DOSSIER Moulins Peugeot formaté GB final

Academic Year : 2008/2009

Creation :August 2008

Diffusion :September 2008

DEPARTMENT Management

PROGRAM / CURSUS Master 1, English

Course Strategic Analysis

Course Leader Sophie Reboud

Faculty Martin Calnan, Jacques Hendieh

Background Information

The recipe for worldwide success:

A brand with salt and pepper.

A case study of the Peugeot mills

This document belongs to Groupe ESC Dijon Bourgogne

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BACKGROUND INFORMATION

The recipe for world wide success:

A brand with salt and pepper.

A case study of the Peugeot mills

© CCMP 2008

Authors: Marcel Truche et Sophie Reboud, translation Viviane Clarac

Establishment : Groupe ESC Dijon Bourgogne

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http://www.univers-maison.com/p/1/6-13-88/1018/moulin-poivre-et-sel-electrique-peugeot-.html

Summary

1. The « arts de la table » market.......................................................................................................5

1.1 The market……………………………………………………………....41.2 Market segmentation by clientele……………………………………..5Erreur ! Signet non défini.1.3. Breakdown of the market by product category............................................................................7

2. Consumer behavior.......................................................................................................................... 8

2.1. Flexibility of meal times................................................................................................................82.2. Loss in the importance of the dinner table and development of dinner trays/ TV dinners............82.3. Evolution of lifestyles................................................................................................................... 82.4. Reasons for purchasing ..............................................................................................................92.5. Purchasing behaviors.................................................................................................................. 9

3. Distribution..................................................................................................................................... 11

3.1. A fast evolving area under strong competitive pressure...........................................................113.2. The breakdown of sales by distribution channel ......................................................................133.3. Evolving rules of the competitive game ...................................................................................143.4. The competitive position of the main distributors .....................................................................153.5. Reasoning behind modern purchasing and its impact on distribution........................................16

4. Internationalization of the market and the growth of imports ..................................................17

4.1. Evolution of exchange...............................................................................................................174.2. The main French partners.........................................................................................................18

5. The state of the industry................................................................................................................19

5.1. A highly threatened competitiveness.........................................................................................195.2. New strategies........................................................................................................................... 195.3. Restructuring of the offer...........................................................................................................205.4. A vulnerable industry.................................................................................................................20

Illustrations

Figure 1 : Purhasing power of households and « arts de la maison »...................................................5

Figure 2 : Comparative evolution of sales on the French market in % ...................................................6

Figure 3 : Breakdown of the market by clientele ....................................................................................7

Figure 4 : Breakdown of the market by product category.......................................................................8

Figure 5 : Breakdown of sales by distribution channel..........................................................................13

Figure 6 : Product segmentation created by distribution networks.......................................................14

Figure 7 : Evolution of retail sales by distribution network 2004-2006.................................................14

Figure 8 : Strategic groups in distribution of « arts de la table »..........................................................16

Figure 9: Job positions by social/professional classification in the “arts de la table” industry...............21

Table 1 : Breakdown of market categories by clientele.........................................................................7

Table 2 : Compared characteristics of purchasing « arts de la table » ………………………………… 11

© CCMP – 2008 – Le cas des Moulins Peugeot – Marcel Truche et Sophie Reboud – Groupe ESC Dijon Bourgogne 3

Table 3 : Breakdown of pepper sales in terms of packaging................................................................13

Table 4 : Management constraints coming from the reasoning behind modern purchasing.................17

Table 5 : Evolution of exchange by product category (in millions of euros)..........................................17

Table 6 : Evolution of exchange by country..........................................................................................18

Table 7 : Progression of imports from China in the sector of household goods....................................18

Table 8 : Imports by country of origin ..................................................................................................19

Table 9 : Evolution of the expectations of distribution...........................................................................20


1. The « arts de la table » market

1.1. The market

Rare is the data concerning the market of « arts de la table » [as the expression suggests, “arts de la table” is the French expression for luxury dinnerware]. The quantity and diversity of the products and the distribution networks make it difficult to follow its statistical evolution.

