| 24 January 2011 | |
INTERVIEW: Jason Grinton and Aart Roos |
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Backed by a sizeable investment since the split from Nobia, German kitchen specialist Pronorm is taking on the UK market with renewed confidence. Tim Wallace met UK managing director Jason Grinton (left) and Aart Roos (right), director of new Dutch owner De Mandemakers (DMG)...
There's a genuinely positive vibe around Pronorm these days. A year ago, the German furniture brand was bought by Dutch retail giant De Mandemakers (DMG) which immediately pledged to provide the levels of investment that former parent company Nobia had been reluctant to commit to in a tightening market.
It's a pledge that Pronorm UK managing director Jason Grinton says has undoubtedly been kept. The restrictions imposed by Nobia had left the brand playing a frustrating game of catch-up with its competitors and lacking the innovation to make it a leader rather than a follower. But DMG has not only brought the Pronorm range swiftly up to date, particularly with the new handleless Y-line range, but given it the chance to develop more retail opportunities in European markets, including the UK, with greater conviction.
Pronorm has been a major supplier of kitchens to DMG for many years and sees the new partnership as a perfect fit. In particular, it has been impressed by DMG's progressive, investment-led strategy, which it sees as sharply contrasting with Nobia's plans to cut its investments and consolidate its position.
"DMG have come in, had a look at what needs to be done and done it," is how Grinton sums things up as kbbreview sits down with DMG director Aart Roos to discuss where the Pronorm brand goes from here. "In some ways we're catching up, but in others we're really pushing forward..."
Q: What was the thinking behind taking on Pronorm?
Aart Roos: We wanted to show that we're serious about taking the factory and the brand forward and that we're willing to invest in it. The main focus has been the development of the handleless Y-line kitchen. In just three-and-a-half months, we've been able to pull it off and we're very happy with that.
We had a joint venture with Nobia, but along the way there was a mismatch in culture and the way we look at the business, so it was decided last year to buy Nobia out.
Q: What exactly do you mean by a mismatch?
AR: Just in how we look at the business. Every company has its culture and it didn't fit ours. We are capable of quick decisions, we don't have to report quarterly figures, we can move quickly when we see opportunities. Nobia has a reporting obligation.
We took Pronorm because of its potential. It was a good fit, Pronorm had been an important supplier to DMG, whereas Nobia was sitting there saying 'we want to streamline our factory', and that's how we came together.
Q: So the investment in Pronorm as a brand has been significant?
Jason Grinton: Yes, previously we hadn't had that but it's what you're seeing here now. We're now running four product lines. DMG is a major retailer, it knows the market inside out, it knows what people are asking for in the showroom. We haven't had that feedback in the past. For the past two or three years, we haven't had a viable handleless kitchen. I'd say 15 to 25% of kitchens sold in UK are handleless. Prime Line was past its sell-by date, but with Y-line we now have a credible handleless range and about 30 new doors.
AR: The next step is to build our new exhibition centre in 2011 and to develop our partnership with our customers in the UK.
There's a genuinely positive vibe around Pronorm these days. A year ago, the German furniture brand was bought by Dutch retail giant De Mandemakers (DMG) which immediately pledged to provide the levels of investment that former parent company Nobia had been reluctant to commit to in a tightening market.
It's a pledge that Pronorm UK managing director Jason Grinton says has undoubtedly been kept. The restrictions imposed by Nobia had left the brand playing a frustrating game of catch-up with its competitors and lacking the innovation to make it a leader rather than a follower. But DMG has not only brought the Pronorm range swiftly up to date, particularly with the new handleless Y-line range, but given it the chance to develop more retail opportunities in European markets, including the UK, with greater conviction.
Pronorm has been a major supplier of kitchens to DMG for many years and sees the new partnership as a perfect fit. In particular, it has been impressed by DMG's progressive, investment-led strategy, which it sees as sharply contrasting with Nobia's plans to cut its investments and consolidate its position.
"DMG have come in, had a look at what needs to be done and done it," is how Grinton sums things up as kbbreview sits down with DMG director Aart Roos to discuss where the Pronorm brand goes from here. "In some ways we're catching up, but in others we're really pushing forward..."
Q: What was the thinking behind taking on Pronorm?
