrand statement. The UK's flagship store in

Regent Street, London, is being refurbished inthis style.

One of the company's priorities is to appealto consumers at all price points. "On the onehand we have to provide more casual productsfor 'mass class'. On the other hand, we havepossibly rarified some products to the extentthat people don't realise they can and shoulduse them everyday. It's a balancing act to showthat the brand can straddle both ends of themarket."

This interview was conducted the day afterthe company's interim results in June. Itsannouncement that production of Johnson

Brothers was to be transferred to Asia,with the loss of more than 1,000 Britishjobs, had provoked strong commentamong the Stoke community, and thelocal member of parliament, who said

local businesses shouldbe more committed tokeeping local peopleemployed.

O'Reilly admits,"Employees were obviously saddened andshocked and there was a lot of anger from cer-tain quarters. But these are tough times in atough world. The price segment that JohnsonBrothers is in made it a victim: the economicreality is that at this mid-to low-priced levelthere is huge competition." But, he stresses,"we have invested fioom since the 19905 in

From Jasper Conranat Wedgwood,Strata, a 15cmdeep gift bowl

: :

the business, so no-one could say we didn'ttry. We thought long and hard before takingthis decision. Anyway, outsourcing is not anew policy - there has been a component ofoutsourcing for some 30 years."

The new outsourcing arrangement -Johnson Brothers will be made in China andMalaysia by factories with whom Wedgwoodhas been testing the water for some months toensure quality standards - applies only toJohnson Brothers and not to fine bone china orto Wedgwood branded earthenware or jasper,which will continue to be made in Stoke. "Wethink this is important," says O'Reilly."Country of origin is less of an issue today,especially with casual dinnerware at mid-pricepoints, but Wedgwood is still a great Britishbrand: it's synonymous with Stoke-on-Trent."

One of O'Reilly's strategies has been todecentralise the diverse parts of the globalbusiness. "There used to be a 'push' strategyby which policies were pushed out from theheadquarters to the rest of the group. But werealised that every market has its own com-plexion and I gave each market the authorityto define its own product offering."

"We have some fantastic attributes butsometimes we get so caught up in the 'day job'that we forget to feed our ideas and achieve-ments back to each other. I sometimes getfrustrated that we don't share local initiativesand best practice enough. But we're workingon that. Despite the size of the group and thediffering product lines and geographicaldifferences, it's really not a complicatedbusiness - there's a constant and that's theWedgwood brand."

That constant is maintained by whatO'Reilly calls the 'brand police' - a manage-ment team that includes himself and thatmonitors centrally all marketing initiatives."Marketing is so much more than just puttingan advert in a magazine - it's aboutsound-bites, about public relations, aboutletting the public know all the things thatWedgwood is doing around the world, everyday, making them understand that while we'relong-established we're also innovative."

O'Reilly says his management style is non-hierarchical - he favours an open-door policy."I'm not a political individual - 1 like to feel thatI'm in the trenches with everyone else. Wehave some great people, who really 'live' thiscompany but who historically have been madeto feel either that they have no voice or thattheir voice has been diluted by other people'sperspectives. An open-door policy gives thema voice, and means there's less politics."

In fact, adds O'Reilly, he was excluded athis managers' request from some of the initialplanning meetings for the current five-yearmarketing plan. 'It had to be a collectiveapproach that gave them ownership of theirown markets, and my presence might haveinhibited them."

At 36, he is among the youngest chiefexecutives in the tableware industry - hecredits his family background with endowinghim from an early age with an acquaintancewith business matters. (His father is SirAnthony O'Reilly, the Waterford Wedgwoodchairman, who is also active in many other

business activities, and other family membersare also involved.)

"I'm a lucky guy who's been given a lot ofopportunities. There's never been a dividingline between work and non-work. In my family,business and social was always intermingled.I don't switch off at 6pm on Friday and say'that's it for the week'. I work hard but I find itenjoyable. I'm interested in interior design andhomes - when I go to dinner parties I talkabout homewares but I'm not talking shop - I'dbe talking about it anyway.'

As we did the interview there had beenmore publicity about 'fat cat' executives inbusiness as a whole, with the UK governmentthreatening to curb corporate excesses.O'Reilly commented, "I have no problems withpeople earning a lot of money but goldenparachutes, huge pay-offs, are not my cup oftea. Sustained performance should be thebasis for remuneration - you shouldn't get abonus simply for going to work. And I don'tbelieve in huge disparities between thechief executive and the rest of themanagement team - a chief executive is onlyas good as the people around him, and I havea great team."

What of the future for the tablewareindustry? Price points remain an issue, saysO'Reilly, especially in the USA. "They'regetting incredible value even at RRP, but thereis heavy discounting as well. I believe incharging full price. We want people to get

value but don't want to follow the route ofgiving it away: we don't want price points inthe industry to come down further."

However, he thinks that "There is a littlemore confidence in the world and, assuming theworld economy doesn't go south, there will bean improvement. But businesses that haven'taddressed their cost bases will be exposed."

And what for Waterford Wedgwood?The company returned to profit (€7.2m) in theyear to March, from a €53171 loss the previousyear, and its debt has been reduced by nearly9% to €356m. O'Reilly concedes that this stillsounds like a large debt but points out,"People forget that we bought Rosenthal andAll-Clad - both now successful businesses -and we made heavy investments in technologyat Barlaston and Waterford and carried out aseries of restructurings over the past fiveyears. All that involved large capital expendi-ture and we had to borrow to carry it out, butnow it's been done it's time at last to startreaping the harvest.

"We have had a challenge over recent yearsbut I think we have responded well and beenproactive. We are working to realistic budgets.Our task now is to give consumers a reason tobuy Wedgwood rather than the products of acompetitor supplier or a from a homewaresretailer's own brand. We can't simply say to aconsumer 'we're Wedgwood, buy our product'so we have to go out there and tell theconsumer why Wedgwood is good."