Michel de Guilhermier's Blog

Aston Martin : the Potential of a Very Exclusive Brand, Unlocked by Great Management !

I recently came across the story of Aston Martin, and I find it absolutely fascinating. As almost everyone I guess, the brand has to me a close-to-iconic status, but the business case itself is also very interesting !

Aston Martin, which was founded in 1913, changed hands many times, almost as often as it went into bankrupcy and as a matter of fact has hardly ever made any money in its history ! It was profitable last year but that was the 1st time in 40 years !

Despite these financial struggles, Aston Martin's strong brand and very unique positioning, at the crossroad between performance, luxury, design and somewhat of an inimitable "british class", have always kept the company afloat with passionate and providential white knights.

When a Porsche is a mass-produced car finely-tuned to German engineering perfection, an Aston is a hand-built sports car with bucket loads of style, attention to details, presence, character and even mystique, without mentioning the addictive soundtrack !

Beauty, power and soul is the mantra of the brand. On top of that, there's a unique exclusivity status : over its 94 years history, Aston Martin has produced a total of 30,000 cars only, which is more or less what Toyota or General Motors manufacture on average per day !

Most interesting (for the purpose of this post) is the last 10 years period which shows what a seasoned and creative management can build up out of a languishing but intrinsically strong brand.

In the early 80s, when Ford acquired the company, and as amazing as it may now look, only a few dozens cars were built by Aston Martin in a given year ! In 2006, over 7,000 cars were sold and the company is now aiming at 10,000 within the next 3 years. Aston Martin, which once again changed hands about a month ago (after 20 years of ownership Ford divested the company to a group of kuweitis investors led by britishman David Richard, keeping a small minority stake), is now in solid shape.

Sure, the continuing increase of millionaires around the world paves the way to the brand, but still, it could have collapsed once again if the right things had not been well executed.

So, this is what it took to Aston Martin to increase sales 100fold over the last 20 years :

- Great New Product. First and foremost, and as always, it's the product which first matters. After several, say controversial, unsuccessful models, Aston Martin got out of trouble in the 90s thanks to the launch of the famous DB7 (right photo), which has been the best selling model in Aston Martin's history with over 10,000 units sold in a decade. In 2004 the DB9 succeeded to the DB7 and now enjoys a even greater success with over 3000 cars sold every year. Both the DB7 and DB9 couldn't have been developed without the powerful financial backing from mother company Ford.

- Extended Product Range to Lower Segments and Wider Markets. The DB9 Coupé, successor to the DB7 Coupé, was the entry point in Aston Martin's product range, but what an entry point : over €150K ! This is a level which is extremely exclusive and as a matter of fact limits sales. Consequently, and once again thanks to Ford's financial backing, company developed a new model priced in the more accessible €100K area, the V8 Vantage, also dubbed Baby Aston, coming on Porsche's turf. The Vantage, which was introduced in late 2005, is a total success, making no compromise on Aston Martin's core values and intrinsic exclusivity, but for the price tag. Very recently company introduced a roadster version of the Vantage (photo right), that some considers to be the best Aston in a long time. Company estimates they should be able to sell between 5 and 6,000 V8 Vantage a year, with 50/50 Coupé/Roadster split.

- Wider Distribution. Ulrich Bez, a seasoned car industry executive who once was head of product development at Porsche and who took the top job at Aston Martin in 2000, also considerably increased the brand distribution network with now around 130 dealerships worldwide vs a few dozens only in the mid 90s. As for France, let's notice there's only one single exclusive dealer (with a showroom Avenue Franklin D. Roosevelt in Paris and another branch in the Riviera). Aston Martin is extremely demanding for its dealers, requiring a specific and expensive store layout and furbishment, with white marble as an example...

- Modern Production. In 2003 Aston Martin inaugurated a brand new production facility in Gaydon, UK, for the 1st time built up from scratch to its own requirements. In contrast, the historical facility in Newport Pagnell, which still produces the very exclusive and expensive Vanquish (due to be replaced next september by Daniel Craig's DBS in Casino Royale), looks more like an old-fashioned workshop than a decent modern automotive plant. Engines are developed and produced in Koln, Germany, in another modern plant. As a consequence, product quality is now better than ever, though cars have always been hand-built, which is one of the key characteristics of the brand.

All told, management has tremendously "modernized" the company in all aspects, product range, manufacturing and distribution, without compromising on the core values of the brand and its very exclusivity.

