future of lead crystal consumer products in the united states market timothy maher icf meeting –...

FUTURE of LEAD CRYSTAL FUTURE of LEAD CRYSTAL CONSUMER PRODUCTS IN THE CONSUMER PRODUCTS IN THE

UNITED STATES MARKETUNITED STATES MARKET

Timothy MaherTimothy Maher

ICF Meeting – SienaICF Meeting – Siena

November 5, 2007November 5, 2007

INTRODUCTIONINTRODUCTION

Challenging TimesChallenging Times

Changing ConsumerChanging Consumer

Retail “Revolution”Retail “Revolution”

Shrinking Revenues & ProfitsShrinking Revenues & Profits

Consolidations & TakeoversConsolidations & Takeovers

Consumers Have Different ValuesConsumers Have Different Values

Post war 62-79Post war 62-79

Leading edge Leading edge boomer 53-61boomer 53-61

Trailing edge Trailing edge Boomer 42-52Boomer 42-52

Generation X 31-41Generation X 31-41

N Generation 23-30N Generation 23-30

Distribution ChannelsDistribution Channels

Department Stores*Department Stores*:: Macy’s (Federated merger with May Co.)Macy’s (Federated merger with May Co.) J. C. Penney (Moving “Up Market”)J. C. Penney (Moving “Up Market”) Dillard’sDillard’s Belk StoresBelk Stores Bon-TonBon-Ton Gottschalk’s (Eliminating “Home”)Gottschalk’s (Eliminating “Home”) 1984 = 1 National & 38 Regional Department Stores1984 = 1 National & 38 Regional Department Stores Today = 2 National & 4 Regional Dept. StoresToday = 2 National & 4 Regional Dept. Stores **Excluding SearsExcluding Sears

Department Store Retail Sales Department Store Retail Sales 1993-2006 ($ Billions)1993-2006 ($ Billions)

$0

$50

$100

$150

$200

$250

1993 1995 1997 1999 2001 2003 2005

USA Retail Sales*USA Retail Sales**Excluding Motor Vehicles & Parts*Excluding Motor Vehicles & Parts

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

U.S. Department Store Death SpiralU.S. Department Store Death Spiral (Share of Non-Automotive Retail Sales)(Share of Non-Automotive Retail Sales)

0%

2%

4%

6%

8%

10%

12%

14%

1993 1998 2003 2008

U.S. Depar tmentStor e Sal es

Distribution ChannelsDistribution Channels

““Independent” Tabletop Stores:Independent” Tabletop Stores:

China & CrystalChina & Crystal

JewelryJewelry

GourmetGourmet

Interior Design/FurnitureInterior Design/Furniture

GiftGift

1984 = 3,500 – 5,0001984 = 3,500 – 5,000

Today = 250 – 350 “Tabletop” IndependentsToday = 250 – 350 “Tabletop” Independents

Distribution ChannelsDistribution Channels

““Specialty” Retailers:Specialty” Retailers:

Bed Bath & BeyondBed Bath & Beyond

Crate & BarrelCrate & Barrel

Linen’s & ThingsLinen’s & Things

Pottery BarnPottery Barn

Williams SonomaWilliams Sonoma

1984 = Few Regional Stores or Non-existent1984 = Few Regional Stores or Non-existent

Today = Thousands of StoresToday = Thousands of Stores

USA Annual E-Commerce Retail Sales*USA Annual E-Commerce Retail Sales*Billions of DollarsBillions of Dollars

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

1998 2000 2002 2004 2006 2008

E- Commerce

E- Commerce will account for 10% of U.S Retail Sales by 2010

*Excluding Travel

Internet Consumers & RetailersInternet Consumers & Retailers

85% of “High Income” Consumers Buy Products 85% of “High Income” Consumers Buy Products on The Internet.on The Internet.22% of All Regular Retail Store Sales Are 22% of All Regular Retail Store Sales Are “Influenced” By Internet Shopping.“Influenced” By Internet Shopping.46% of “Online” Customers Also Purchase 46% of “Online” Customers Also Purchase Products At Regular Retail Stores.Products At Regular Retail Stores.““Multi-Channel” Marketers Control 75% of Multi-Channel” Marketers Control 75% of Internet Sales.Internet Sales.Internet Sales (excluding travel) Are Growing at Internet Sales (excluding travel) Are Growing at More Than 25% per Year.More Than 25% per Year.

