Grohe's plans to turn Chinese brand Joyou into a global mass market player are gathering pace. Tim Wallace travelled to Joyou's manufacturing base in China to meet chief executive officer Gerry Mulvin

 

"It's fantastic," Joyou CEO Gerry Mulvin enthuses as we look out from the top floor of the company's factory complex in Na'nan, China to the company's new ceramics plant in the valley below. "I'm one of the luckiest people in the world to be given this opportunity and we're very excited - we're transforming the industry."

 

It's an ambitious claim, but Mulvin certainly presents a convincing case. It all began with the announcement of a joint venture between German brassware giant Grohe and the Chinese manufacturer in February 2011. Grohe's aim from here, Mulvin tells me, is to roll out the first mass market bathroom brand - Joyou International - on a global scale, helping turn Grohe into what he claims will be the bathroom industry's leading global player.

 

Inevitably, the new venture has led to accusations that Grohe's brand message will be compromised, but Mulvin insists the two brands will be carefully differentiated. Nor will the stigma attached to Chinese manufacturing be a problem, he says, primarily because Grohe has commissioned Italian designers to develop its new ranges and brought in experienced engineers from its plants in Germany to oversee quality control. Formerly with consultancy firm Bain & Co, Mulvin now spends most of his time out in China and, along with Joyou's international business director Mike Usher, is working tirelessly on exploiting the brand's global potential.

 

Worth a reported £267 million, Joyou has already signed a lucrative deal with Home Depot in the US, and on the day of my visit Usher is tied up in meetings with construction giant Saint-Gobain. Contracts in Mexico and the Middle East have also been agreed. When Usher joins us later he also confirms Joyou's plans for the UK. This will include exposure in around 4000 outlets, both trade and retail, including a new private label deal with Homebase.

 

Usher stresses that Joyou will be sold unashamedly as a Chinese brand. "We're coming clean," he says. "It's a Chinese product, a Chinese brand. We didn't get any negative feedback at the KBB Show." He then lists a string of competitors who he says also manufacture in China. "The difference is that the Joyou product will hold a value because it's not going to be overly distributed," he insists. "It's a quality product at a competitive price. It's got the Grohe endorsement and it delivers good margin."

 

Usher admits he's now relying on Joyou's three UK distribution partners - Robert Lee, Cooper Callas and Faucets to deliver for him. "But we've already got business globally," he reminds me. "That normally takes two or three years. There's definitely a requirement for a mass market brand." Mulvin clearly shares Usher's determination to make the venture work and is happy to expand on the company's plans. He also offers a frank and candid assessment of the bathroom market as a whole...

 

The first question UK retailers will be asking is what's in this for them?

Higher margins. Retailers need to make money and our job is to allow them to do that. We've got to create a global brand that people walk into the store and know, a brand built around quality, design and engineering. We're going to build Grohe into the leading global player. We're already pretty much there but we're going to expand into Africa, South America etc. But at the same time, the second brand Joyou will also be mass market.

What's the background to the deal? Why Joyou?

Grohe was looking for a partner to help us expand our distribution in China. We realised Joyou's vision and ours were very similar. Our industry has seen the emergence of a number of premium global players - Grohe, Hansgrohe, Toto, Kohler and Geberit. But what we realised is there's no mass market global brand in our industry.

What will be your route to market in the UK?

We've got the three distributors we wanted. We'll stick with those three and that's it. We'll start with the independents and as it grows we'll work closely with them as to where we go next. With the multiples we may go in as a private label brand. You have to be careful to respect the independents. We will end up being widely distributed because this is multi channel but the distribution will be managed.

How big do you want to be in the UK?

We want to be a significant player that people recognise as a leader in the UK. Our goal is to be a worldwide market leader. Our goal in the UK is to be a leader. I'm not saying we'll be the biggest but we'll be in that top area. What was the thinking behind the stand at KBB Birmingham? What we launched at KBB was an entry range. We didn't want to say, 'these are amazing' because the next wave would never be good enough. This is a generational thing.

What's your online strategy?