"One finds dishware, glassware, tableware and table linen. This variety of products is itself proposed by numerous distribution networks… there is no specific statistical reference for the manufacturing or the distribution of “arts de la table."1

" « Arts de la table » constitutes the first segment of the home décor and household goods market as much because of its traditional importance as for its variety of products. It includes dishware items, common glassware or precious crystal glassware as well as kitchenware accessories, and kitchen or pantry linens.2"

At the beginning of the preceding decade the home decor and household goods market enjoyed significant growth which has then slowed down considerably ever since 2001. Estimated at 5 billion Euros in 20063, the « arts de la table » has shown much the same tendency; its growth being not quite as high and the slowing of its growth being more marked. The general economic slowdown, uncertainty linked to the persistence of unemployment, and the decrease in the purchasing power of consumers are undoubtedly the causes for this economic slump and is particularly felt in the top market range. The correlation between the variations of sales and those of the purchasing power of households is illustrated in Figure 1.

Figure 1 : Purchasing power of households and home decor/ household goods (“arts de la maison”)

(Source: from “Table et cadeaux” n°483 January 20064)

1 Retailers for household goods are listed under NAF 52.4J. Retail businesses in textile furnishings are under NAF 52.4A. The code NAF 52.4H includes companies whose main activity is the retail selling of household furniture. Hypermarkets are listed under the code NAF 52.1F. Department stores are listed under the code 52.1H. Mail order businesses have the code 52.6A.2 Xerfi, Distribution of « arts de la table », code : 4-DIS-11, July 2004

3 « Comité des arts de la table », structural study of the market of « arts de la table », Synthèse 2007


The trend for « Arts de la Maison » or home decor seems nevertheless to be on the rise. « The foundations for growth are solid. Founded on an evolution in lifestyles which have created a true social phenomenon; the French have become infatuated with decoration.5"

Figure 2 : Comparative evolution of sales on the French market in %

(Source: « Arts de la maison », Précepta, Communiqué, Paris February 2006 and « Arts de la table », Précepta, Communiqué, Paris, October 2006)

1.2. Market segmentation by clientele

Household consumption represents 78% of the market. Consumption by professionals (organizations, hotels and restaurants) only represents 22%. Sales to professionals have had a tendency to increase recently whereas sales to the individual consumer have declined. Since 2004, sales to professionals have increased 3% whereas individual sales have decreased by 1.5%.

4 Units: growth rate by volume. Household purchasing power (right scale) and turnover of household equipment retail businesses (left scale).

5 Les arts de la maison:[a market with a high potential] « un marché au fort potentiel, en plein cœur de l'actualité », Communiqué Paris, 3 February 2006, www.precepta.fr


Figure 3 : Breakdown of the market by clientele

(Source: «Comité des arts de la table», market study of arts de la table in France Synthèse 2007)

Product category Individuals Professionals totalDishware 19,5% 25,5% 20,5%Glassware 13,0% 20,5% 14,5%Tableware 9,0% 18,5% 11,0%Table linen 6,5% 7,5% 7,0%Kitchenware 19,0% 15,0% 18,5%Household appliances 15,0% 1,5% 12,0%Decoration 18,0% 11,5% 16,5%

100% 100% 100%

Table 1 : Breakdown of market categories by clientele


1.3. Breakdown of the market by product category

Dishware represents the biggest category with 20.5% of the market. Tableware comes in second position with 18.5%. Its part in the make-up of product categories for this market has increased by 0.5% since 2004, whereas dishware, glassware and silverware have lost 1%.


Figure 4 : Breakdown of the market by product category


2. Consumer behavior

The « arts de la table » market has evolved under the influence of recent consumer trends.

2.1. Flexibility of meal times

"Dinner time seems to vary each evening, the time being adapted to the individual rather than the individual being adapted to the time. People want to organize their lives according to their own individual rhythms. In 2003, 20% of the population did not eat dinner at a fixed hour (with a variation of at least one hour) whereas this group was only 15% in 1995. This behavior is often found in young people (23% of the 25-34 age group does not have dinner at a fixed hour) whereas it is fairly rare in older people who are 75 years old or more (3%)...6"

2.2. Loss in the importance of the dinner table and development of dinner trays/ TV dinners

"One eats elsewhere than at the dinner table, on a tray, in front of the television, in the living room…the dinner tray or TV dinner has become part of daily life…one household out of two has this kind of meal at least once a week compared to1/3 in 1995…Dinner trays/ TV dinners are more frequent with younger people (68% as opposed to 30% of people over 65), Parisians (36% eat this way at least once a week as opposed to people in rural areas), single people (on the average, twice as many eat dinner tray/ TV dinners each day) and finally, single household families also resort more to this way of eating (75% as opposed to 38% of couples without children)7".

