Islandbridge’s Gerard Tannam features in Business & Finance article.
Waterford Wedgewood’s failure to move into the production and design of cheaper, contemporary products appears to be one of its major downfalls writes Ciaran Brennan.
One of the serious issues facing Waterford Wedgwood is image and branding, according to market watchers. The company is facing strong competition from more modern and cheaper brands, and questions are being asked about the company’s ability to adapt to a changing consumer demands.
“They’re running into the same difficulties that brands like Bewley’s have been guilty of, which is, I think, that they have been living off people’s memories of the brand,” said Gerard Tannam, managing director of Islandbridge, a company specialising in brand development, planning and communications.
The use to which we put glass has changed very dramatically. There was a time when someone was retiring or getting married, and they received gifts, which would be put into a cabinet somewhere for display. I think that sort of static display is gone. I’m not too sure that Waterford has successfully looked at the whole proposition of what exactly glass means. Not in the same way as some other consumer brands have looked at the meaning of, for example, coffee and have taken coffee and looked at what it used to mean and now means in a contemporary society.”
Industry analysts agree, and feel that Waterford Wedgewood has already been left behind by the changing market and that it is struggling to catch up.
“The last time they did well was back in the Millennium 2000,” said Standard & Poor’s Sunita Kara. “their style of products really suits that kind of occasion, the one-off occasion where people want to buy memorabilia for a particular year or a gift for a wedding. The basic demand for a well-performing business would be something that appeals to a broad range of consumers. At the moment, what you have is a very classic, heavy-cut kind of crystal which doesn’t really appeal to a younger market or a more contemporary market.”
In the past few years, the company has been making efforts to address this problem by embracing more contemporary designs to meet lifestyle changes, putting greater emphasis on new designs and entering into new arrangements with designers such as John Rocha on the crystal side and Vera Wang on the ceramics side. While these lines have been successful and there are huge benefits in attaching your brand to somebody who has currency, particularly celebrity currency, there is also a danger that the brand gets lost in the mix.
“You have to be very careful that you’re also communicating why you are an essential part of the proposition,” said Tannam. “The John Rocha collaboration has been successful on its own basis but I think in a sense it was perceived in the market more as a John Rocha thing than as a Waterford thing. I don’t think people were looking to own a piece of Waterford crystal line, they were looking for a piece of the John Rocha magic.”
One of the problems behind this may be the lack of investment in marketing the new product ranges – which can turn into a vicious circle of continuous underfunding of new products.
“They’ve got designer alliances with Jasper Conran, Vera Wang and John Rocha which aren’t doing too badly,” said Kara. “This is a side of the business that is actually performing better than the traditional, classic and niche style of products. However, when a company comes to promoting those kinds of designer lines, they also need to put the right marketing behind it. Unfortunately for a company, which isn’t doing very well, you don’t really have the high level funds. They have some funds which they can use towards promoting those particular alliances, but they are pretty much in a straitjacket at the moment. They have some short-term commitments due to bondholders and banks. I don’t think they have very much of an open field when it comes to spending what they could spend.”
However, there is also a perception that the new contemporary designs are still too expensive and upmarket. While there seems to be a genuine fear among Waterford’s management of diluting the brand by going too downmarket, market watchers say the company will have to look at producing cheaper, but still classy, products that people will use rather than display. This issue is becoming even more acute, especially as it is facing competition from lower-cost operators manufacturing stylish and contemporary products that suit both the tastes and pockets of mass consumer market.
Another problem is the huge inventory of existing stock that the company has to offload before it can move into manufacturing new lines. This has resulted in a glut of older products on the market at a time when it is trying to market a new image.
“Until recently, even though they have been redesigning some of their classic styles, they haven’t been looking at the existing inventory and thereby had built a large number of stock-keeping units (SKUs) of these older, sometimes obsolete products, “ said one analyst.
“They are now in the process of realigning the inventory and, in order to do that, they need to sell-off these SKUs. So what we are seeing is these SKUs actually coming on the market now.”