‘We’re much more than just sinks and taps…’
Neil Clark became managing director of Franke UK only nine months ago but is already driving ambitious plans for further growth. Tim Wallace asks him how the job is going and why the brand is now re-entering the appliance market with the launch of Frames by Franke
Q: How’s business?
A: The rate of market growth is slowing a little bit. Some of the builders are struggling with labour, particularly in the South. Core commodities like bricks are challenged. The Government are putting pressure on developers to build a million homes by 2020, that’s 250,000 a year. We won’t get to that this year. So there’s been a tail-off, but we expect it to come back. We grew just short of 10% last year.
Q: Are you satisfied with that?
A: You always want more but it has to be sustainable. There’s no point in doing anything to achieve short-term growth. If you grow too fast, you get into trouble with product shortages.
Q: What’s your assessment of the job done by previous Franke MD Tracy Bamber, who’s moved to Zip?
A: Merging the Carron Phoenix business into Franke required a particular skill set and Tracy did a fantastic job. The business needed a bit of modernising. She got selective distribution up and running. We looked at the challenges online and that was addressed. We also introduced More in Store.
Q: So she’s left Franke in a good position?
A: Yes, and what we need now is a period of stability and incremental change rather than some of the more radical things that we’ve done over the past three or four years. Selective distribution is constantly under review and we’ve also made some changes with [former distributor] Cooper Callas. They were going in a different direction – into bathrooms – so we parted company. These things are never totally amicable, but there was an acceptance that it was the right time.
Q: Franke has recently announced that it’s moving production to Slovakia, resulting in the loss of around 200 jobs at its Carron Phoenix sink plant in Scotland. What’s your view on that?
A: The decision to close a factory is never easy, and clearly has an impact on the workers, their families and the local community. I have a strong personal connection with the Falkirk operation and the team who work there, having spent eight years of my working life there before moving across to the Franke UK business.
But the decision to invest in the new factory in Slovakia is based on a sound business case, resulting in increased capacity and improved efficiency. The new operation will provide a strong platform from which to further develop our coloured sinks business at all levels of the market.
Q: Is the online side under control now?
A: It’s not perfect but it’s dramatically better than it was three years ago. We’d lost control of the brand and it was being damaged by the behaviour of market free-riders.
Q: Why aren’t things perfect?
A: There are other ways that online retailers can get access to our products. They can buy internationally for example. The challenge for us is ensuring we’ve done all we can to present as positive a story as possible about the brand online. There was a perception that we were a little bit arrogant and distant and just expected people to sell our product. We’ve had to be a little bit humble. We’ve made it easier to work with us, with point of sale availability, promotional information, all the things retailers want. We’ve come a long way. There’s still more work to do but we’re in a really good place.
Q: What’s your biggest challenge?
A: Maintaining the growth trajectory. We have a very strong position with retailers through distribution. Our growth with developers has been spectacular over the past few years. We have a number of key accounts and there are challenges there, but fundamentally we’re in a good place with those businesses. But the question is how do we grow? We’re not just sinks and taps; we have fantastic products and factories, so how do we leverage that in the UK market?
Q: Would you ever sell direct to the retailer?
A: It’s highly unlikely. My view is that everyone in a value chain has to justify their existence. As long as distributors continue to do that, there’s a future for them. But we are planning to sell Frames by Franke direct.
Q: Why’s that?
A: Franke Group entered the appliance world in the UK about eight years ago and it wasn’t successful. We really need to have a direct relationship with the retailer. The product is right but because it’s such a premium offer, we need to explain the benefits to retailers.
We’re also keen to control the distribution of the product and we have specific selective distribution agreements signed by the retailer. It protects the brand and the product and it’s not a scattergun approach. It makes the retailer feel like we want to partner with them, not with market free-riders.
Q: What’s the thinking behind Frames by Franke?
A: It’s a first step into appliances for Franke here in the UK. It’s an integrated system – we’ve got sinks, appliances, hobs, hoods, taps and pretty much all of it is manufactured by the Franke group. We wanted to develop a premium range using all those capabilities. It’s a big step forward for us. The system concept is totally different. Nobody is doing this with sinks and taps included.
Right now we sell a sink and tap, but we see an opportunity to sell much more than that.
Q: What are the other big threats for kitchen brands at the moment?
A: Commoditisation. Unbranded, cheaper product shipped in bulk containers from overseas has challenged the heartland of the established kitchen brands. So too has the manufacture of private-label product. B&Q are moving down the private-label route with a unified, own-brand offer. It will be interesting to see how that one plays out. But the cautionary note is that they intend that their brand be more powerful than anything else. We in the kitchen sector need to respond to that challenge.
Q: How much of a challenge does online still pose?
A: The rise of the internet has been alarming and interesting in equal measure as the kitchen sector works out how to deal with it. Is being a multi-channel retailer right for you or not? Does your strategy meet the increasing consumer expectation for speed and immediacy? Will your strategy maintain your core values and protect your brand’s reputation?
In contrast to the bathroom sector, which has taken a very heavy hit from the internet, my view is that the kitchen sector is more resilient to a similar onslaught. Buying a complete new kitchen is a complicated process and almost always requires the skill of a designer with knowledge and experience. That’s why we are supporting the independent high-street retailers and investing in long-term, loyal relationships. Everyone can make a quick win from commodity, unbranded product, but I really question if this is sustainable.
Q: Does distribution need to up its game?
A: Our buying culture has changed enormously and I think this represents a significant challenge going forward. We live in a world of increasingly high expectation. If we look at our traditional distribution model, it needs to be able to adapt. It needs to hold the right stock, offer a fast service and have the in-depth knowledge to be able to explain the benefits of the brand to the retailer. In turn, the retailer must be able to impart that knowledge to the consumer to show how your brand adds value, rather than them going somewhere like B&Q for an unbranded alternative. Faced with this, we all have to up our game.
We should also not forget how important installers are to a brand. Installers are key to influencing consumers and are very loyal brand ambassadors. We’ve recognised a gap in our support and are addressing this by launching a new scheme for installers via a dedicated website.
Q: What do you make of the recent changes at Blanco with MD Ron Blount stepping down?
A: I think they’re doing a nice job. They’re selling directly to retailers in most of the country. I guess they have the benefit of having that direct relationship with retailers.
Q: Is that something you envy?
A: No, because they don’t have the reach that we have. One of the big benefits of working with third-party distributors is we’re dealing with customers we could never hope to reach if we were selling direct. Our turnover in the UK is £50 million, Blanco’s is a lot less than that, so we have a much bigger presence.