Ideal Standard chief executive Torsten Tuerling has reassured UK bathroom retailers that the company is prepared for any eventuality over Brexit and that underlying market conditions remain positive.
Speaking exclusively to kbbreview at international bathroom trade exhibition ISH in Frankfurt, Tuerling (pictured) said his “expectation and base scenario” was that the UK and EU would agree an eleventh-hour deal.
However, he also warned that a ‘no-deal’ would have “a severe impact on the UK and European economy”.
Tuerling admitted the UK was “at the peak of Brexit uncertainty” and that UK bathroom customers were “holding back on investments”.
But when asked for his message to showrooms concerned by a drop in footfall and orders, he said: “I’m among the optimists that believe something will be found, maybe last-minute. Everyone is really keen to avoid a hard Brexit, but nobody wants to give in easily. As is often the case in negotiations, you hold on until the very last minute and then both parties make a bit of a move to get together. That’s my expectation.”
Ideal Standard achieved a 2% to 3% growth in the UK last year in a wider market that Tuerling described as “flat.”
“We see different dynamics in the market,” he said. “Residential was still very strong last year and some of the non-residential was a bit slower, but we were growing nicely. We were happy with that level of growth.”
Tuerling insisted he had full confidence in the UK bathroom market should a favourable Brexit deal be found: “The market fundamentals are good,” he insisted. “Is there a further need for residential housing? Absolutely. Is there is further need for upgrading non-residential projects in schools and hospitals? Absolutely. So the macro drivers of needs are there, and if the shadows of economic uncertainty are removed I’m pretty certain we’ll get back to healthy business.”
“We are the only large-scale manufacturer of ceramics in the UK,” he said. “This is making us more autonomous. We can serve a good proportion of the domestic market from our local manufacturing base. That’s an advantage.”
Torsten Tuerling CEO, Ideal Standard
He also claimed Ideal Standard was well placed to deal with the short-term impact of Brexit: “We are the only large-scale manufacturer of ceramics in the UK,” he said. “This is making us more autonomous. We can serve a good proportion of the domestic market from our local manufacturing base. That’s an advantage. But my concern is that if there’s a hard Brexit and an overall slowdown of the economy, this will impact everyone.
“But we are prepared in the sense of having our warehouse with raw materials for manufacturing finished goods. So if there are a few weeks of interruption, it wouldn’t impact us. We would have a seamless continuation.
If it dragged on much longer, there would be a collapse and it would impact us. But as far as one can be, I think we’re prepared.”
Tuerling agreed that in a flat market there was a temptation for the dominant brands to target new channels, but said Ideal Standard had recognised the risks of such a strategy.
“There’s always a temptation to compensate and if you have a challenge in one channel you try elsewhere,” he explained. “But then it’s dangerous to lose part of your value proposition. We might have made our own mistakes in the past, but in learning from those mistakes, we want to give the retailer a product offer that’s retail-dedicated only and allows them a larger margin percentage. We then have to be careful that we don’t offer the same product in the DIY store or online. This will be more difficult. We have become clearer which brand we use in specific channels. That’s important to preserve the business segments. With the launch of the new range [launched at ISH] we want to make sure it’s positioned in the right way and gets the right support.”
Responding to industry claims that Ideal Standard is too reliant on the merchant channel, Tuerling said: “The merchant channel is important and is an important part of our business but I wouldn’t say we are overly reliant. We are probably under-represented in the DIY and online channel, which is by intention, and then we’re quite well represented in the merchant channel. We do a lot of business with house builders, but then we also have the retail channel that we intend to grow further.
• For the full interview, see the May issue of kbbreview