Aart Roos: We wanted to show that we're serious about taking the factory and the brand forward and that we're willing to invest in it. The main focus has been the development of the handleless Y-line kitchen. In just three-and-a-half months, we've been able to pull it off and we're very happy with that.
We had a joint venture with Nobia, but along the way there was a mismatch in culture and the way we look at the business, so it was decided last year to buy Nobia out.
Q: What exactly do you mean by a mismatch?
AR: Just in how we look at the business. Every company has its culture and it didn't fit ours. We are capable of quick decisions, we don't have to report quarterly figures, we can move quickly when we see opportunities. Nobia has a reporting obligation.
We took Pronorm because of its potential. It was a good fit, Pronorm had been an important supplier to DMG, whereas Nobia was sitting there saying 'we want to streamline our factory', and that's how we came together.
Q: So the investment in Pronorm as a brand has been significant?
Jason Grinton: Yes, previously we hadn't had that but it's what you're seeing here now. We're now running four product lines. DMG is a major retailer, it knows the market inside out, it knows what people are asking for in the showroom. We haven't had that feedback in the past. For the past two or three years, we haven't had a viable handleless kitchen. I'd say 15 to 25% of kitchens sold in UK are handleless. Prime Line was past its sell-by date, but with Y-line we now have a credible handleless range and about 30 new doors.
AR: The next step is to build our new exhibition centre in 2011 and to develop our partnership with our customers in the UK.
Q: Shortly after the takeover, Nobia's Christian Rösler suggested you'd lose customers in Holland and Germany and take a more aggressive stance in the UK. Has that been the case?
AR: That's his opinion and I respect everyone's opinion. You might lose some customers, you might gain some. The biggest confirmation of where this is going is the way the Dutch partners have reacted. Some were sceptical, but we've been able to convince them of our commitment to investing in the future of Pronorm. A key example is the Y-line proposition, which has been extremely well received. We've seen a lot more door types too. The jury is still out on how many customers we're losing and gaining, but we're doing the right things.
JG: As long as our UK retailers don't see any major change, they're happy. But what they have seen is an upping of the game. They're used to Pronorm under Nobia, but it's obvious that since the takeover there's been a major step change in product development and investment in the company. That's good news and they've been very positive. I'm confident that with the products we've talked about, including Y-line, we'll get more dealers. It can only grow apace.
Q: So you haven't lost any customers then?
AR: The great advantage is that Pronorm doesn't have a huge export base, over 50% is exported. We are able to understand what's happening in the Netherlands, for example, and respond to it. We have an ability to cater to local market needs, much more than some of the bigger players. We have a unique proposition, it has a huge dependence on the export market.
Q: How concerned are you by the downturn?
AR: It's terrible, it's unbelievable. The German market is not that bad, but the Dutch market was very negative in 2009. In the UK, it started in 2008, we're talking about double-digit falls. The market environment is not easy. House building has been decimated in the UK. Completions are 30,000 from 250,000. You're talking about 700,000 less transactions.
But even in the downturn there are positives. You're forced to reinvent your business model and look at your processes. It gives you breathing space. You need to take out costs and you're also able to go after market share via acquisitions. We tend to up our investments in a downturn. We've bought more in the past 18 months than we did in the 18 months before that.
Q: Was the acquisition of Pronorm a direct response to the downturn?
AR: It wasn't the downturn so much as we wanted 100% control of the retail operation in such a critical market. Pronorm has gone through a terrible period like the whole German kitchen industry and the phasing-out cycle hasn't finished. But it's enabled us to reinvest in our footprint. We've become lean and mean over the past 24 months, which has enabled us to start investing in the capability of the brand.
Q: So you've had to make some redundancies?
AR: In the past few years we've streamlined our organisation. It's not a nice story, but we've taken people out of our factory force, which has enabled us to have a healthy base. We've lost about 20% of our workforce, that's since 2008. We've gone from 275 people to 250.
Q: Are there plans to make any further acquisitions?
AR: From a factory perspective, no. There will be further shake-out. But we're looking to make Pronorm a top-five player.
Q: Do you think we're coming out of recession?
AR: I don't have a crystal ball, but the worst of the financial crisis is behind us. The amount of housing is increasing. It's logical because of population growth and the increase in single households. The forecast for housing is double-digit growth in 2012, so we're relatively positive.
