Waterford Wedgwood plc - Company Profile, Information, Business Description, History, Background Information on Waterford Wedgwood plc

1-2 Upper Hatch Street
Dublin 2

Company Perspectives:

We live in exciting times. Waterford, Wedgwood and Rosenthal bring some of that excitement into our homes, together with the comfort and the continuity of great traditions. There are few great luxury goods enterprises in the world and we are proud to have our place among them. In our own sphere, however, our offering is clearly unmatched. Together, Waterford, Wedgwood and Rosenthal form the marvelous synergy that makes us such an exciting company.

History of Waterford Wedgwood plc

Waterford Wedgwood plc is a holding company for two of the world's most highly respected names in tableware: Waterford Crystal Limited, which is the world's leading manufacturer of premium cut-glass crystal and one of the most important exporters in Ireland, and Josiah Wedgwood and Sons Limited, a British producer of bone china and fine ceramics that is best known for its distinctive and long-lived patterns. Both of these branches of the company draw upon traditions of craftsmanship that date back to the 18th century. Waterford and Wedgwood merged in 1986. The combined company went on an acquisitions spree in the late 1990s, purchasing Stuart & Sons Ltd., a U.K. premium crystal maker; a majority stake in Rosenthal A.G., a German maker of fine porcelain; and All-Clad Metalcrafters Inc., a U.S.-based maker of premium cookware. Although Waterford Wedgwood sells its luxury items in more than 80 countries worldwide, more than 40 percent of revenues are generated in the United States.

Waterford Crystal Roots and Development

Although the present company was founded in 1947, the firm traces its heritage to the 1780s, when a relaxation of trade restrictions on the Irish glass industry ushered in a 40-year period known as the 'Age of Exuberance.' Hopeful entrepreneurs established many new glasshouses during this time, among them Quaker brothers George and William Penrose. In 1783 the partners invested a then-hefty IR £10,000 in a crystal factory named for the port county of Waterford in southeast Ireland. They hired more than 50 employees to carry out the extremely labor-intensive crystal-making process.

The operation first involved mixing the 'batch' of heavy flint or crystal glass, which contained 35 percent lead to make the highest grade crystal. This batch of glass was then heated for more than 36 hours to 1400 degrees Celsius, where it reached the consistency necessary for forming. Each piece was hand-blown into a water-soaked wooden mold, forming thick glass walls to accommodate the deep, intricate cuts that came to characterize Waterford crystal. After a period of controlled cooling known as 'annealing,' teams of glass cutters created the complex geometric patterns for which Waterford soon became recognized around the world. Waterford employees have used essentially the same tools and techniques throughout the company's history.

The Waterford Glass Works' first foreman was John Hill, a highly respected craftsman who had brought some of his best craftsmen from England to Ireland to escape excessive glass taxes. Hill was credited with setting up the Waterford factory, but his career there was short-lived. Personal clashes with owner William Penrose's wife led to his premature exit from the company. Before he left, however, Hill passed on valuable technical information to a clerk, Jonathan Gatchell.

The Penrose family sold its enterprise to Gatchell in 1799. In spite of rising taxes and a changing roster of partners, Gatchell was able to pass the Waterford legacy on to his brothers, James and Samuel, and his son-in-law Joseph Walpole, upon his death in 1823. In accordance with Gatchell's will, these three ceded the works to his son, George, upon his 21st birthday in 1835. Unfortunately, a new excise tax had been enacted just two years after Gatchell's death. George found a partner in one of the works' employees, George Saunders, but Saunders sold out by 1850, as heavy taxation eliminated any profits. Gatchell entered a Waterford piece in the Great Exhibition of 1851 (held, ironically, in London's Crystal Palace), then closed the business later that year.

Nearly a century elapsed before the Waterford tradition was revived in 1947 by Joseph McGrath and Joseph Griffin. They established their glass company less than two miles from the site of the original Waterford Glass Works and hired talented employees from Czechoslovakia to staff the operation. Following the lead set by their 18th-century antecedents, their chief designer, Miroslav Havel, adopted historical patterns that had been documented by the National Museum of Ireland. McGrath and Griffin focused their sales efforts on the massive and prosperous postwar American market. By the late 1960s, Waterford had captured the largest share of the fine glassware market.