A brand with almost a 100 year history and such a pedigree can really be a gem. But that's no easy task, congratulations to the mastermind of the revival, CEO Ulrich Bez, and it's also by no mean cheap ! Ford has invested hundreds of millions of dollars to put Aston Martin back on track, with the result that the brand is now more solid than it has ever been in its 94 years history !

All told, with American money, German CEO Ulrich Bez has transformed this once struggling and hazardly managed British producer of a handful of old-fashioned cars a year into an acclaimed maker of ultraluxury sports cars passionately desired by some lucky and stylish ones ! Bez has capitalized on the exclusive and genuinely unique image of Aston Martin to create a money-making company, and as history has shown, that was a real challenge.

A great business case so far, though the road ahead, without the financial backing of Ford, still remains a bumpy and difficult one.  Sure, Aston Martin was profitable last year, but it now has to evolve into a consistently profitable car business over the years and the long term, and that's no easy task and no given. Most probably the brand will prosper in the short term, thanks to the new models and investments done or started during the Ford era, but when the current line fades up in the distant future, the new shareholders will have to put big investments again. And we just hope that history won't repeat again...

If one looks at the worldwide sports and luxury car market, there's only one other brand which remains independent, it's Porsche, but it's 15 times bigger than Aston Martin in terms of unit sales (above 100,000 this year) and has consistently been profitable since the postwar era. All the others (Ferrari, Maserati, Lamborghini, Bentley, etc) are now owned by big guys such as Fiat (Ferrari and Maserati) or Volkswagen-Audi (Lamborghini and Bentley). Though an iconic brand, the Aston Martin long term model is yet to be proven, business-wise. Over the years, Aston Martin has been run by over-optimist passionate guys under whom it eventually went bankrupt many times...

One could use about Aston Martin the same joke Guy Kawasaki used in his brilliant speech about the art of the start : one of the reason I believe in God is because there's no other explanation for Apple's continuous survival !". Replace Apple, a 30 year-old company, by Aston Martin, almost a century old which several times went bust or on the very verge of bankrupcy, and you get something even more true, don't you ?

In a side effort to exploit and strengthen the potential and exclusivity of the brand, Aston Martin has recently teamed up with famous british fashion designer Amanda Wakeley to create the "Amanda Wakeley for Aston Martin" clothes collection which will be available sometimes this year. Great and interesting co-branding initiative between 2 brands which both stand for style, luxury, superb craftsmanship and use of top quality materials. Beyond this collection, Amanda Wakeley today acts as an ambassador of the brand.

A key quote from Ulrich Bez : "in 5 years we will be the most successful prestige brand in the world".

Oh, by the way, I sent an email to Aston Martin last saturday, asking some details about a particular point, and you know what, I got an answer this monday morning as early as 8:30AM UK time. Great reactive customer service !

Earnings Season : Impressive Apple. The 3 Pillars of Apple's Profitability !

Apple yesterday made me happy and proud to be an Apple fan, both as a consumer and as an investor ! Coincidentally, I was during they day wearing black my Apple-branded sweat-shirt !

They yesterday evening reported their FY07 Q2 earnings and that was mind-blowing : net margin now stands at an amazing 15% of sales ($770M out of $5.26bn sales).

Top line growth is still very solid with a good 21% ! iPods and other music-related sales represented 44% of sales, Apple was very right to delete the "Computer" mention from its original name "Apple Computer Inc".

Back in november '06, I reiterated my $100 target within 6 months, so here we are now : in after hours Apple stock jumped to $102, increasing the market cap to $90bn.

Simply said, the Apple model is a gorgeous one ! By providing truly unique, differentiated, beautiful, user-friendly devices, both in computers and MP3 payers, they have created a very strong profit-generating business. And with the soon-to-be-launched iPhone (confirmed for end June in the US, great news), the model will not decelerate.

Any secrets behind that ? My take is the following, they are 3 things and only 3 :

- Apple invoices a slight premium for significantly better products, better in design, better in user friendliness, better in overall consumer experience (this also includes the brand experience). This works consumer-wise, who can be foolish enough not to accept to pay a slight premium for much better products ?

- Apple now have a tight control of costs, both in manufacturing (subcontracted to Foxconn) and in overheads (driven down but the 3rd point below). Again, as I have put it many times, Steve Jobs is not only a marketing and design visionary but is unrivaled when it comes to buy components. This has always been one of his strong point for the last 3 decades.