Q: But isn't consumer spend the big unknown?
JG: Customer confidence is at an all-time low. In the UK, everyone likes to move, but for two years now the number of completions has been reduced. But there's latent demand there. Once the confidence returns, demand will take off.
AR: Our reports forecast very strong growth in 2012, so the market will recover and we're starting to get ready for it.
Q: How much of a focus is there on your UK dealer network?
JG: We have a network of 80 and in an ideal world we're looking to increase that to 120-130. But the market is very weak and we have to be very careful taking on new dealers because of the credit and insurance issues you have. We have to be a bit more careful. But we're definitely looking to develop the existing dealership.
Q: How easy is it to convince UK dealers to take Pronorm on in the current climate?
JG: The UK market is different to the continent. In Holland, they'll sell four or five brands under one roof - Hacker, Nolte, Pronorm etc - and that's a sophisticated sales channel. In the UK, one dealer will sell one product. To get dealers to change from one to another is difficult. You need a package of product, price and service that's better than your competitor. I think we have a handleless kitchen now that is exclusive. You have to be different, you have to be best in class. My ambition of 100 to 130 studios is achievable in the next two or three years for sure.
Q: Are retailers looking for new opportunities because of the recession?
AR: They're looking to perform better. In a recession, people look inward so our retailers are stronger than they used to be. The industry has lost a lot of people who couldn't adapt, but this is another advantage of the recession. It helps to clean out the system.
Q: What are your key aims going forward in the medium term?
JG: To take a bigger market share from the German manufacturers currently supplying in the UK. We have the tools now to do that. Taking only three months to develop Y-line is phenomenal.
AR: We need to understand trends and react quicker than our competitors. We don't want to create too much tension in the market by going out and chasing volume with the multiples. All that does is create friction and gives the independent kitchen specialist a more difficult time. Some of our competitors are chasing volume, it's the same in the appliance industry.
We have to focus on being at the forefront of the market.
Q: Are there any areas where Pronorm can improve?
JG: We need to spend a bit more time training and educating our dealers to have an awareness of the worktops, appliances, brassware, lighting, flooring... That's what sells the kitchen and it's the guys who can do all that who are successful. It's all about emotion. The Dutch have done it for years, they speak very much about the emotion and they're 100% right. The emotion of the living space is an angle we can bring to the UK in a positive way and educate our dealers.
Q: Are there a lot of dealers out there surviving week to week?
AR: In any industry you have this kind of scenario. Where the weaker companies have a problem is in discounting. Being competitive is important, but once you get to the point where you're selling purely on who has the cheapest product, you're lost. You have to sell at a competitive price, but there has to be something about what you offer. Furniture only represents 20 to 25% of the overall sale, the rest is flooring and tiling and worktops and installation. So to say furniture is key to the sale is completely wrong. It's missing the point. The point is, it's you and me and it's what you've got to offer and what I'm prepared to pay.
AR: That's his opinion and I respect everyone's opinion. You might lose some customers, you might gain some. The biggest confirmation of where this is going is the way the Dutch partners have reacted. Some were sceptical, but we've been able to convince them of our commitment to investing in the future of Pronorm. A key example is the Y-line proposition, which has been extremely well received. We've seen a lot more door types too. The jury is still out on how many customers we're losing and gaining, but we're doing the right things.
JG: As long as our UK retailers don't see any major change, they're happy. But what they have seen is an upping of the game. They're used to Pronorm under Nobia, but it's obvious that since the takeover there's been a major step change in product development and investment in the company. That's good news and they've been very positive. I'm confident that with the products we've talked about, including Y-line, we'll get more dealers. It can only grow apace.
Q: So you haven't lost any customers then?
AR: The great advantage is that Pronorm doesn't have a huge export base, over 50% is exported. We are able to understand what's happening in the Netherlands, for example, and respond to it. We have an ability to cater to local market needs, much more than some of the bigger players. We have a unique proposition, it has a huge dependence on the export market.
Q: How concerned are you by the downturn?
AR: It's terrible, it's unbelievable. The German market is not that bad, but the Dutch market was very negative in 2009. In the UK, it started in 2008, we're talking about double-digit falls. The market environment is not easy. House building has been decimated in the UK. Completions are 30,000 from 250,000. You're talking about 700,000 less transactions.