2.3. Evolution of lifestyles

"Nesting» or "slow life" has truly become a sociological phenomenon and is expressed in the French craze for decoration, « arts de la table », textile furnishings and linens, and decorative objects. All market segments are part of this growth. One can see this in the headlines of the “house and garden” magazines and in the exhibitions which are open to the general public8."

6 CREDOC, « Consommation et modes de vie », No 196 septembre 2006

7 CREDOC, Consommation et modes de vie, No 196 septembre 2006

8 Table & Cadeaux, 483, January 2006


2.4. Reasons for purchasing

Xerfi9 identifies three types of purchases: "equipment, renewal and gift purchases. The first motivation depends on the evolution of the family’s household (setting up of the household, marriage, or setting up independent lodging for children who are continuing their studies). According to the socio-economic category of the households, the first equipment purchased is rather utilitarian with middle of the range quality or top market items.

The second reason for purchasing concerns renewal. Either it is a question of completing a set of dinner/kitchenware, or of buying new products which correspond to an evolution in taste. These purchases concern mainly an older clientele interested in a second set of equipment.

Finally, the “arts de la table” products are appropriate as gift items. They can be offered for special events (weddings, housewarming parties etc.), for seasonal holiday events (Christmas, mother’s day etc.) as well as other personal events (birthdays, dinner invitations etc.).

Consequently, the “arts de la table” market has variations which are seasonal (mainly the beginning of September/October and the end of the year holidays). It remains, however, linked to purchasing over longer periods of time which involves various motivations for the purchases (evolution of the household, number of weddings, etc.) and the behavior of French people ( eating habits, wedding gifts etc.)."

2.5. Purchasing behaviors

a. From goods as an investment to goods as a convenience …

Though the causes of the slow-down in sales are economic and cyclical, they seem to be connected to profound changes in the attitudes of the consumers. Purchasing "goods as an investment » has given way to purchasing « goods as a convenience » and « sales of full sets of dinnerware for the long term are tending to be replaced by more regular purchases of smaller items in smaller quantities at more reasonable prices. The loss of regular mealtimes and of their formality has won over the sacred aspect that was once associated with the “arts de la table”. Nevertheless luxury dinnerware is still important; however, its value no longer comes from the intrinsic value of the goods, but in their capacity to create a warm and friendly atmosphere. Other changes in French society have done the rest. The sector concerning wedding gifts, for example, has been seriously affected by the present decrease in the number of ceremonies, the growing tendency to set up a household before any ceremony or simply because of competition from other sectors of consumption such as trips or hifi /video equipment."10

b. … personalized goods at a reasonable price

These behaviors are part of deeper changes in purchasing motivations. If the need for “reassurance”, to take up the concept of R.Rochefort,11 in the messages expected by the consumer is still real, this need has become part of a more rational approach known as “the entrepreneur model”. The consumer-entrepreneur is autonomous and responsible and aims to satisfy both professional and personal needs. This passage from an individual to a person can be understood, in terms of purchasing behavior, by the search for the personalized satisfaction of a need that has become exclusive.

In their behavior consumers have known how to integrate the knowledge and the rationale which they must use in their professional or academic sphere. They especially know how to plan their purchases in order to obtain the best prices or how to optimize organizing for their supplies according to the different sales outlets…Consumers have therefore become consumption specialists who apply elaborate purchasing strategies. They compare and multiply the places where they buy therefore

9 Xerfi, La distribution des arts de la table, code étude : 4-DIS-11, July 2004

10 ibidem

11 R. Rochefort, "Le consommateur entrepreneur", 1997


upsetting the traditional typologies of general consumer behavior. 84 % of those questioned during the survey said that they indeed compare prices when they buy a product. One third of those participating in the survey wait for the sales to buy clothes compared to only 14% in 1993 12". These trends analyzed by the CREDOC in 2000 have recently been confirmed by different studies put forth in « Les Echos » in their issue of 17 September 2007. 13 The awareness of the decrease of their purchasing power is the first concern of French people, just ahead of unemployment. Within this context they are looking for “the right price…encouraging simplicity, searching for balance, looking for meaning and time for one self." “One is no longer dealing with a fixed cost but rather with a reasoning in which it is the consumer who is deciding his own idea of the cost. In fact, one is dealing with a perception of the price which is more and personal, each one becoming free to invest as one chooses to invest.14” “These consumers associate impulsive buying with being reasonable and are careful in the daily management of their budget yet don’t hesitate to spend for their pleasure when it is justified15". A coveted value at a reasonable price.