Crystal IndustryCrystal Industry

Total Lead Crystal SalesTotal Lead Crystal Sales Stemware & Giftware SalesStemware & Giftware Sales Imports By Country Imports By Country

Total Crystal & Glass ImportsTotal Crystal & Glass Imports

““Crystal” Retail Sales By ChannelCrystal” Retail Sales By Channel

Future DirectionFuture Direction

Market Size :Market Size : U.S. Crystal Imports 1985-2005 U.S. Crystal Imports 1985-2005

(Millions of Dollars) (Millions of Dollars)

20 YR. Average Annual Growth: 2.4% Compounded20 YR. Average Annual Growth: 2.4% Compounded

104 92 98134

100

88

196247

275

205

0

50

100

150

200250

300

350

400

450

1985 1990 1995 2000 2005

Gif twar eStemwar e

288

345

409

305

192

U.S. Crystal Imports U.S. Crystal Imports Lead Crystal Imports have Declined Lead Crystal Imports have Declined 41%41% Since 1999 Since 1999

(Millions of $)(Millions of $)

142 134 101 106 104 108 100 81

205214214226232

275287

0

50

100

150

200

250

300

350

400

450

500

1999 2000 2001 2002 2003 2004 2005 2006

Gif t war eSt emwar e

429409

333 332 318 322 305

% Change +13% -5% -18% N/C -4% +2% -5% -17%

173

254

Crystal Imports By Product Type Crystal Imports By Product Type Stemware vs. Giftware 1985-2005Stemware vs. Giftware 1985-2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

1985 1990 1995 2000 2005 2006

Gif twareStemware

54

46

68

72

6767

3228

33 33

68

32

Crystal Imports By Exporting Region Crystal Imports By Exporting Region (1985 – 2005)(1985 – 2005)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Wester n Eur ope 86% 82% 80% 75% 72%

Easter n Eur ope 6% 12% 17% 22% 22%

Far East 5% 5% 2% 2% 5%

Other 3% 1% 1% 1% 1%

1985 1990 1995 2000 2005

Crystal & Glass Imports - StemwareCrystal & Glass Imports - Stemware1995-2005 (Millions of Dollars)1995-2005 (Millions of Dollars)

020406080

100120140160180200

1995 1997 1999 2001 2003 2005

CrystalGl ass

10 YRS: Lead Crystal Stemware Increased from $98M to $100M

Glass Stemware Increased from $80M to $178M

Crystal & Glass Imports – Giftware Crystal & Glass Imports – Giftware 1995-2005 (Millions of Dollars)1995-2005 (Millions of Dollars)

0

100

200

300

400

500

600

1995 1997 1999 2001 2003 2005

CrystalGl ass

10 YRS: Crystal Giftware Decreased from $247M to $205M

Glass Giftware Increased from $244M to $356M

2000 - 2006 Crystal Retail Sales 2000 - 2006 Crystal Retail Sales

0

50

100

150

200

250

300

350

400

450

2000 2002 2004 2006

Depar tmentStores

Spec ial tyStores(Category &Independent)Catal ogs(Mail / Internet)

Other

$762 $725 $711 $678 $665 $645

Note: HFN Defines Crystal as “High Quality Glass” (Not Limited to Lead Crystal)

(Millions of Dollars)

$667

INDUSTRY “FUTURE” DIRECTIONINDUSTRY “FUTURE” DIRECTION

IDENTIFY TODAY’S CONSUMER IDENTIFY TODAY’S CONSUMER AND REACH THEM WHERE & AND REACH THEM WHERE & WHEN THEY SHOP.WHEN THEY SHOP.Crystal Is a “LIFE ENHANSING” Crystal Is a “LIFE ENHANSING” Product & Must Be Sold As SuchProduct & Must Be Sold As Such..Design Uniqueness & QualityDesign Uniqueness & Quality Are Strategic Imperatives.Are Strategic Imperatives.Diverse Distribution Channels Are Diverse Distribution Channels Are RequiredRequired To Reach Today’s To Reach Today’s Consumer.Consumer.““BRAND BUILDING” IS ESSENTIAL !BRAND BUILDING” IS ESSENTIAL !