But even in the downturn there are positives. You're forced to reinvent your business model and look at your processes. It gives you breathing space. You need to take out costs and you're also able to go after market share via acquisitions. We tend to up our investments in a downturn. We've bought more in the past 18 months than we did in the 18 months before that.
Q: Was the acquisition of Pronorm a direct response to the downturn?
AR: It wasn't the downturn so much as we wanted 100% control of the retail operation in such a critical market. Pronorm has gone through a terrible period like the whole German kitchen industry and the phasing-out cycle hasn't finished. But it's enabled us to reinvest in our footprint. We've become lean and mean over the past 24 months, which has enabled us to start investing in the capability of the brand.
Q: So you've had to make some redundancies?
AR: In the past few years we've streamlined our organisation. It's not a nice story, but we've taken people out of our factory force, which has enabled us to have a healthy base. We've lost about 20% of our workforce, that's since 2008. We've gone from 275 people to 250.
Q: Are there plans to make any further acquisitions?
AR: From a factory perspective, no. There will be further shake-out. But we're looking to make Pronorm a top-five player.
Q: Do you think we're coming out of recession?
AR: I don't have a crystal ball, but the worst of the financial crisis is behind us. The amount of housing is increasing. It's logical because of population growth and the increase in single households. The forecast for housing is double-digit growth in 2012, so we're relatively positive.
Q: But isn't consumer spend the big unknown?
JG: Customer confidence is at an all-time low. In the UK, everyone likes to move, but for two years now the number of completions has been reduced. But there's latent demand there. Once the confidence returns, demand will take off.
AR: Our reports forecast very strong growth in 2012, so the market will recover and we're starting to get ready for it.
Q: How much of a focus is there on your UK dealer network?
JG: We have a network of 80 and in an ideal world we're looking to increase that to 120-130. But the market is very weak and we have to be very careful taking on new dealers because of the credit and insurance issues you have. We have to be a bit more careful. But we're definitely looking to develop the existing dealership.
Q: How easy is it to convince UK dealers to take Pronorm on in the current climate?
JG: The UK market is different to the continent. In Holland, they'll sell four or five brands under one roof - Hacker, Nolte, Pronorm etc - and that's a sophisticated sales channel. In the UK, one dealer will sell one product. To get dealers to change from one to another is difficult. You need a package of product, price and service that's better than your competitor. I think we have a handleless kitchen now that is exclusive. You have to be different, you have to be best in class. My ambition of 100 to 130 studios is achievable in the next two or three years for sure.
Q: Are retailers looking for new opportunities because of the recession?
AR: They're looking to perform better. In a recession, people look inward so our retailers are stronger than they used to be. The industry has lost a lot of people who couldn't adapt, but this is another advantage of the recession. It helps to clean out the system.
Q: What are your key aims going forward in the medium term?
JG: To take a bigger market share from the German manufacturers currently supplying in the UK. We have the tools now to do that. Taking only three months to develop Y-line is phenomenal.
AR: We need to understand trends and react quicker than our competitors. We don't want to create too much tension in the market by going out and chasing volume with the multiples. All that does is create friction and gives the independent kitchen specialist a more difficult time. Some of our competitors are chasing volume, it's the same in the appliance industry.
We have to focus on being at the forefront of the market.
Q: Are there any areas where Pronorm can improve?
JG: We need to spend a bit more time training and educating our dealers to have an awareness of the worktops, appliances, brassware, lighting, flooring... That's what sells the kitchen and it's the guys who can do all that who are successful. It's all about emotion. The Dutch have done it for years, they speak very much about the emotion and they're 100% right. The emotion of the living space is an angle we can bring to the UK in a positive way and educate our dealers.
Q: Are there a lot of dealers out there surviving week to week?
AR: In any industry you have this kind of scenario. Where the weaker companies have a problem is in discounting. Being competitive is important, but once you get to the point where you're selling purely on who has the cheapest product, you're lost. You have to sell at a competitive price, but there has to be something about what you offer. Furniture only represents 20 to 25% of the overall sale, the rest is flooring and tiling and worktops and installation. So to say furniture is key to the sale is completely wrong. It's missing the point. The point is, it's you and me and it's what you've got to offer and what I'm prepared to pay.