Maintaining dominance of the industry was effortless throughout the 1970s: Waterford did not introduce any new patterns or revise its advertising from 1972 to 1982. In the early 1980s, however, Waterford began to face challengers; although the market for fine lead crystal tripled from 1979 to 1983, Waterford's sales grew by only about one-fifth, and its market share slid by five points to 25 percent. The company added new patterns, enlisted a new advertising agency, and, in 1986, acquired Josiah Wedgwood and Sons Ltd. in the hopes of finding retail and distribution synergies.

Wedgwood Roots and Development

The roots of Wedgwood ceramics are most often traced to Josiah Wedgwood, himself the descendant of four generations of potters. Josiah embarked on his life's work at the age of nine, when he left school to work under his eldest brother at the family pottery works. An outbreak of smallpox left the youngster physically impaired at the age of 11. (The disease left a lingering infection in his leg, which eventually led to its amputation.) Unable to continue throwing pottery as a result, he turned instead to design and formulation of ceramics and glazes. When Josiah's apprenticeship ended at the age of 19, his brother inexplicably refused to take him on as a partner.

For the next ten years, the young potter cast about for a business associate; during this period his longest partnership, with Thomas Whieldon, lasted for five years. Wedgwood struck out on his own in 1759. Not content to imitate the generally substandard wares on the market, Wedgwood achieved his first important innovation, No. 7 green glaze, shortly thereafter. The potter used his new glaze to produce rococo-style teapots, plates, compotes, and other practical pieces shaped like fruits, vegetables, and leaves. Wedgwood created demand for his pottery by offering innovative products, including asparagus pans, egg spoons and baskets, sandwich sets, and even special plates for 'Dutch fish.'

By 1765, word of Wedgwood's elegant yet durable wares had reached Britain's royal family. That year, Queen Charlotte ordered a tea service made of Wedgwood's second important development, a uniquely cream-colored earthenware. Through this, the first of many 'command performances,' Wedgwood earned the right to call his ivory-colored pottery 'Queen's Ware.' Needless to say, the endorsement added to the potter's prestige, popularity, and sales.

Such successes allowed Wedgwood to purchase an estate, which he named Etruria, in 1766. A factory on the site was completed three years later, just in time to accommodate an order from Catherine the Great of Russia for a 952-piece service for 50. The amazing set featured more than 1,200 hand-painted scenes of the English countryside. Wedgwood named a pattern with maroon flowers after Catherine. That style, as well as the Queen's Ware and Shell Edge styles, exemplified the enduring nature of the founder's designs: all were still in production in the 20th century.

Wedgwood capitalized on the popularity of his wares by expanding his line in the 1770s. With the help of an amicable partner, Thomas Bentley, Wedgwood began producing wall tiles and such ornamental wares as plaques, vases, busts, candlesticks, medallions, and even chess sets. Many early decorative pieces were made of a proprietary ceramic called Black Basalt. Although Wedgwood was sure that Black Basalt would enjoy an enduring popularity, it was his Jasper ware, introduced in 1774, that would symbolize Wedgwood for centuries of consumers and collectors. Jasper, an unglazed, translucent stoneware that assimilated colors well, was produced in green, yellow, maroon, black, white, and the shades of blue Jasper that became known as 'Wedgwood blue.' Historian Alison Kelly, author of The Story of Wedgwood, asserted, 'Connoisseurs of pottery since [Wedgwood's] day have valued [Jasper] both as a technical triumph and as an ornament perfect of its kind.'

Wedgwood worked alone for ten years after Bentley died in 1780. He went into semiretirement in 1790, taking his three sons and a nephew into partnership that year. In addition to his artistic achievements, the founder had invented a pyrometer to measure the heat of his kilns and implemented steam-driven potters' wheels and some principles of mass production. Upon his death in 1795, his second son, also named Josiah, shared management of the works with his cousin, Thomas Byerley. Josiah II assumed full control when Byerley died in 1810.

