Iconic cooker company looks to social networking websites and greener models to cope with a ‘demanding year’, writes Jonathan Sibun
If you own an Aga, consider yourself a target. There are 300,000 of you out there – Jilly Cooper and David Cameron included – and Aga chief executive William McGrath is after you.
William McGrath has warned of a ‘demanding year’ ahead
The former banker’s aim of creating an “Aga-family”, with members across the country, will go live this week as the company launches a £3.5m marketing drive to spark life into the iconic slow cooker brand.
The launch will kick off a crunch two-week period, culminating in Aga Foodservice Group’s full-year results, with the planned appointment of a new company chairman and the disclosure of an estimated £140m cash return to shareholders.
With concerns over an economic slowdown growing, shareholders will be looking to Aga – which also owns brands including Rangemaster, Fired Earth, Divertimenti, Grange and La Cornue – as much for an indication of how it plans to ride out the storm as for confirmation of the size of the cash windfall.
The concern over the marketing drive – which will feature celebrities including musician Alex James and Sophie Conran, daughter of designer and restaurateur Terence – is that Aga is acting from a position of weakness.
The consumer sector is under pressure and Aga’s management will be hoping its slow cookers are seen as household necessities rather than discretionary treats.
McGrath said in January that Aga sales had declined marginally in 2007 and warned of a “demanding year” ahead.
The company has reason for optimism – the price of an Aga ranges from £1,500 to £10,000 and has traditionally been the preserve of the middle and upper classes, groups historically less exposed to an economic slowdown. Aga’s efforts to position the brand as a luxury item should also help maintain sales.
Shareholders will nevertheless be expecting Aga, which will reveal pre-tax profits of more than £26m, to set out a plan to drive growth. That strategy will revolve around the marketing drive behind Aga, as well as continuing the stronger growth of the company’s Rangemaster cookers and focusing on international expansion.
The “Love Aga” campaign, the company’s biggest ever marketing drive, aims to remind owners how important a part of the home the cookers are and to persuade new customers of the desirability of joining the “family”.
The company has launched a website – thisismyaga.co.uk – to act as a social networking tool and cheap advertising vehicle, where owners will post photos of their cookers and be able to see a map of where Aga owners live around the UK.
A “Love Aga” book to coincide with the company’s 300th anniversary next year and a range of accessories is also planned.
It might sound corny but the company is right to leverage the popularity of the brand with its core customers, while at the same time focusing on expanding elsewhere. Management are well aware that Agas are durable goods and growth in the UK is limited, hence their attempts to grow the Rangemaster range and focus on overseas expansion.
Aga’s decision to sell off its Foodservice arm in October last year in a £260m deal increased its focus on the consumer sector, a move analysts welcomed but which also prompted warnings of possible challenges to follow.
Credit Suisse analysts said of Aga at the time: “We continue to question its longer-term fundamentals given 62 per cent and 20 per cent [of sales] are exposed to the UK and US consumer respectively.”
The move to expand overseas, which already accounts for 20 per cent of the company’s sales, should help counter those concerns.
McGrath is targeting 50 per cent of revenues to come from outside the UK and growth in France, Ireland and the US suggests those targets are realistic. Rangemaster, which enjoyed a record year in 2007 with sales increasing 10 per cent to more than 75,000, saw growth in France of more than 30 per cent.
Aga has since increased capacity for the range’s manufacture to 100,000 a year.
Select innovation has also been key as Aga struggles to drive growth, while also retaining its traditional image.
The electric Aga, launched three years ago, now accounts for 40 per cent of the brand’s sales and allows for a “greener” option, while a range of 14 colours including pink and chocolate brown has offered even greater choice.
The company is also working on ways to use the cooker as a generator in conjunction with wind turbines or solar panels.
The company’s share price performance in recent months – it has fallen 25 per cent since September, giving Aga a market value of £366m – suggests the manufacturer still has some convincing to do.
One figure likely to be watching with a keen eye is Edmund Truell, the founder of Duke Street Capital and Pension Corporation Investments. Truell has a 22 per cent stake in Aga, which has a pension scheme worth at least £770m, and his presence will have given the share price some support.
Shareholders will be expecting McGrath to give further support when he announces his growth strategy a week on Friday.