Polishing the family silver for global growth

Transcription

1 BRAND SHOWCASE Georg Jensen January 2006 Polishing the family silver for global growth By Martin Moodie and Mary Jane Pittilla Turning a rough diamond into the epitome of modern luxury is the task facing Hans-Kristian Højsgaard since he took over the reins of Danish silversmith Georg Jensen in It s a case of so far, so good, as an ambitious diversification programme delivers increasingly impressive results. So what lies next? It may have recently turned 100 years old and it still bears its founder s name, but Danish luxury house Georg Jensen is a very modern company facing very contemporary issues. Like an increasing number of companies in the international brand business, its ownership is no longer family but venture capital based. For a time it was owned by the Danish brewer Carlsberg, but in 2000 it passed into private equity hands, a change that prompted the arrival of Hans-Kristian Højsgaard as CEO. His brief was simple but daunting. Turn the company around, add value, and reposition it so that the owner could derive maximum return from its investment. Højsgaard was a good choice. The Dane has more than 20 years experience in consumer goods, including 16 in the luxury sector. Previously he had served as President of Lancaster Group Worldwide, the prestige fragrances and cosmetics division of Coty, and before that he was Managing Director and CEO of Guerlain Asia- Pacific. He also held down a number of 82 The Moodie Report

2 January 2006 BRAND SHOWCASE Georg Jensen senior roles for liquor company Joseph E. Seagram & Sons [now integrated into Pernod Ricard and subsequently Diageo]. So how does he view his task? The end game is very clear, he says, pointing out that the equity fund wants an exit plan with meaningful profits in the future. My mandate is to try to create value. I had an original five-year horizon and I have two left to an exit. The options are an industrial sale, an IPO or to sell to another fund. Does he have any preferences? He smiles. We would really benefit from the ownership of a luxury goods company, he says, ideally by a group listed in New York, Paris or London. Any nibbles yet? Clearly we are seen as an opportunity, he responds, so, yes, we have had some approaches. There are some groups out there, for example, which are focusing on jewellery more than others. Plus there are other groups such as funds. For now, Højsgaard and the company are delivering exactly what its shareholders want. Even though we are privately held our results are very public, he says. You can see them on the net [and in the panel on page 87]. For the year ended 30 September 2005 we saw a very, very significant increase in EBIT and EBITDA. Understanding the DNA Product design is the DNA of the Georg Jensen brand, and the company has a unique take on this side of the business. Always wanting to refresh the brand s contemporary image, the in-house design team works with leading outside designers. One top name is Arne Jacobsen, whose Georg Jensen Living espresso and caffe-latte spoons boast clean, simple lines and are nicely set off by their outer gift packaging. Other sleek Living products include wine stoppers, bottle openers and a leafshaped snack bowl. Each year Georg Jensen teams up with a leading designer to create a limited-edition annual Heritage Collection pendant. This is a reworking of a design from the company s archives dating back to the early 1900s, and is a strong seller in Asia, especially Japan, China and Taiwan, according to Højsgaard. Those results continue the solid progress that has taken place during Højsgaard s reign. Year one saw the company exit from red ink, while year two (to September 2004) witnessed a near threefold increase in EBIT and a virtual doubling of EBITDA. It s going in the right direction, he says. We ve grown turnover to 115 or 116 million, and now that we re starting to sell items with price points of US$ it is starting to justify the investment we have put into the shops. Timely diversification The broad aim is to double turnover by So how is Georg Jensen going to get there? In a word, diversification. At the recent TFWA World Exhibition in Cannes the company s message was all about turning a Danish silversmith into a global luxury goods brand. The company is in a period of transformation, Højsgaard explains. We were traditionally known as a Danish silversmith, making 100% silver gift products, and now we are becoming a global luxury goods company manufacturing gifts in other precious metals. In just two years [since Højsgaard took over the helm of Georg Jensen] one third of our business is done in gold and diamonds, and two The 2006 Heritage Collection takes a classic Art Nouveau design from 1913 which captures the bud of a flower about to burst open. The company also selects an artist to produce an annual Artist Heart Collection pendant. For 2006 Georg Jensen has teamed up with acclaimed New York-based designer Karim Rashid, who has interpreted the heart in his signature sensual way in a pendant and earrings. The pendants from both ranges have become collector s items, Højsgaard points out. In terms of new product development, the company is responding in a big way to the global trend for personalised jewellery. Featured now in the world s top fashion magazines are the new Carnival rings, available with a choice of five cabochon-cut coloured stones in either 18ct white gold or sterling silver, designed to be worn together to create an individual look for the wearer. The Fusion collection also responds to the trend for individuality. The Moodie Report 83