c. …Purchasing for pleasure, setting the scene, being fashionable

Having analyzed a study done by the CREDOC, Xerfi concludes : "the ‘arts de la table’ are gradually losing their importance as status symbols as households no longer perceive them as such ( showing one’s identity via the style and quality of the set of dinnerware used); “arts de la table” have become linked to moments of consumption. A sign of this evolution is in the fact that the French readily adapt their dinnerware to their menu rather than to their invited guests. Households have therefore progressively put an end to the everyday/reception dichotomy which determined how they used their dinnerware…henceforth the « arts de la table » are approached from three angles of construction/adaptation: the image of oneself, the interior decoration of the house or apartment and the desired atmosphere...nowadays, The “arts de la table” have a tendency to be considered no longer as an investment but as a purchase for pleasure.” As Jean-Claude Kaufman underlines, “the consumer is going to buy in relationship to a moment that he imagines he will be living. It is a purchase for a scenario one has created for oneself, to stage a life event or sequence whether it is practical, financial or luxurious. He is more and more distinguished by his strong emotional and individual investment which is evolutionary by definition... generally speaking, concerning the full range of “arts de la table’ products, most of the buying has progressively moved towards buying of less expensive items over an extended period of time and whose styles evolve with fashionable trends and wishes of households16".

The « Comité des arts de la table » concludes that « as with wine and jewelry, France is going from markets structured by tradition to markets based on desire and impulse. The French are daring to go towards new forms, innovations, and bold materials.17" "Buy cheaper to change more often to keep up with the fashion is the new way of living…18

Traditional Buying Modern Buying

Motivation for buying A need Desire, wish

12 Credoc, "A nouveaux consommateurs, nouvelles stratégies industrielles", June 2000.

13 TNS Worldpanel, Référenseigne, 12e édition; Fêtes de Gondoles, "Value for money, de l'ère du prix à l'ère de la valeur".

14 Agnès Chevalier de Carlin International, in les Échos.

15 Référenseigne, TNS Worldpanel in les Échos.16 Xerfi, La distribution des arts de la table, code étude : 4-DIS-11, July 200417 Comité des arts de la table, étude du marché des arts de la table en France Synthèse 2007

18 Sessi, Les arts de la table en chiffres, édition 2007.


Reason for investment Status Emotional

Nature of the buying action Thought out and decided ahead of time

Spontaneous

Buying frequency Low Regular

Products purchased All decorative household goods Small items, small quantities

Expectations of products Quality guaranteed, long-lasting Originality (design, color) reasonable price

Importance of the brand strong weak

Table 2 : Compared characteristics of purchasing “arts de la table”.

(Source: Xerfi, La distribution des arts de la table, code étude : 4-DIS-11, July 2004)

3. Distribution

3.1. A fast evolving area under strong competitive pressure

a. An attractive market where the new participants are numerous and the distribution is still atomized…

"The distribution of « arts de la table » is totally heterogeneous. Next to the many independent shops, big shopping centers are evolving. There are department stores, chain stores specialized in household goods and decoration, brand stores for young households like Ikea or Fly as well as makers of porcelain, glassware, or tableware. These different actors of distribution for “arts de la table” meet different consumer needs (equipment, wedding gifts, impulsive buying, etc.)19".

On a market which has come to maturity, this diversity of distribution channels is the result of a recent evolution. The sector « arts de la table » has constituted an important element of diversification for brand stores that had first developed in the sector of decoration. One can cite for example the brand stores for young households (Ikea, Habitat, Fly) and furniture stores in general.

The sector « arts de la table » is extremely atomized. Independent businesses (not connected to any group or other form of business) still represent 80% of all businesses. The franchise (Geneviève Lethu et le Torchon à Carreaux) is one way of developing which has hardly been used as yet, compared to household goods and decor where more than half of the brand stores have developed a franchise.