We'll have a progressive e-commerce approach but we're not doing it at the expense of the trade. One of Grohe's biggest customers now is Amazon because we have a slick interface, and we'll do the same with Joyou. The best high street stores will have an online section. You need to be at the top of a search list. Many people don't understand that. Nobody goes to page two on a search. You have to be on the top page and you've got to pay for it.

How do you see the UK market at the moment?

The smaller players in the UK take up a lot of stock, they're not investing, they're worried they'll go out of business. They haven't grown, the market's not growing and these guys over time will fall away, just like the auto industry. All these local manufacturers - the mainstream volume players - will close down because of the costs.

What disappoints you about the bathroom industry?

The onslaught of the global brands. No matter what town you go to it's the same bloody shops with the same products, same everything. That's because a lot of the smaller retailers aren't innovative. They don't ask what they need to do differently to win. It's not about the product, it's about the purchase experience. Make people want to come back. What amazes me is how little time people put into traffic generation.

Is the bathroom market in the UK too saturated?

The problem a distributor has is he's stocking 25-30 brands, of which only three or four are growing and the rest are in slow terminal decline. They can't invest in products or advertising and their cost base is too high because they're using local labour. So the distributor is finding it tough and needing to offer an alternative. So they come out to China and try to brand it, and there's an unspoken thing that it's ok not to say it's Chinese, even though it is. What we say is the world has changed. The image of China as a 'me too' place for copying is changing. Just as it's done in Japan and Korea. Most companies are now very happy to explain that they make things in China.

 

What about the quality issues?

We're not worried about product origin. We could have used a German name, but we decided to offer an honest proposition based round international design. Italian designers will develop our ranges. Second, we have Chinese manufacturing - low cost, high volume manufacturing supported by German engineering. It can be done in a premium quality way. So you don't mind that it's from China because the design is great.

How easy is it to control quality?

We have full process control. We've taken the manager from a Grohe factory that won the best factory of the year two years ago. The process quality here will be as good as Grohe's by 2013. How much of a risk is Grohe taking? I'm taking a big risk for Grohe buying into a Chinese company but we've done a very thorough due diligence for six months. We had Ernst and Young come in, we've done background checks. Once you make the decision you can't go back...

Isn't it a very difficult time to be rolling out a new mass market brand?

Unless you've got 95% of the market who cares? This is normal, this is how it's going to be for the next 20 years. When the market's going down you've got to be clever about costs and very aggressive. Look at Spain, a good crisis is a chance to make great money.

Why have you named it Joyou 'International'?

The only reason was so consumers realise it's not a Chinese product. Simply put, when the products come in with the Joyou International box you know they meet the standards in that market. Some people say Joyou sounds too Chinese. But if you put 'international' on it becomes a different proposition.

Some have accused Grohe of diluting the overall brand message?

It's the exact opposite, we're strengthening it. Grohe is the premium product. It's the same as Hansgrohe and Bristan, the difference is we can clearly differentiate between two market propositions. To sell a Chinese product under the Grohe name would have been a risk, but we're taking the Joyou brand and selling it around the world.

So you're a threat to the likes of Bathroom Brands, among others?

Yes and the difference is the quality will be higher at the same price level. The industry suffers from what I call 'me too-ism'. There are only a few players who do original innovative designs - ourselves, Hansgrohe and Dornbracht... beyond that it gets harder. The rest just copy and it drives us at Grohe nuts. Few companies create a design language. The other thing is we can offer and build a complete bathroom suite. We have seven categories. We've built the most modern ceramics plant maybe in the world. It produces the same quantity as Roca and it's the first of four.

So what do you make of companies like Imperial Bathrooms shifting their production from China to the UK to save costs? It's a different approach. One of the challenges on ceramics is the cost of shipping. Costs are going up in China but not here. In our valley there's been a 5% increase, but in Shanghai it's 25%.

What's your take on Bathstore, prior to the recent takeover by Endless?

Bathstore was badly managed, it's a great concept that was poorly executed and there's a huge potential in the UK high street for someone to take that and do it properly. It was successful when the market was booming. The ranges were quite dull. You need to create a multi channel experience, you need offline and online. They don't have enough soft furnishings and accessories. You can't afford to rely on the purchase alone. Second, they didn't obey the cardinal rule of retail, they didn't understand where the source of traffic was coming from.