The Napoleonic Wars, which made trade with continental Europe all but impossible, were followed by an economic slowdown that made the early years of the 19th century difficult for Josiah II. In 1828 financial shortfalls compelled him to close the company's London showrooms and sell the bulk of Wedgwood's stock, molds, and models for £16,000. Still, the Etruria works survived both hardship and Josiah II's often-criticized management. His third son, Francis, succeeded him upon his death in 1843. Francis had joined the company in 1827 and would control it for 27 years. He revived the founder's legacies of innovation and modernization, adding machines that mixed and dried the clay, as well as new colored ceramics in the tradition of Jasper. His celadon, a pale gray-green ceramic, a lavender clay, and Parian Ware, which featured marbled effects, appealed to Victorian tastes. By 1875, Francis was able to reopen the London showrooms. He also reinstituted production of bone china, which had been offered briefly in the early 1800s. This line would later form the foundation of Wedgwood's export trade.

Successive generations of Wedgwoods took the company into the 20th century, which witnessed a revival of interest in the company's classical designs, both among collectors and consumers. The Wedgwood Museum was opened in 1906, the same year that the company established an American sales office. Overseas trade expanded dramatically during the early decades of the 1900s: by 1920, the U.S. office had grown sufficiently to justify a new subsidiary.

Even the Great Depression did not slow Wedgwood's growth. In 1938 the company laid plans to build a modern facility near Barlaston. The plant, which featured the first electric pottery kilns used in Britain, began production in 1940. Since 80 percent of Wedgwood's production was for export, the company was allowed to continue production throughout World War II. At war's end, Wedgwood was poised for expansion. During the late 1940s and early 1950s, the company incorporated Canadian and Australian subsidiaries, expanded its factory, and inaugurated special 'Wedgwood Rooms' in upscale department stores. By the end of the 1950s, the company employed more than 2,000 people at the Barlaston plant. (All production had been transferred from Etruria to Barlaston by 1950.)

In 1963, Sir Arthur Bryan became Wedgwood's managing director, marking the first time in the company's history that an individual who was not related to Josiah Wedgwood held that position. Bryan was named chairman five years later.

Wedgwood's first public offering on the London Stock Exchange in 1966 marked the beginning of an eight-year acquisition spree. The company acquired four competitors in 1966 and 1967, including Coalport, manufacturers of high-quality bone china figurines. Wedgwood doubled in size with the acquisition of Johnson Brothers, which included five tableware factories as well as overseas plants. The company entered the glass market with the 1969 purchase of King's Lynn Glass, then began the 1970s with the acquisition of J & G Meakin and Midwinter companies, manufacturers of fine china and earthenware. These purchases gave Wedgwood access to broader markets without compromising the reputation of their premier brand. Additions in the ensuing years helped Wedgwood integrate vertically. They included Precision Studios, a producer of decorative materials for the ceramics industry, and Gered, a retailer and longtime customer of Wedgwood. By 1975, Wedgwood had nearly 9,000 employees in 20 factories.

The company's growth came to an abrupt halt in the early 1980s, when recession forced Wedgwood to lay off nearly half of its workforce. As the company struggled, threats of hostile takeover necessitated Wedgwood's amicable union with Waterford.

Waterford Wedgwood: Post-Merger Woes in the Late 1980s and Early 1990s

Waterford and Wedgwood merged in 1986, when the crystal manufacturer executed a 'white knight' takeover of the china producer for £252.6 million. A recession in the late 1980s and early 1990s brought the premium crystal market's growth to a halt, as price-conscious consumers traded down. From 1989 to 1992, sales in the premium market in the United States (then the world's largest market) dropped by 25 percent, while sales of second-tier crystal increased by half. At the same time, employment costs for both Waterford and Wedgwood had soared: Waterford's labor expenses, which accounted for more than two-thirds of the company's overhead, grew three times faster than inflation in the late 1980s. From 1987 to 1990, Waterford Crystal alone lost more than £60 million, and total corporate debt had swelled to £150 million.