Many investors are interested in the distribution networks of household goods and decor. In 2005, Capzanine et CDC Entreprises became part of the capital of Bois et Chiffons. Maison du monde was bought in MBO by Barclays Private Equity et Natexis Industry. The Vizille bank(CIC) invested in the capital of Comptoir de Famille. (Précepta, Communiqué Paris 3 February 2006).

New shops and brand stores are setting up. Many of them clearly wish to develop through a franchise.

Sales are also developing thanks to distribution channels which are not characterized by any direct link to “arts de la table”: gardening (Truffaut), textiles (Bouchara). This is without counting the decor brands created by the distributors of ready-to-wear clothes (Zara Home, subsidiary of the group Inditex) or the fashion designers (Armani Casa).

19 Xerfi, La distribution des arts de la table, code étude : 4-DIS-11, Juillet 2004


Finally, even if it is still only a small part of the sales, e-commerce is also developing on the “arts de la table” market. Its potential is important especially among young people. There again, operators are numerous and their profile varied: traditional mail-order companies (La Redoute especially), click and mortar, some specialized, some not, in arts de la table (Ikea, La Vaissellerie…), manufacturers (Bernardaud, La Maison de la Porcelaine, Villeroy & Bosch…). Add to these, new categories of operators and in particular : the pure players sites constructed around household goods and decor (decoclico.fr, univers-maison.com…) giving more confidential brand offers, plus private sales sites which are so successful these days and with whom big brands like Guy Degrenne et Villeroy & Bosch are already working.20"

"Manufacturers of “arts de la table” (Haviland, Guy Degrenne, etc.) are very present in the sector as well, mainly via their own exclusive shops or boutiques. True showcases for their product ranges, this allows them to keep control of the marketing of their products and therefore of their image. At their side, one can notice the presence of luxury groups such as LVMH (via an agreement between Christian Delacroix and Christofle) and Hermès. As with the closely related jewelry market, this sector’s market has been forced to adapt itself quickly to marketing imperatives which has resulted in the development of luxury brands and labels whose credibility for « arts de la table » is based more on the prestige associated with the name than on a traditional savoir-faire21".

b. … pressure on prices is very high

" …in an economic context marked by a weakening of the purchasing power … favorable to the competition of discount brands, discount stores (Gifi, Foir'fouille), and even of supermarkets (hypermarkets or general stores) … the pricing policy of big brand stores show their willingness to adapt to the slowing down of the market : a decrease of 5 % at Ikea in September 2005, , extension of the range for items at reduced prices at Résonnances…a favorable context for the creation of brands positioned in the low market range … and foreign concepts such as Butlers (a German brand for decorative items at low prices) which could eventually make their way to the French market22." "Most specialists of home decor have chosen a policy of sophistication – refine the concept and target the clientele – to increase the value perceived by the client, without regularly revising the prices…with a reinforced communication around the exclusivity of the collections, the savoir-faire of the designers and the stylists23”.

c. …and the threat of substitute products is real

In the “arts de la table” sector and more particularly concerning the salt and pepper mill products, the choices made by the manufacturers of salt and pepper in terms of packaging constitute a real threat. In 2005, Ducros, for example, introduced a range of 9 innovated and patented mills in which could be distributed coarse black pepper, gourmet pepper, spiced white pepper, mixed peppercorns, gourmet sea salt from Guérande, gourmet Mediterranean salt, garlic selection, a mix for steak and a mix for salads (with peppers). This innovation comes in on the only dynamic segment of the peppers which is that of the mills (25% of sales). The new transparent mill, without a lid, is the first on the market to have the mechanism on the bottom, like the traditional mills. The “turn/close” system to close it, and which preserves the savor of the spices, is also unique24.

Mills 25,20%

Metal boxes 0,30%

20 Precepta, Communiqué Paris le 2 Octobre 2006.21 Xerfi, La distribution des arts de la table, code étude : 4-DIS-11, Juillet 2004

22 Precepta, Communiqué, Paris 3 Février 2006.

23 Precepta, Communiqué, Paris 3 Février 2006.24 Process Juin 2005 No 1216


Packets 2,10%

Plastic boxes big size 32,10%

Plastic boxes small size 5,70%

Glass bottle big size 6,20%

Glass bottle small size 28,40%

Table 3 : Breakdown of pepper sales in terms of packaging

(Source Panel Distributeur IRI, CAM April 2005 in Process June 2005 No 1216)

