DINNERWARE MARKET OVERVIEW: Dinnerware and Pottery Markets Remain Challenging; Innovation, Manufacturing Efficiency are Key
Although the period from June 2003 to June 2004 saw overall U.S. imports of china, fine earthenware and other pottery products drop only slightly (1%),1 this might have been enough to stem the rising tide of layoffs and plant closures that has affected the industry over the last several years. Many U.S. dinnerware manufacturers reported that 2003 sales were flat, but that they anticipate a stronger year in 2004 as the U.S. economy continues to improve.
Some companies are already beginning to see evidence of this trend. For instance, Libbey Inc. saw sales of its Syracuse China dinnerware products-as well as its glassware, Traex plastic and World Tableware products-increase 8% to the foodservice sector in the first half of 2004 compared to the same period in 2003. The Homer Laughlin China Co. also reported that the foodservice sector appears to be strengthening as the U.S. travel industry rebounds and "dining out" becomes increasingly popular.
It was undoubtedly this optimistic outlook that rescued the Buffalo China factory. In October 2003, Oneida announced that it had decided to close five factory sites-including the Buffalo China dinnerware factory and decorating facility in Buffalo, N.Y.-because of "substantial negative manufacturing variances." (The others were a dinnerware factory in Juarez, Mexico; a flatware factory in Toluca, Mexico; a holloware factory in Shanghai, China; and a holloware factory in Vercelli, Italy.) However, in January, Oneida agreed to sell Buffalo China's factory buildings and associated equipment, materials, and supplies to BC Acquisition Co. LLC of Buffalo, with the Buffalo China name and all other Buffalo China trademarks and logos remaining the property of Oneida. The transaction was finalized in March 2004, and Niagara Ceramics now operates the Buffalo factory as an independent supplier to the dinnerware industry, including Oneida.
Despite the positive trends, some casualties have also occurred. In August of this year, Haeger Potteries announced that it would close its Macomb, Ill., pottery factory on October 31, eliminating about 65 jobs. The facility manufactures vases and other ceramics, and also has a contract to make stoneware for the Pampered Chef, a kitchenware company and direct seller of housewares. According to Terry Rosborough, director of manufacturing for Haeger Industries, business has waned for five years because of competition from foreign producers with "pennies-per-hour employment costs."
U.S. Imports Still Far Outweigh ExportsAlthough China remains the primary source for U.S. dinnerware and pottery imports, its share of the market (in dollar terms) slid 3% in the July 2003 to June 2004 period, compared to the same period a year earlier (see Figures 1a and 1b).1 Japan, however, saw an increase of 16%, while imports from Portugal surged 10%. The countries with the largest gains in U.S. imports were the Dominican Republic (up 83% to $11 million) and South Africa (up 73% to $3.1 million).
U.S. exports of dinnerware and pottery increased 9% in the July 2003 to June 2004 period, compared to the same period a year earlier, with France (+76%), Taiwan (+32%) and Canada (+26%) capturing the largest growth (see Figures 2a and 2b).2 However, overall exports remain small ($247 million) compared to the estimated $922 million in imports for the June 2003 to June 2004 period.
"We really have not been able to increase our exports," says Joe Wells III, president of The Homer Laughlin China Co., Newell, W.Va. "One of the main reasons is that American hotel ware just isn't used in other countries. Occasionally you'll find a U.S.-based hotel chain that's building a new hotel in another country and wants an American product. But there really isn't a market overseas for the products we make."
Instead, U.S. suppliers have had to focus on new products, increased brand awareness, innovative marketing strategies and improved manufacturing efficiencies to remain profitable. For example, Lenox reported that its new Kate Spade co-branded fine china product has been greeted with enthusiasm and is seeing good early results in the bridal registry business. The company is focusing on ways in which it can generate excitement and broaden its appeal to consumers, while also reducing fixed costs, increasing production efficiencies, closing unprofitable retail outlet locations and developing relevant new products.
Homer Laughlin has been able to capitalize on the popularity of its Fiesta® brand to increase sales. The line now comprises 13 different colors (including a new scarlet color introduced earlier this year) and has appeared in mainstream movies such as Spider-Man and Stuart Little 2. Fiesta was recently named by Tableware Today, a retail sector magazine, as the number-one pattern pick of new brides for casual dining.
Niagara Ceramics has decided to innovate in a completely different direction-by pursuing the technical ceramics market. "We recognized the challenges in the U.S. dinnerware market and saw that we had the capacity and capability to serve more than one industry," explains Robert Lupica, the company's president. "In this economy, it just makes sense to diversify."
According to the marketing consulting firm Unity Marketing, the U.S. luxury market is once again on the rise,3 and this could help boost high-end tableware spending. Additionally, new displays at retail stores such as Bed Bath & Beyond-which recently redesigned the dining section of its stores to create a more "upscale" appearance-could also help reduce consumers' focus on price, thereby helping U.S. manufacturers gain more market share.
However, there's no question that more efficient manufacturing technologies will be required to compete longer term. "We certainly don't have a level playing field, and it's becoming more and more difficult to compete in the world market. But our efforts to increase our manufacturing efficiencies have helped," Wells says.
UK Manufacturers Feel Pricing PressureThe U.S. isn't alone in the struggle to compete against low-cost imports. The UK-based Waterford Wedgwood plc closed two factories in England in 2003, resulting in the elimination of 1000 jobs, and now outsources all of its Johnson Brothers Earthenware Products to China in an effort to enhance its profit margins. Royal Doulton has also turned to outsourcing-only one-third of its products are now manufactured in the UK. Another one-third is manufactured in the company's Indonesia factory, while the remainder is sourced from other low-cost regions.
Both companies are certain that these strategies will improve their profit margins going forward, but they're also focusing on new product introductions and marketing strategies to boost their global market share. For instance, after seeing significant growth of its "Vera Wang at Wedgwood" line in the U.S., Waterford Wedgwood said that it intends to continue to broaden its designer alliances to support a new crystal range for the U.S. The company also plans to more actively target the casual market segment.
Royal Doulton successfully launched a new shape called Symmetry in the fourth quarter of 2003, with three new designs at lower price points to follow on the success of its Fusion range in capturing younger customers. The company said that new products represented 12% of its overall sales in 2003, underscoring the importance to the consumer of continually refreshing the product range.
Future Growth Hinges on the EconomyWhile no long-term forecast could be obtained for the dinnerware and pottery markets, it is clear that many manufacturers are much more optimistic than they have been over the last several years. As long as travel, consumer confidence and disposable income remain on the upswing, growth potential exists for any manufacturer that is innovative enough to catch the attention of today's consumers.
Editor's note: The foregoing information (except where noted) was compiled from publicly available information in annual reports and news releases, as well as from personal interviews.