Trading conditions have been tough for Aga Rangemaster but the company has positioned itself to cook up a storm in the kitchen market now consumer interest is starting to bite again
As people typically spend as much in the first six months after moving house than they do in the next five years, many business leaders are breathing a sigh of relief at signs of life in the housing market. William McGrath, chief executive at range cooker specialist Aga Rangemaster, is one of them.
When the bottom fell out of the market in 2008, sales of the company’s cast-iron products – which also cover its Rayburn and Stanley brands – nearly halved. Since then, they have grown slowly. Sales of its Fired Earth tiles and Grange kitchens (sold under the Fired Earth brand in the UK) were also hit hard.
“But over the past six months we’ve started to see a material alteration, a turning of the tide,” says McGrath, drawing comparisons between the shape of economic trends and that of a bath (as you might expect from someone involved in interior design). “The number of people spending money on their home should be picking up.”
The chief executive hasn’t just been waiting for customers to return. The company remained profitable because it took swift action on its cost base. Aga Rangemaster had been targeting a 10 per cent return on sales and “we were headed merrily in that direction,” says McGrath. “Obviously sustaining profitability through the recessionary period suddenly became rather more the central target.”
It cut the size of its workforce – by as much as 20 per cent at its US operations, where it also consolidated three factories into one new one. Its factories switched to short-time working and efforts were made to adopt lean manufacturing principles.
McGrath adds: “The big story for us has not just been about adjusting the cost base, but developing a new product base so that we’re not just going to relive the economic cycles of the past – we’ve got a fundamentally new proposition.”
In fact, 60 per cent of the products Aga Rangemaster sold in the second half of 2013 weren’t on the market in the first half of 2011. For Aga, its main focus has been on more controllable, electric cookers. In May 2011 it launched the Total Control range, which can be programmed through a touchscreen or remote control, with the user deciding what elements of the cooker they want to use and when, whether to leave it running or to switch it off. In June 2013, it launched the Dual Control range, which can be switched off when not in use, has a low-energy setting and hotplates that can be controlled independently. It is designed to cost up to 50 per cent less to run than a 13-amp electric Aga.
The issue of running costs has come to the fore over recent months, with widespread concern around energy bills. “Fortunately we were already on the case,” says McGrath. He is confident that the flexibility in these products has the power to attract new audiences, as well as encourage brand stalwarts to upgrade. Using a plug, they are also simpler to install than the Agas of old, freeing up sales staff to talk about the different ways of cooking and the ovens’ unique features and benefits, rather than tricky questions about flues and “whether it needs a plinth or not”.
This will come in handy considering Aga Rangemaster is targeting more international growth. Its target is for 50 per cent of sales to come from outside the UK – it’s been stuck at 37 per cent for the past couple of years. But McGrath explains that the new operational structure in the US, where the group also makes fridges, presents good growth opportunities for North America.
He’s also keen to see increased sales in the near continent – in France, Holland and Belgium. And he has his eye on Germany, which continues to be dominated by the built-in appliances made familiar by the post-war, small “Frankfurt kitchen” design.
The other, rather more ambitious target, is China. “The Chinese story is fascinating,” he says. “At one level it looks too thorny and tough a road to achieve much. Why are we more optimistic than you might think that the Chinese, after 3,000 years, will remember in the next three years that the oven is a good idea?”
He explains that the idea of having a family life surrounding the cooker as the heart of the home only dates back to the 1930s in Britain. At the time it was a big shift and Vatti, Aga Rangemaster’s partner for its Chinese venture, has identified that interest in the premium, western product could fuel a similar change in the East. “Vatti approached us, rather than us heroically concluding that this could be a major market,” he adds. “Clearly our cookers have to cook the Chinese menu as well as anything that’s currently available on the market – we think we can do that.”
Nevertheless, it’s taken a solid 12 months to get the right accreditations to launch there. “There is no real category in China for ovens – so it meant starting from scratch, explaining what it is and how it works.” But the agreement with Vatti is designed to be reciprocal, as there is potential demand for Vatti’s gas-burners, used for wok cooking, in Aga’s more traditional markets. Using each others’ existing distribution structures should keep risk to a minimum, says McGrath.
Another market gap that McGrath is hoping to plug is in 60cm appliances – delivering an alternative to “the dull, soulless” built-in appliances for owners of small kitchens. This would be particularly pertinent for the younger, flat-dwelling audience that has had its interest piqued by the resurgence in the popularity of baking – Great British Bake-Off presenter Mary Berry has been a long-term Aga enthusiast, working with the brand for 30 years.
They are also the kind of people who would be attracted by Fired Earth’s tiles. With this brand, Aga Rangemaster has followed the same strategy, focusing on the product portfolio and getting its cost structures right. It has highlighted its in-vogue, retro chic design credentials in partnership with Transport for London, recreating tiles from the London Underground’s 150-year old archives. It’s also opened new stores in its south-east England heartland, in anticipation of market recovery. New London locations include Blackheath, Dulwich, Richmond and Clapham, where it has every chance of attracting yummy mummies pushing buggies down the high street, rather than relying on larger, out-of-town formats.
But if he’s setting out his stall on the basis of the recovery in the housing market, is he not worried by talk of another housing bubble, particularly in the south-east? No. McGrath points to mortgage levels still being lower than they were a few years ago – although he says consistent planning and policy development is needed to ensure enough houses are being built. “I think it’s no reason why we shouldn’t see the next few years as being rather better for our kind of company than the past few years have proved to be,” he concludes.
McGrath credits the change in “mood music” from the government around exports, its collaboration with organisations including the CBI, and the significance of the “Great” campaign in helping businesses such as his succeed overseas. But Aga Rangemaster is also running its own advertising aimed at international customers – it recently filmed an ad, which is likely to appear on TV, “for the first time in a very long time”. As well as the brand’s heritage, lifestyle and aesthetic qualities, it emphasises the range of food that you can cook using an Aga – from making toast to Christmas or Thanksgiving dinner.
McGrath senses an attitudinal shift in readiness to celebrate British design, helped by the Olympics. The company is a founder member of IDEA Birmingham, a business and university collaboration across the Midlands, with support from Birmingham City, Aston, Staffordshire, Wolverhampton and West Midlands universities. It promotes design-driven innovation, talent and knowledge transfer.
“It’s not all about money. Sometimes it’s a marketing job to promote the positives, what we’re good at, what our strengths are. Business plays an important role in that,” he says. “If we’re not beating the drum, more fool us. Nobody is going to do it for us.”