3.2. Breakdown of sales by distribution channels

Figure 5 : Breakdown of sales by distribution channels

(Source: « comité des arts de la table », Structural study of the arts de la table market in France, Synthèse 2007)


Figure 6 : Product segmentation created by distribution networks

(Source : « Comité des arts de la table » in « les Échos », Monday 24 December 200725)

Figure 7 : Evolution of retail sales by distribution network 2004-2006

(Source: « Comité des arts de la table », Structural study of the arts de la table market in France, Synthèse 2007)

3.3. Evolving rules of the competitive game

Changes in the demand have modified all of the parameters of the market and consequently the nature of the competitive edge. Until now, competition was essentially structural, that is to say, based on the legitimacy of the savoir-faire of craftsmanship first (the manufacturers of porcelain in Limoges, of crystal in Sèvres, etc.) and secondly, on marketing with the associated services of well-known brands (Baccara, Lalique, etc.). It is now based on the price and the aptitude for creativity of the operators (original items, attractive packaging, and creative displays on the shelves or display stands).

25 Caption: preparation includes household appliances and kitchenware ; the dinner table includes dishware, glassware, tableware and table linen.


This new way of thinking which is oriented towards the demand, is challenging for the traditional operators in this sector (especially the top market manufacturers, independent retailers, and department stores). They are the first to suffer from the decline in the captive market of wedding gifts, while simultaneously having to face competition from recent actors namely the brand stores specialized in « arts de la table », home decor and household goods. The other losers are the big shopping centers and hypermarkets whose offer of low market range products has been done at the expense of the attractiveness of the product (whether it be their creative aspect or in their display). In other words, only those brands which have been created to parallel these changes have been able to survive thanks to their ability to align themselves with the new expectations of the clientele.”

"The symbol of this success is the brand specialized in the “arts de la table”, Geneviève Lethu. Created in 1972, it is constantly looking to be with the fashion trends. It basically offers two collections, however it also proposes one or two themes per month for which there are specifically organized activities. 1 500 novelties are launched each year while references are progressively extended to connected areas such as bed linens, bath towels or decor. Creating a global environment or universe, so to speak, (which responds to the French interest in the art of living) also explains the drive and buoyancy of brands of home decor and household goods (Ikea, Habitat, Casa, Gifi, etc.). These big specialized stores have won market shares ever since the year 2000. Their offer of a wide range which is modern at attractive prices has allowed them to meet the needs for young households as well as favor impulsive buying.

The traditional circuits are therefore challenged to modernize their image to appeal to new generations. This is particularly trying for independent retailers who are confronted with a total transformation of their profession. The deconsecrating of the « arts de la table » has in fact upset the traditional rules not only of marketing but also of management. Selecting quality products and giving advice are no longer enough. At the same time, however, the modifications in what the boutique has to offer must be done with care in order to keep loyal customers. The greater emphasis being put on the enhancement of the product (namely via an organized activity or promotional event) plus the new demands concerning supplies, create important handicaps for independent retailers up who are up against the groups. Consequently, more and more of them are finding support in re-grouping which gives them the means (beyond that of a known brand when they have one) to adapt their offer (extending to home decor, to the kitchen, catalogues made available, favorable conditions of payment, product enhancement events or promotion kits, etc.), and to adapt their management (via delivery of small range products in small quantities at reasonable prices)26".

Strong competitive tensions are created by the sheer number and diversity of the distributors, the abundance of what is offered, and the distributors having to re-shape and re-position their production while making consumers want what is offered though continuous innovation and trying to make « the objective characteristics of the product coincide with its symbolic attributes » « at a good price ». As a result, these competitive tensions create a deflationary trend since the price is such a strong ingredient in the product appeal.

"The « arts de la table » is a market which has reached maturity. Consequently, the growth for each of the circuits involved will not come so much from the market itself as it will from the redistribution of the competitive game cards, so to speak. The progressive structuring of the specialized distribution will have as an effect the decrease, which has already begun, of the number of independent retailers in favor of groups and franchised chain stores. This greater concentration of specialists will be the basis for the continuing growth of their turnover27"

3.4. The competitive position of the main distributors

The abundance of what is offered, the deconsecrating of « arts de la table », and the big diversity of the distribution circuits may make the product commonplace thereby making its positioning difficult, « the risk being to let the market lose its value and the product lose its quality. If “arts” disappear than all that is left is “table”.28". In this evolving market one can nevertheless propose the following matrix positioning of the different distributors of “arts de la table”.

