Hanneck spells it out for kitchen studios

The commercial director of distributor Swift Electrical, Malcolm Scott, goes to hear ex-BSH boss Uwe Hanneck’s views on UK kitchen studios

I was surprised to be invited to join a small group of kitchen specialist proprietors for an informal presentation about kitchen studios held recently by one of the KBB industry’s grandees, Uwe Hanneck.

He quashed rumours of his retirement as not true. He has been busy working on various projects, including the advisory council of German Industry UK (GIUK), a group founded in 1975 and made up of 100 company directors from German businesses with British factories or British divisions. Most recently he has taken on a consultancy role with the KBSA.

GIUK promotes industry training and offers access to interim management services – where a company wishes to make a major change and identifies the need for the assistance of one or more experienced managers. Hanneck is currently also a board advisor for several small retailer businesses. He might have stepped down from his post as CEO of BSH Group after 40 years of service, but he has not stopped working.

Malcolm Scott

Malcolm Scott of Swift Electrical

His views on the kitchen studio business and the kitchen market in general were very interesting and will cause many proprietors to look at their business and consider the future.

Shrinking

What he said was that UK independent kitchen studio owners were a shrinking group, as franchise groups and multiple retailers continue to grow and squeeze the independent out of the market, it shows how much change can occur within 10 to 20 years.

Hanneck pointed to the French market, where Schmidt has developed rapidly over quite a short period of time to dominating the kitchen studio sector in France. It also has a big presence in Germany and Spain, with over 500 exclusive franchised dealers.

Schmidt has created a major European kitchen manufacturing and retailing company, with a strong trading base and a near monopoly in its home market. Schmidt has now started to open franchised stores in the south of England.

The activity within the much bigger German market shows different but just as interesting trends, with kitchen furniture sales over twice those in the UK or France. Several very large furniture manufacturers, such as Nobilia with sales over €900 million (£650m), battle for market share against the even bigger Swedish Nobia group with over 20 brands including Magnet, Gower, Poggenpohl and Rixonway.

Huge furniture groups dominate the German market, like Nobia with 310 showrooms. In this market, the independent kitchen studio has found the best way to survive is to sign up to one of the small number of very large buying groups. These are shareholder-owned businesses operating in Germany and other European countries, which provide support for the independent retailer for a fee. They often impose strict purchasing and selling policy conditions that limit the retailer’s ability to ‘offer a different proposition’ from other buying group outlets. In practice, the buying group can be very similar to a franchise owner.

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Hanneck made it clear that he believed that the specialist kitchen studio had a secure future within the UK kitchen market. But he pointed out that with giants like Howdens and Ikea and fast-growing new players like Wren – and with French and German groups looking to the UK as a market they can attack – the long-term survival of any single independent studio depends on having an identity as “something rather different”. This means visible high service levels and a local identity – specifically, those businesses that moved towards the premium sector, instead of trying to compete head-on with the multiples, builders, merchants and DIY sheds. They, he said, would have a much better chance of long-term survival.

Hanneck argued that to supply budget kitchens from a kitchen studio with a high cost base had less chance of success than trying to attract higher-spending consumers and fitting far fewer kitchens per year with far higher average sales values. He also argued that UK kitchen studio owners were typically much more entrepreneurial than their German counterparts. So they do not need, in his view, the support of a fee-charging specialist buying group. Those proprietors who worked together in a trade association to promote best practice and whose showrooms could demonstrate an affiliation with a national trade association were more likely to survive in the medium to long term.

Hanneck concluded that kitchen studio retailers who could position themselves above the mass-market sector, and who worked closely with other similar retailers under the umbrella of a trade association, would be more able to distance themselves from the offering presented by the franchise outlets and manufacturer owned retail showrooms.

He went on to talk about succession and said proprietors should ask where their business will be in five or 10 years, especially if they are in their 40s or 50s. He said that the ability to extract some value from the business on retirement would be massively improved if plans were in place before the owner retires.

 

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