Ceramic Industry

Consumer Trends, Cheap Imports Erode Dinnerware Market

October 1, 2003
The past two years have been challenging for many dinnerware manufacturers, as the weak global economy has made consumers reluctant to travel and spend. The "luxury lifestyle" sector has been especially hard hit, with companies in this market losing up to half their value during the fall of the world's stock markets.

According to Lenox, Inc., a subsidiary of Brown-Foreman Corp., department stores and retail outlet centers, two of the primary distribution channels for fine china and tableware, remain weak. In addition, the direct-to-consumer channel, which includes direct mail, catalogs and the Internet, has slowed since early 2002.

Oneida also continues to be hampered by low consumer confidence. The company's retail accounts faced a lack of in-store traffic in the first quarter of 2003, which slowed order flows for the company's products. The decrease in personal and business travel, as well as less dining out, continued to hurt the company's hotel, restaurant and resort accounts.

Although Libbey Inc. saw strong sales increases in 2002 to foodservice and retail customers, leading to a 3.4% increase in overall revenues, sales for the first half of 2003 declined. John F. Meier, Libbey's chairman and CEO, said that the Iraq war, a tentative consumer, higher energy prices and substantially lower travel continue to challenge the economy.

The casual "Where’s Scotty?” dinnerware collection, introduced by Wedgwood in spring 2003, was designed to appeal to both new brides and gift-givers. Photo courtesy of Waterford Wedgwood.

Changing Tastes Affect Sales

The recent downturn has forced many dinnerware manufacturers to rethink their product lines. According to Pam Danziger, president of Unity Marketing and author of the book, Why People Buy Things They Don't Need,1 higher-priced formal tableware is becoming increasingly less desirable.

"Today's consumers don't view fine tabletop, including china dinnerware, crystal stemware or sterling silver, as relevant to their lifestyles," Danziger said. "Brides today are choosing less formal patterns and registering at Crate & Barrel or Pottery Barn rather than department stores. Even among the luxury market, home-owning consumers with incomes of $50,000 and above that purchased luxury products or services in [2001], only 8% purchased luxury tabletop. In a focus group a luxury consumer expressed an attitude common among these affluent consumers, "You get married and pick what you want. Then you put it away and use it once a year. It is nice to have for holidays and special occasions, but it is no big deal anymore.?"

According to Danziger, today's tabletop consumers are looking for designs that will fit their fast-paced, multitasking lifestyles. "They look at fine bone china plates and sterling silver flatware as an anachronism, a leftover remnant of a long lost time," she says. "For today's homemaker and hostess, dinnerware must go from freezer, to oven, to table, to dishwasher and still be pretty enough to display on the shelf. Nobody has time today to hand wash the crystal or polish the silver."

This trend is leading to more plant closures in the U.S. In April 2003, Lenox closed its Lenox China giftware factory in Oxford, N.C. Production of bone china hollowware is now made at the company's Kinston, N.C., plant, while the ivory china giftware previously produced at the Oxford facility is being sourced overseas. This followed the closure in early 2002 of the Lenox Crystal factory in Mt. Pleasant, Pa., which the company said was necessary due to changing consumer tastes. "Our marketplace in the U.S. has become more casual in lifestyle, and fine crystal stemware sales are declining for Lenox and Gorham. We view this trend as a long-term shift away from the crystal stems that we manufactured at Mt. Pleasant," said Jerry Ciszewski, president of manufacturing for Lenox.

Wedgwood's Procession dinnerware, which was also introduced in the spring of 2003, is crafted from fine bone china and features horizontal and vertical platinum bands along the rim of each plate. Such luxury tabletop products are becoming an increasingly smaller share of the overall market, as consumers tend toward more casual designs. Photo courtesy of Waterford Wedgwood.

Germany, China Play Key Roles

For tableware manufacturers in Europe, a severely depressed German economy and unfavorable currency exchange rates are posing additional challenges. Villeroy & Boch's Tableware Division saw its 2002 sales increase by 0.7%, largely as a result of its marketing concept, "The House of Villeroy & Boch," which positions the company's products as a lifestyle brand that closely relates to consumer needs. However, sales in the division declined by 6% in the first half of 2003 due to reduced levels of travel brought about by the war in Iraq and the SARS virus, continued weak demand for consumer goods in Germany and other major export markets, and the relative strength of the euro (4.8% of the sales decline resulted from currency fluctuations). The company reported that consumer demand in Germany remains hampered by an uncertain corporate tax policy and a persistently high level of unemployment, and that exports continue to be dampened by a high-valued euro.