26 Xerfi, La distribution des arts de la table, code étude : 4-DIS-11, July 2004

27Xerfi, La distribution des arts de la table, code étude : 4-DIS-11, July 2004


Figure 8 : Strategic groups in distribution of arts de la table

(Source: completed by the author based on a study by Xerfi)

3.5. Impact on distribution of the reasoning behind modern purchasing.

The evolution of the demand imposes a number of constraints on distributors concerning management which correspond to the expectations they will have of the manufacturers. Table 4 summarizes these constraints.

28 Comité des arts de la table, Structural study of the market of arts de la table in France, Synthèse 2007.


Communication

needs

Important

(attract the consumer)

Visibility on Shelves very important (create desire)

Store offer It can be small if it is original and often renewed

Fashion products at reasonable prices

Often renewed

Customer order Take away

Type of Management Strong rotation of stocks

More numerous references

Follow up of small product ranges

Table 4 : Management constraints coming from the reasoning behind modern purchasing

(Source: Xerfi, distribution of arts de la table, code étude : 4-DIS-11, July 2004)

4. Internationalization of the market and the growth of imports

4.1. Evolution of exchanges

The deflationary trend noted in the preceding paragraphs has been made worse by the increasing penetration of the low market and middle market ranges of imported products which are innovative, quality products at a low price and which represent a heavy trend on the market. There is still a surplus in the international exchange but the trade balance has decreased by half in two years due to the push of imports and stands at only 200 million euros in 2006. The exportation has been stable from 2004 to 2006 (2119 million euros), while the importation has increased by 10% (1903 million euros).

Evolution of exchange by product category ( in millions of euros)

Exportations Importations Balance Rate of sales

coverage 2006 2006/2004 2006 2006/2004 2004 2006 2004 2006Dishware 388 -3% 563 11% -110 -175 78% 69%Glassware 623 -10% 178 2% 517 445 395% 350%Silverware 94 3% 127 7% -28 -33 76% 74%Table linen 35 21% 76 6% -43 -41 40% 46%Kitchenware 414 17% 292 12% 94 122 136% 142%Small appliances 424 4% 480 15% -10 -56 98% 88%Decoration 141 -6% 187 5% -28 -46 84% 75%Total 2119 0% 1903 10% 392 216 123% 111%

Table 5 : Evolution of exchange by product category (in millions of euros).

(Source: Comité des arts de la table, Structural study of the arts de la table in France, Synthèse 2007)


4.2. The main French partners

Whereas Europe is still the main partner as much in what concerns exportations as importations, the weight of Asia concerning importations is still growing. The imports from this area represented 33% of all the importations in 2004, compared with 42% in 2006 (802 million).

Evolution of exchange by country

Exportations Importations Balance Rate of sales coverage 2006 2006/2004 2006 2006/2004 2006 2004 2006 2004European Union 1132 1% 897 -6% 235 167 126% 118%America 260 -4% 31 -9% 229 238 839% 800%Asia 358 -10% 802 35% -444 -199 45% 67%Other European countries 243 2% 119 3% 124 123 204% 207%Oceania and others 126 31% 54 64% 72 63 233% 291%Total 2119 0% 1903 10% 216 392 111% 123%

Table 6 : Evolution of exchange by country

(Source: Comité des arts de la table, Structural study of the arts de la table in France, Synthèse 2007)

The progression of the imports from China is particularly felt in the sector of household goods.

In % 1993 2000 2003 2005

Clothing, leather 45,6 51,7 57,9 72,3

Household equipment 18,2 25,2 39 38,5

Electric or electronic appliances 10,4 26,6 23,8 27,3

Textile 13,9 21,9 25,7 27,3

Chemistry, rubber, plastic 6 8,5 12 11,4

Metal 18,8 20,7 20,6 17,2

Electronic components 11,5 25,6 26,3 34,9

Total of manufacturing industry 9,4 15,1 15,8 16,9

Table 7 : Progression of importations from China in the sector of household goods.

