Interview

Wayne Nutbeen, chief executive of Roya) Doulton, intends to prove that Royal Doulton can be returned to profitability

After a determined" programme of cost reduction, Royal Doulton is about to embark on investment in marketing and newfproduct development, with the on innovation. Susan Fenton talks to chief executive Wayne Nutbeen, who believes that the company has now turned the financial corner and that the new strategy will make it once more a prosperous business

lot of people have said that Royal Doulton won't make it - there are people who are waiting for us to fail. But we can return this business to profitability and I'm going to prove it." That's the intention of Wayne Nutbeen, chief executive of Royal Doulton, who frankly concedes that when he took over in 1999 the company was 'financially unstable'. But since then, reductions in staffing, factory sites, stock levels, and retail outlets, plus rights issues, the transfer of distribution to third parties and an outsourcing policy that has seen production costs 'collapse' - all these factors have helped bring costs down to a level appropriate for a business of its size. Even debts have been reduced by more than 80%. Nutbeen, who describes himself as a 'focused and sometimes ruthless' businessman, wants to turn Doulton around, not just to confound the pessimists but also to prove something to himself. "I was brought in [to head up the UK-headquartered group after a spell as chief executive of the Australian subsidiary] to fix this company. We're 90% of the way there and I'm going to see it through." Although last year like-for-like sales fell 8% and losses grew by 19%, Nutbeen says the company is on course to turn its financial fortunes around, largely thanks to the major restructuring in manufacturing and retail and cost reductions already undertaken. He says that the company will benefit in the longer term from having been forced to take these measures - meanwhile, other large suppliers, equally affected by the difficult market conditions, including over-capacity, market pressures and high levels of competition in the tableware and giftware industry, have yet to address these problems fully. They are all issues, he says, that will lead to further major price shifts across the industry.

Vlovinc forward
"We've already seen recommended retail prices in the key US market come down by about a quarter in the last few years: whenever you get over-capacity you get pressure on margins and this means that sales values are falling as volumes rise. There are bound to be further price adjustments and not everyone will survive this process." Royal Doulton brands, he believes, will be among those that survive and thrive. The future, says Nutbeen, is in new product development and marketing initiatives, and Royal Doulton already has a big advantage in that its three brands - Royal Doulton, Minton and Royal Albert-are global brands. "We have huge brand recognition among consumers and research shows that we're number one in the industry." The company is adopting a 'lifestyle' approach to product presentation. Although the total number of retail outlets has been reduced by about 60% to 250 to reduce the cost base, this has been through free-standing stores and concessions and shops-withinshops, where space considerations and the retailer's buying policy often restricts what is stocked. The focus now is on Royal Doulton's own stores, where a vastly reduced volume of SKUs [down by about 85% since 1999], expansion into non-ceramic product areas, and the use of contemporary displays give the uncluttered lifestyle impression that Nutbeen is aiming for. "As long as retail makes money you need to have a presence in it, because that's how you maintain a brand image. In concessions the focus tends to be on bridal. In our own stores we can create a wider homewares environment that covers all product types. We have stretched our ranges to include not just ceramics and collectables but also glass, cutlery, even mirrors and furniture." He sees new product development as contributing 'a lot of growth' in the future. There will also be a lot of emphasis on sales tools like collectors' club websites. "In the past the group hasn't invested enough in its brands - in marketing, design, point of sale and so on, so we have some ground to make up." He allows the design staff a great deal of

Interview
leeway in achieving this. "Design has got to be leading edge. This tends to be a 'me-too' industry, where suppliers and buyers all tend to be risk-averse and stick with the mainstream, because it costs money to innovate. I believe in being innovative, within reason." One noteworthy area in this regard is collectables, which are about to be updated with new ranges of'celebrity'-inspired figures. "There's huge potential in updating your subject matter like this," says Nutbeen. Dinnerware, too, will continue to take a contemporary direction, with more launches in a similar vein to the popular Fusion range launched a couple of years ago, which has since become a best-seller. Despite indications that consumers with money want to spend it on prestige, formal dining as we knew it is unlikely to return, believes Nutbeen, not simply because of the much-discussed trend of recent years towards fun and gourmet food but also because of the growing desire among retailers to improve sales. "People shop differently - they're less tolerant of bad service and retailers have responded to this by reacting more quickly when lines don't sell well. In the past they would give a new pattern six months but now they are more likely to kick it out of store after one season." Nutbeen is sceptical about the suggestion that, as consumers seek luxury at one end of the scale and value-for-money at the other, the middle market will erode. "I'm not quite sure what people mean by 'middle market' - Royal Albert remains the best-selling tableware pattern in the world and its sales continue to rise - and that's mid-priced and as traditional as you can get. Though it's true that younger people are moving towards the contemporary - and sales of Fusion prove this - you have to remember that very many baby boomers still love to buy traditional patterns." One criticism of Royal Doulton in the last year has been its growing reliance on overseas manufacturing at the expense of British jobs. The news that UK production of the Royal

Royal Doulton's Fusion range, shown here with the Flirtation pattern, meets the demand for modern products Albert range was to end and be transferred to Indonesia created particular comment in the Potteries, possibly because Doulton is so well-established as a quintessential^ 'British' company. Sourcing is simply a matter of commonsense arithmetic, responds Nutbeen. "The retail sector, especially in branded bone china, is awfully tough. Competitors are having to be very aggressive on price just to shift stock. We're all on the world stage alongside the likes of homewares retailers like Ikea, whose ranges include ceramics and who can retail a dinner plate for a couple of pounds. Sourcing has enabled us to drastically reduce our cost base, and from a supply chain point of view we are now among the most cost-effective suppliers in this industry." Most consumers, he says, place little importance on the country of origin, certainly as far as dinnerware goes [it's different for high-end items such as those made under the Minton brand, where a 'made in the UK' label is specifically valued by consumers, and these items will continue to be made in Stoke]. "It's about brand perception. Consumers want a brand name and where it's made is not that important. Yes, we manufacture in Indonesia but it is a UK-owned factory, making British designs to British quality standards. What it means is that we can produce at a price the market will pay, and that is vitally important if we are to grow this business. We wouldn't survive if we couldn't manufacture off-shore." So what of the future for Royal Doulton? Nutbeen predicts, "I think we will start to take increased market share in what is a declining market. Thanks to a good management team with a will to win, and a supportive board, the hard work has been done and we're 90% of the way to what we want to achieve." A former semi-professional rugby player, Nutbeen regularly works a 12-hour day and concedes that the task of running Doulton 'without letting it consume you' is a hard one, but adds, "as a chief executive, you have to keep challenging yourself and others. My challenge is to return this business to profitability and give shareholders a return on their investment. If we can put the same application into marketing that we have put into the restructure, we will have a prosperous business."

These are the glasses from the new Symmetry range of dinnerware. Symmetry is one of the ranges that marks Royal Doulton's continued move into contemporary dinnerware