In 1988 Anthony J.F. 'Tony' O'Reilly (chairman, president, and CEO of H.J. Heinz Company, as well as 'the wealthiest man in Ireland') offered Waterford Wedgwood Chairman Howard Kilroy a buyout. His first attempt was refused, but by early 1990, the struggling company was ready to deal. O'Reilly formed a coalition of investors, including his own Fitzwilton Public Limited Company and New York investment house Morgan Stanley Group Inc. Together, they exchanged an estimated £80 million for about one-third of the tableware firm's equity. Morgan Stanley took 15 percent, 9.4 percent went to Fitzwilton, and O'Reilly personally acquired five percent. The deal valued Waterford Wedgwood at £230 million--less than it had paid for Wedgwood alone just three years earlier.

The company's problems were deeper than O'Reilly had surmised. When Waterford Wedgwood lost IR £1.2 million on IR £71 million sales in 1991, Don Brennan of Morgan Stanley replaced Kilroy as chairman. The new managers traced their financial woes to expensive labor, especially at Waterford. The company trimmed some of its labor costs and simultaneously countered the contraction of the premium crystal market with the 1991 introduction of the Marquis by Waterford line, which retailed at about 30 percent less than traditional Waterford. This new offering--the company's first new brand of crystal in 200 years--was manufactured in Germany and Slovenia, where wages averaged ten percent less than in Ireland. Stylistically, Marquis featured designs less elaborately cut than Waterford patterns. Company executives were careful to assert that they were not reaching 'down-market,' but that the elegant new designs appealed to more modern, youthful, 'continental' tastes. The launch was an unquestionable success: from 1992 to 1993, sales of Marquis increased by 24 percent, and the brand captured the number six spot among premium crystal brands sold in the United States.

At the same time, the company was beset by confrontations with its domestic workforce, including strikes and even a shutdown. In 1992, after management threatened to move more of Waterford's production to Eastern Europe, the unions agreed to a wage freeze and job cuts. In return, the company pledged to keep its Waterford operations in Ireland as long as it could remain competitive.

Although Waterford Wedgwood's share price sank as low as 12p in 1992, the company recorded its first operating profit (IR £500,000) since 1987 that year, with sales 4.5 percent higher than in 1991. In 1993 profits increased again, to IR £10 million, and Waterford Wedgwood's share price grew to 60p. The turnaround was credited to O'Reilly, who advanced from deputy chairman to chairman in 1994. O'Reilly was confident that his stalwart brands would regain their steady and strong profitability, and he targeted future growth for the mature markets of Japan and the United Kingdom.

Mid-1990s and Beyond: Growth Through Acquisitions

Following up on the success of the lower-priced Marquis by Waterford line, the company in 1995 introduced a new Wedgwood line called Embassy, which was positioned in the mid-priced segment, with a five-piece place setting costing about $80. This was also Wedgwood's first porcelain line. Wedgwood also launched an even less expensive--$50-$60 per set--and less formal porcelain line dubbed Home. Also in 1995 Wedgwood debuted a new, bestselling line called Cornucopia, a fine bone china pattern.

Waterford Wedgwood's improved financial condition set the stage for a new round of acquisitions. The first came in 1995 when Stuart & Sons Ltd. was acquired for about IR £4.2 million (US$6.8 million). Stuart & Sons was a leading U.K. maker of premium crystal and claimed to be the last major U.K. manufacturer making all of its glass in its home country. In early 1997 Waterford Wedgwood spent US$1.9 million for a 9.1 percent stake in Rosenthal A.G., a maker of premium porcelain china, tableware, and art; by the end of 1997 the company had gained majority control of Rosenthal after increasing its stake to 61.5 percent. Based in Selb, Germany, Rosenthal had a long history dating back to its establishment in 1879 by Philipe Rosenthal in the Upper Franconian town of Erkersreuth. Rosenthal had sales of US$206 million in 1995, with about 60 percent derived in Germany; the United States and Italy were the company's two largest export markets. In 1998 Waterford Wedgwood further increased its stake in Rosenthal to about 85 percent.