(Source: Douanes, Sessi-EAE in CCPI Edition 2006)


In millions of Euros 2000 2005 Evolution en % 2000-2005Asia without Japan 27418 38030 39China 10991 20966 91South Korea 2393 3613 51Singapore 2554 3148 23Taiwan 2857 2404 -16India 1214 1765 45Malaysia 1819 1257 -31Eastern Europe 7038 13558 71Poland 1678 3530 110Czech Republic 1242 3111 150Hungary 1939 2285 18Romania 911 1596 75North Africa 5628 6219 11Tunisia 1780 2489 40Morocco 1934 1839 -5Latin America and South America

2872 3158 10

Brazil 1420 1586 12Others 1025 1568 53Total 44 881 62539 39

Table 8 : Imports by country of origin

(Source: Customs, in CCPI Edition 2006)

5. The state of the industry

5.1. A highly threatened competitiveness

Competitiveness is highly threatened in the segments of low market and middle market product ranges. Margins have been eroded, and profitability is low.

"The profit margin and the rate of investment show that there are considerable problems in all of the « arts de la table » industries. Textile alone has ratios close to that of consumer goods as a whole. The sector is faced with several difficulties: production suffers from a lack of competitiveness due to the importance given to the finishing done by hand for most of the products. This entails substantial labor costs which take off a large part of the added value. To this one can add a lack of buoyancy in the market of « arts de la table » due to the slow down in the spending of households and to a slowing down of foreign demand. Moreover, a slow down in the price increase because of the rise in product range of imported products which are creative and cheap, reinforces the difficulties of manufacturers whose margins are negative and whose capacities for self-financing are deteriorating.29 »

5.2. New Strategies

New strategies are necessary because of the pressures on distribution which are linked to the evolution of the demand, (buy more cheaply in order to change more often to follow the latest trend), and the competitive pressures linked to an internationalized offer. The evolution of the expectations of distribution is illustrated in Table 9.

29 Sessi, Les arts de la table en chiffres, édition 2007


"Traditional" Purchasing "Modern" Purchasing

Communication

needs

Not very important Important

(attract the consumer)

Visibility on shelves Secondary Very important

Store offer Largest possible range

complete

Can be small range if it is original and often renewed

Very Cost effective (product), quality/service (store)

Reasonable prices ranges, regular product renewal

Customer order On order accepted Take away

Type of management

Bigger managing costs Stronger stock rotation references more numerous, follow up of small product ranges

Table 9 : Evolution of the expectations of distribution

(Source: Xerfi, Distribution of arts de la table, code étude : 4-DIS-11, July 2004)

5.3. Restructuring of the offer

Faced with the pressures of distribution needs, manufacturers have looked to diversify their product ranges. They create less expensive items which are more “trendy”, with fewer added values, to meet the tastes of the clientele.

a. Creative, reactive, flexible

Confronted with a demand which is more and more sensitive to fashion and innovation, manufacturers must be creative in order to offer products which will be frequently renewed and will have shorter and shorter life spans on the market. Because of these constraints they must become highly reactive and highly flexible in their production methods which replace a stock which is very quickly threatened with obsolescence by a demand which is difficult to foresee.

b. A reasonable, competitive price

This constraint is not to be neglected; the part of production concerning hand finished work is still high and involves high labor costs. Businesses which deal with middle or low product ranges must often adopt strategies which rely on outsourcing.

c. The top market segment as security

The top market segment, which is still backed up by the traditional values of French “arts de la table” (creation, tradition, and brand), is still secure for French manufacturers on both the domestic market and foreign markets which are sensitive to its reputation. Creation, tradition and brand make up the technological barriers for this segment which seem to make the difference in what concerns the penetration of the competition coming from the developing countries.

5.4. A vulnerable industry

These challenges are difficult to face by manufacturers who have now little room for financial maneuvering and who have traditionally done little to invest in production, with strong capitalization of


a labor force and little inclination towards automation. The competitive edge coming from their know-how having been eroded by the evolution of the demand, it is the entire industry which is threatened. The relocation of production in countries having a cheap labor force is often a strategic choice which they are forced to make. However, this is a competitive illusion if these gains in productivity do not include an investment in creative and innovative resources. This does not seem to be the case. The small part of resources which is applied to the new context stands out in the compared analysis of the professional profiles of the sector, where the jobs which contribute strongly to the competitive edge of the products (technicians and engineers) are few compared to the average in the consumer goods industries.

Figure 9 : Job positions by social/professional classification in the “arts de la table” industry

(Source: Sessi, Les arts de la table en chiffre, édition 2007)


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