Waterford Wedgwood saw its 2002/2003 sales of ceramic products drop 5.3% at constant rates of exchange as the hoped-for upturn in the U.S. economy failed to materialize and German economic conditions worsened further. "The sharpness of the downturn in America and the slow pace of recovery has, in some respects, exceeded expectations. Extraordinary conditions such as the war in Iraq saw consumer activity in the U.S. luxury sector come to almost a complete halt for the duration," said Chief Executive Redmond O'Donoghue.

In an effort to better compete in the highly competitive mid-priced earthenware segment of the ceramics market, the company announced in June 2003 that it would close two Johnson Brothers tableware potteries employing more than 1000 people in the UK and shift production of those products to China, where costs are lower. The move will reportedly allow the production of Johnson Brothers' earthenware products at significantly increased margins, and the creation of new ranges aimed at capturing sizeable incremental volumes. "With our outsourced manufacture, we are now able to deliver a five-piece place setting of excellent quality Johnson Brothers earthenware to the United States for a quarter of the cost of doing so from the UK. The result--the transformation of a money-losing subsidiary into one with the potential for substantial contribution to the profitability of our ceramics business," O'Donoghue said. The brand accounts for just 8% of the group's sales of ceramics.

The company's world-renowned Wedgwood-branded earthenware, which comprises the rest of its ceramics sales, will continue to be crafted by Wedgwood in the UK. Collaborations with famous designers have proven especially lucrative for this division--the launch of Vera Wang at Wedgwood in 2002 was "a remarkable and rapidly growing success," O'Donoghue said, and the performance of the Jasper Conran at Wegwood range is also making significant contributions to sales. "Rosenthal meets Versace," which is among the company's highest-priced products, also showed strong growth in 2002 and early 2003.

Improvements Expected for Near Future

Although most companies don't expect any radical improvements in the tabletop market any time soon, a slight increase in sales is expected for the remainder of 2003 and early 2004 as worldwide economic conditions improve. Many companies are especially hopeful that the 2003 Christmas season will provide a much-needed boost to sales.

"With the end of the war in Iraq, consumer confidence in the U.S. is returning, and there are clear indications that it will continue to grow," said Wedgwood's O'Donoghue.

Manufacturers that are willing to change their product mix to meet consumers' increasingly casual tastes could also see a big payoff in the near future--Unity Marketing foresees a significant growth in the bridal market starting about 2005, as many of the babies of the "baby boom generation" reach the age of marriage. "Tabletop marketers need to be researching this new generation of brides so that they offer her products, designs and styles that meet her needs, fit her lifestyle and are readily available in the kind of stores where she wants to shop. They still have time to get ready for the coming new bridal boom," Danziger said.

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 interviews with companies listed in the 2003 Whitewares Giants (see http://www.ceramicindustry.com/FILES/HTML/CI_2003_CI_Giants/0,1067,,00.html).

Reference:

1. Danziger, Pam, Why People Buy Things They Don't Need, Ithaca, NY, Paramount Market Publishing, 2002; www.unitymarketingonline.com.

Sidebar
New Products, Venues Needed for Collectibles

The collectibles market has also faced troubles in recent years. Continuing a three-year stretch of slipping sales, the collectibles industry declined 9% in 2001 (the latest figures available) to $6.5 billion in total industry revenues, dropping from $7.1 billion in 2000.1 The figurine and sculpture product category, which accounts for the industry┬┐s largest share of retail sales, fell even faster than the industry as a whole with 2001 sales down 20% to $1.9 billion at retail.

According to Danziger of Unity Marketing, the conventional product-driven strategy isn't working for collectible companies anymore. Today's collectors are younger, smarter, more sophisticated and more affluent, and they shop in a much wider range of retail venues than yesterday's collector. They want new items to collect, and they're finding them in new types of stores and retail venues where the collectibles marketers don't have a presence. "For too long, the collectibles industry has used trade shows and the products that other companies are showing as the primary stimulus for their own new product development," she says. "Reinventing the collectibles industry means getting in touch with the new collector, understanding their wants and desires, and creating products based on that."

Reference:

1. "Collectibles Industry Report, 2002," October 2002, 200 pp. The full report is available for $1500 from Unity Marketing, (717) 336-1600 or www.unitymarketingonline.com.