Waterford Wedgwood Holdings PLC

Waterford Wedgwood Holdings PLC

Barlaston
Stoke–on–Trent
Staffordshire
ST129ES
England
78 220 4141
Fax: 78 220 4402

Public Company
Incorporated: 1947 as Waterford Crystal Limited
Employees: 7,606
Sales: IR£319.2 million (US$450.1 million)
Stock Exchanges: Irish London NASDAQ
SICs: 3250 Structural Clay Products; 5719 Glassware; 3262
Vitreous China Table & Kitchenware; 3263 Semivitreous
Table & Kitchenware; 3220 Glass & Glassware, Pressed
or Blown

Waterford Wedgwood Holdings PLC serves as the parent company for two of the world’s most highly respected names in tableware: Waterford Crystal, 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 branches of the company draw upon traditions of craftsmanship that date back to the eighteenth century.

Waterford Crystal

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. 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 °C, 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 twenty–first 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 eighteenth–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 didn’t introduce any new patterns or revise its advertising from 1972 to 1982. In the early 1980s, however, Waterford began to face challengers; while 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

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 eleven. (The disease left a lingering infection in his leg, which eventually lead 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 fifty. 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 twentieth 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 that “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 semi–retirement 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 economic slowdown that made the early years of the nineteenth 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 IPs 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 briefly been offered 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 twentieth 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.

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 the late 1960s 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 twenty factories.

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

Waterford Wedgwood PLC

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 5 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 was manufactured in Germany and Slovenia, where wages averaged 10 percent less than in Ireland. Stylistically, Marquis featured less elaborately cut designs 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 £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. Future growth was targeted for the mature markets of Japan and the United Kingdom.

Principal Subsidiaries

Waterford Crystal Limited (Ireland); Josiah Wedgwood and Sons Limited (United Kingdom); Waterford Crystal Gallery Limited (Ireland); Waterford Wedgwood Australia Limited; Waterford Wedgwood Japan Limited; Waterford Wedgwood Retail Limited (United Kingdom); Josiah Wedgwood & Sons (Exports) Limited; Waterford Wedgwood Trading Singapore Pte. Limited; Wedgwood G.m.b.H. (Germany); Waterford Wedgwood U.K. pic; Wedgwood Limited; Waterford Glass Research and Development Limited (Ireland).

Further Reading

Craig, Carole, “Home Truths for Ireland: Mixed Fortunes at Waterford Crystal,” International Management, May 1993, p. 34.

Dunlevy, Mairead, Waterford Crystal: The History, Waterford, Ireland: Waterford Crystal Ltd., 1990.

Kelly, Alison, The Story of Wedgwood, London: Viking Press, 1975.

—April Dougal Gasbarre