In June 1999 Waterford Wedgwood diversified its line of luxury goods through the acquisition of All-Clad Metalcrafters Inc., a U.S. premium cookware maker, for US$110 million (IR £68 million). Canonsburg, Pennsylvania-based All-Clad was founded in 1973 by John Ulam, a metallurgist who devised a way to bond sheets of aluminum and stainless steel. The combination resulted in cookware that heated evenly but was easy to clean. Sales for the privately held company were about US$52 million in 1998 and were growing rapidly. In fact, high-end cookware was the fastest growing segment of the cookware market, with sales increasing at an annual rate of 18 percent. All-Clad products were sold primarily in upscale department stores, such as Macy's and Bloomingdale's, and in higher-end home furnishings chains, such as Williams Sonoma, Crate & Barrel, and Pottery Barn. Waterford Wedgwood planned to expand the All-Clad brand outside the United States (its overseas sales stood at only three percent of the total in 1998) and also hoped that the addition of All-Clad could help expand the Wedgwood brand into the U.S. home furnishings specialty retail sector, which would represent a new channel.

In addition to pursuing growth through acquisition, Waterford Wedgwood achieved organic growth in the late 1990s through the introduction of new product lines. Particularly successful were cooperative ventures with leading fashion designers--such as Versace, Bulgari, John Rocha, and Jaspar Conran--who helped design ceramics and crystal lines bearing their own names. In 1999 sales in the United States were aided by the employment of Sarah, Duchess of York, as official spokesperson for Waterford Wedgwood in the U.S. market. In November 1999 Waterford Wedgwood purchased a 15 percent stake in British rival Royal Doulton for IR £11.1 million. Calling the transaction a 'strategic investment' and not a prelude to an outright bid, Waterford Wedgwood nevertheless declined to rule out a future bid if a rival takeover company emerged. Capping 1999 in typically spectacular fashion, Waterford Wedgwood designed the Waterford Crystal New Year's Eve Ball, which was used to mark the beginning of the new millennium in New York's Times Square.

As the new century approached, Waterford Wedgwood was on a clear upward trajectory. Revenues for 1999 increased 20.4 percent over the previous year, nearing the US$1 billion mark and almost double the figure of five years earlier. In fact, the company had achieved seven straight years of double-digit growth. Operating profits, meanwhile, increased by one-third over the one-year period. In the early 21st century, Waterford Wedgwood was likely to continue to plot its successful course of organic and purchased growth, with the acquisition side likely to lean toward further diversification, along the lines of the All-Clad purchase.

Principal Subsidiaries: Waterford Crystal Limited; Josiah Wedgwood and Sons Limited (U.K.); Rosenthal A.G. (Germany; 84.62%); Stuart & Sons Ltd. (U.K.); All-Clad Metalcrafters Inc. (U.S.A.); Waterford Crystal Gallery Ltd.; Waterford Wedgwood Australia Ltd.; Waterford Wedgwood Canada Inc.; Waterford Wedgwood U.S.A. Inc.; Waterford Wedgwood Japan Ltd.; Waterford Wedgwood Retail Ltd. (U.K.); Josiah Wedgwood & Sons (Exports) Ltd. (U.K.); Josiah Wedgwood (Malaysia) Sdn. Bhd.; Waterford Wedgwood Trading Singapore Pte. Ltd.; Waterford Wedgwood N.V. (Belgium); Wedgwood GmbH (Germany); Stratum Limited (U.K.); Waterford Wedgwood International Financial Services; Waterford Wedgwood International B.V. (Netherlands); Waterford Wedgwood Holdings B.V. (Netherlands); Waterford Wedgwood U.K. plc; Wedgwood Ltd. (U.K.); Waterford Wedgwood Inc. (U.S.A.); Waterford Glass Research and Development Ltd.; Dungarvan Crystal Ltd.; Waterford Wedgwood Employee Share Ownership Plan (Jersey) Ltd.; Waterford Wedgwood GmbH (Germany).