3 BRAND SHOWCASE Georg Jensen January 2006 thirds is in silver. I want to achieve a 50:50 balance. His strategy is carefully honed. He knows it will not be easy for a small (in global luxury goods terms) Danish company, steeped in the silversmithing tradition, to compete with the bigger boys on the global stage. But Højsgaard believes there is huge potential for products offering understated elegance and simplicity, which is how he sums up the Georg Jensen brand. Jewellery has been the big push for the past two years, but 2006 is shaping up as the year for watches, a relatively minor category up to now. The company is making a return to the Basel show, a significant international showcase in its own right. Højsgaard concedes that the move into watches is not an easy one, and both quality of product and positioning will be vital in a crowded marketplace. We are not going to claim to be an overly technical watch; we will be the design watch, he says. In essence we will do jewellery pieces that happen to show the time. But if we really want to claim our place in the luxury world we think we have to get watches to represent around 10 15% of our business. Today they are just 5%. The company has just taken a landmark step in developing its luxury range by the appointment of a new Creative and Artistic Director. Nadja Zerunian was formerly with Calvin Klein in New York but has just joined Georg Jensen in what Højsgaard describes as a proud moment for the company. It will mean a new direction, new experience and new skill sets, he enthuses. It also means we will have a very diverse portfolio under one creative head. We know we are fine craftsmen, but she will give us creative focus. That s an important factor, given that in its Højsgaard: My mandate is to try to create value. I had an original fiveyear horizon and I have two left to an exit. The options are an industrial sale, an IPO or to sell to another fund. Scandinavian homeland Georg Jensen is best known for home lines rather than topend luxury. Højsgaard admits the company has spent a fair amount of time cleaning up its act. We re trying to ensure that via Nadja we are coherent across all our categories, he says. If we succeed in jewellery and watches then there is no reason why we can t bring in a home line internationally. The building blocks are certainly well established and Georg Jensen has a growing global spread of business. Over half of its sales are generated in Asia, led by Japan (where it has 28 stores) and Taiwan. The brand and consumer acceptance is very strong, Højsgaard says. The next big step is the US, the acid test for luxury brands but the commercial graveyard of so many. The company has opened no less than six stores in New York in the past year and is also opening in Las Vegas. In France Georg Jensen opened two stores in Paris, while its most successful standalone shop internationally is in London s Bond Street. Retail strategy On the retail side, Georg Jensen has a head start. The brand already boasts 115 owned domestic stores worldwide carrying its wide range of jewellery (pendants are a speciality), watches, gifts and homeware. The Georg Jensen Living sub-brand is offered to third-party retailers, such as airlines and cruise ships in the travel retail sector, and has really taken off, enthuses Højsgaard. British Airways 84 The Moodie Report

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6 January 2006 BRAND SHOWCASE Georg Jensen and SAS were the first two carriers to start carrying Living items; BA is currently listing a candle-holder. Other carriers listing products such as the popular Victory pendant include Lufthansa, KLM, Cathay Pacific, JAL and Korean Air. Turnover and profit on the increase In its financial review for 2003/04, which is the latest set of full-year figures available, Georg Jensen s total turnover was up by +7% to DKr789 million ( million). While sales of third-party products declined, turnover of Georg Jensen products jumped by +15% during the full fiscal year and +30% during the second half of the year (at constant exchange rates). The declining sale of third-party products, the firm said, was in line with the deliberate phasing out of non-group products, which represent only 10% of sales. EBIT for the period rose by DKr21 million to reach DKr6 million (there was a deficit of DKr15 million in the previous year). EBITDA reached DKr24 million against DKr2 million the previous year. In product terms, sales of gold and diamond jewellery jumped by +33%. Jewellery and watches accounted for almost 80% of the retail turnover and 60% of the total turnover. Sales of the Living brand items leapt by +27%. Georg Jensen s biggest markets are Denmark, Japan, Australia, Taiwan, the US and the UK. Sales of Georg Jensen in the US jumped by +40% during 2003/04, driven by jewellery. Turnover in Asia advanced +22% thanks to the strong performance of jewellery and watches. Turnover in Scandinavia grew by +20%, mainly on sales of Living products. The net result (after interest and tax) was a deficit of DKr7 million against DKr44 million the previous year. However, the year s results included an extraordinary profit of DKr70 million generated by the sale of two shop leases, the company said. Højsgaard claims that the airline business has become such a huge success that the company is, for the first time, introducing airline-exclusive pendants. Examples on display in Cannes included Zephyr, on a silk cord, and Gravitas, featuring a leather cord. Outer packaging is kept small, resembling a jewellery box, with no outer window. Two domestic Georg Jensen boutiques opened during the Cannes TFWA fair an extended store in Aarhus, Denmark s second city, and a renovated outlet in Stockholm, Sweden s fashion capital. Where does travel retail fit in? It s about getting a presence on the international radar, he says. It is reinforcing the presence and also becoming very much a business in its own right. It s now close to 10% of our total mix, and it s still going up. Højsgaard harbours big expansion plans for the channel. The brand has two stand-alone boutiques, at Copenhagen Kastrup and Singapore Changi airports, focusing on a tight selection of jewellery, watches and gifts. And, he says, an agreement has been reached with Airport Authority Hong Kong for a store to open from June Three or four more airport shops will begin trading in the Western Hemisphere and Asia next year, although the company is choosy about locations and won t be expanding for expansion s sake. Does Højsgaard relish the challenge? I m enjoying it very much for two reasons, he says. Firstly I see Georg Jensen as a rough diamond that really has a chance to shine. And secondly it s my first time working for a private equity company. They have a very clear agenda. So if you sign up, you have no excuses. So far, so good. The Moodie Report 87

7 M2 THE MOODIE MARSHALL COMPANY A NEW COMPANY A NEW MIDDLE EAST BASE A SINGLE OBJECTIVE... To deliver the best in business communications film, corporate presentations and commissioned multi-media and communication projects. Bringing together 40 years of combined experience in the media, airport, travel and retail sectors. Contact: MARTIN MOODIE: martin@moodie-international.com PETER MARSHALL: peter@marshallartsinternational.com