Waterford Wedgwood and the Market for Luxury Goods
This case study is intended to support classroom discussion of the strategic management of a luxury goods business. Copyright Professor Gary Davies 2006
The forward to Waterford Wedgwood’s 2005 Annual Report concluded "This confluence of great global brands, management talent and focused energy is well placed to take Waterford Wedgwood forward.” The challenge facing its management was how best to reshape a loss-making group that owned a range of branded glassware and chinaware into a profitable concern. Other luxury goods conglomerates such as Richemont, PPR/Gucci and LVMH were doing well but could a quite different brand portfolio be made similarly profitable?
The company of Waterford was first established in 1783 in the Irish harbour town of Waterford. Its founders were two brothers, William and George Penrose, who were prominent businessmen in the city. Their vision was to "create the finest quality crystal for drinking vessels and objects of beauty for the home." Merchant ships sailed regularly from the port of Waterford with cargoes of crystal bound for Spain, the West Indies, New York, New England and Newfoundland. But less than 100 years later the initial company failed due to lack of capital and excessive taxation.
In 1947, while Europe was still recovering after the second World War, a new glass factory was set up in Waterford just two kilometres from the original site. The company grew to become one of the leading Irish brands, marketing its crystal glassware in many countries. In November 2000, Waterford Crystal was named as the top world-class brand in a survey of American consumers. The researchers said that Americans judged Waterford Crystal as the brand with the highest quality out of 19 world-class brands in the US market. Other brands in the league table below Waterford included Rolls-Royce Bentley and Bose stereo. Waterford Crystal could certainly claim to be the leading brand of premium crystal, globally.
In 1986 Waterford Crystal merged with chinaware company Wedgwood, an English company with a long tradition. Josiah Wedgwood was born into a family of potters in 1730 at Burslem, Staffordshire in the British Midlands. Queen Charlotte appointed Wedgwood Queen’s Potter in 1762 and his range of cream coloured earthenware was named Queen's ware after her. Other eminent patrons included Empress Catherine II of Russia, who ordered 952 such pieces in 1774. Wedgwood’s experiments with innovative ways of making pottery included ‘jasper’. The blue base and delicately sculptured figures in white became the company trademark product in design terms and was used for a range of ornaments.
In 1998 Waterford Wedgwood bought an 85 percent share in Rosenthal AG, which increased in 2001 to 89.9%. The Rosenthal Company had begun in 1879 when Philipp Rosenthal established a porcelain manufacturing business at Castle Schloss Erkersreuth in Germany. It prospered and opened its first retail outlet in 1917 in Berlin. In 1993 the company had begun a cooperation with Italian designers Versace and in 2002 another collection of designs was licensed from the (Andy) Warhol foundation. In 2000 the German Hutschenreuther porcelain company was purchased. Independent market research found Rosenthal to be the best-known porcelain brand in Germany in 1995.
In May 1999, Waterford Wedgwood bought the American manufacturer All-Clad for $110m. All-Clad, founded in 1973, produced a range of cookware and had its origins in designing for professional chefs. In 2001 W-C Designs of Anaheim, California was acquired. The company produced quality home textiles under brand names such as Royal Palace, Waterford Linens, Wedgwood Linens and Wilton Cour.
By 2003 the group had three main businesses. In terms of share of revenue these were: Ceramics (43%), Crystal (33%), Cookware (13%). In December 2004...
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