Principal Competitors: Brown-Forman Corporation; Carlsberg A/S; Corning Incorporated; CRISAL; Fitz and Floyd Silvestri Corporation Inc.; Lancaster Colony Corporation; Mikasa, Inc.; Newell Rubbermaid Inc.; Noritake Co., Limited; Oneida Ltd.; Tattinger S.A.; Tiffany & Co.


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Further Reference

Brown, John Murray, 'Update for Waterford Wedgwood,' Financial Times, May 1, 1998, p. 25.Buckley, Christine, 'Wedgwood Develops a Pattern for the Future,' London Times, September 2, 1995, p. 1.Carnegy, Hugh, 'Waterford, in Search of Added Sparkle,' Financial Times, October 15, 1986, p. 14.Cheeseright, Paul, 'Waterford Proposes to Reshape Crystal,' Financial Times, June 1, 1995, p. 12.Cooke, Kieran, 'Crystal Gazing into the Future of a Shattered Empire,' Financial Times, March 5, 1990, p. 22.------, 'Through a Waterford Crystal Glass Darkly,' Financial Times, May 15, 1990, p. 31.Craig, Carole, 'Home Truths for Ireland: Mixed Fortunes at Waterford Crystal,' International Management, May 1993, p. 34.------, 'Waterford Seeks Cash Infusion to Trim Debt,' Wall Street Journal, January 9, 1990, p. A11.Dunlevy, Mairead, Waterford Crystal: The History, Waterford, Ireland: Waterford Crystal Ltd., 1990.Dyer, Geoff, 'Ambitious Goals in the Crystal Ball,' Financial Times, April 2, 1996, p. 22.Finn, Edwin A., Jr., and Richard Morais, 'Table for Two?,' Forbes, November 3, 1986, pp. 67+.Goodhart, David, 'Sir Arthur Finds an Irish White Knight,' Financial Times, October 9, 1986, p. 30.Hill, Roy, 'Why There's a New Gleam at Waterford Glass,' International Management, May 1985, pp. 70+.Kehoe, Anne-Margaret, 'Waterford Stake in Rosenthal,' HFN--The Weekly Newspaper for the Home Furnishing Network, March 3, 1997, p. 35.Kelly, Alison, The Story of Wedgwood, New York: Viking Press, 1975.Lohr, Steve, 'At Waterford, Honeymoon Is Over,' New York Times, April 11, 1989, p. D1.Murray, Matt, 'Dublin's Waterford to Buy All-Clad for $110 Million,' Wall Street Journal, May 25, 1999, p. B3.'Reviving Waterford Crystal,' Economist, April 14, 1990, p. 72.Rigby, Rhymer, 'Wedgwood: Journey to Etruria,' Management Today, December 1998, p. 86.Salmans, Sandra, 'The Worries of Wedgwood,' Management Today, June 1980, p. 66.Toman, Barbara, 'Waterford Wedgwood's Chief Resigns As Firm Splits China, Crystal Divisions,' Wall Street Journal, December 14, 1990, p. A15.Tomkins, Richard, 'A White Knight with Slightly Tarnished Armour,' Financial Times, March 21, 1989, p. 20.Valante, Judith, 'A New Brand Restores Sparkle to Waterford,' Wall Street Journal, November 10, 1994, p. B1.Whiteley, Geoffrey, 'Why Wedgwood Wobbled,' Management Today, August 1983, pp. 26+.Wilson, Andrew B., and Amy Dunkin, 'Waterford Learns Its Lesson: Snob Appeal Isn't Enough,' Business Week, December 24, 1984, pp. 63+.Zisko, Allison, 'Waterford Acquires Minority Stake in Royal Doulton,' HFN--The Weekly Newspaper for the Home Furnishing Network, December 13, 1999, p. 48.Zisko, Allison, and Barbara Thau, 'Waterford Buys All-Clad,' HFN--The Weekly Newspaper for the Home Furnishing Network, June 7, 1999, p. 1.

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