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 !