- Apple is very focused ! Apple doesn't offer a tremendous range of products : they have only 3 variations in each one of their product line Macbook, MacBook Pro, iMac and iMac Pro and 2 variations only in each iPod mini, iPod nano and iPod product lines (plus the color variations). Make the calculation, this is 20 products only ! But each one is extremely well thought in all aspects.

Those 3 pillars of high profitabilty can apply to almost every business domain. Just think about it ! As a manufacturer, no need to sell hundreds or thousands of different products, just remain focus to sell a few very well thought ones at an "adequate" premium, and control your cost structure...

By the way, another example, I read some time ago that Ford was selling Aston Martin (that I consider one of the most iconic car brand in the world) because it was now very profitable and enjoying a fast growth. How many models this brand carry : just 5 ! Aston Martin was sold for roughly €800M about a month ago. I'm convinced the new buyer have a tremendous potential ahead and should triple unit sales in the coming 10 years (to about 20,000 cars vs 7000 in 2006).

Shutterfly Honored Alongside Whole Foods !

Do you know the Copernican award ? It is awarded every year by Creative Good, a NY Customer Experience consultancy, and reckognizes top companies that succeed by putting customers at the center of their business universe.

For their 2007 prizes, the awards went to Whole Foods, in the "large company" segment, and to Shutterfly, in the medium company segment.

That's rather good news for me as well. Shutterfly is and has always been my model when building up Photoways, and Whole Foods, with its gorgeous merchandising and customer-centric organization also is a model in its kind.

I was yesterday dining with the guy who bought my fruit & vegetables retail chain in Lyon, he's now extremely successful but I told him he had to pay attention to the progress of Whole Foods. Their soon-to-open London flagship will mark their bold entry in Europe. Their know-how, in marketing great food is simply unbeatable on the planet. They sure have to fix the supply when in Europe and France, they have to adapt to the rigid retail regulation in France (both in terms of CDEC and labor laws), but they have quite an edge.

Back to the "Copernican Award", customers truly have to be put at the center of one's business universe, many companies claim they do that, but very very few really put it in practice. Doing so is not only a process, it is also a mindset and it is also an art.

This is all the fun and all the difficulty about it ! It's a bit like design, you may have some "rules" and process to follow, there's a great deal of intuition and vision about it.

Sarko-Sego.... !

Le duel qui était le plus attendu sera bien là, no breakthrough en fait. A 31% et 26%, Sarko et Sego font respectivement 3 et 1 points de plus que la moyenne des derniers sondages. L'appel au "vote utile" semble avoir bien fonctionné.

Participation massive et record de 85% (la France est vraiment une république participative, bravo), le spectre de l'abstention de 2002, qui avait conduit Le Pen au 2nd tour, était bien dans les esprits, et on peut s'en réjouir.

La France est en ce moment plutôt à droite, donc à cet instant t je donne logiquement un léger avantage à Sarko pour le 2ième tour, mais dans le même temps les français, conscients que nous avons des sacrés problèmes, ont aussi soif de changements puissants et tout dépendra de ce que faira maintenant Bayrou, et surtout les 7 millions de personnes qui ont voté pour lui, centre de toutes les convoitises.

Bayrou a tapé fort sur Sarko et un peu moins sur Sego, mais de là à la rallier, il y a un grand pas qu'il n'a pas encore franchi.

En l'absence de consigne de sa part, ses voix devraient sans doute se répartir plus ou moins équitablement entre Sarko et Sego, ce qui ferait vraisemblablement alors perdre cette dernière.

Les appels du pied, les mains tendues si ce n'est les perches et les tractations vont fleurir dans les jours à venir. S'il y a pour moi une tendance (Sarko devant), tout reste encore possible pour Sego si elle s'ouvre au centre et si on assiste à la création d'un vaste ensemble social-démocrate.

Le veut-elle, le peut-elle ?

Surtout, ce qui reste totalement en suspend encore, c'est ce que faira le Peuple français lors des législatives. S'il y a toujours une droite et une gauche, et de façon assez marquée, le Peuple a clairement dit lors de ce 1er tour qu'il y a aussi actuellement un centre crédible, et celui-ci jouera aussi un rôle clé pour l'obtention d'une majorité parlementaire.

Finalement, la bataille pour le contrôle de la France se joue en 2 manches, il ne faut pas l'oublier !

Skogafoss, Iceland, 4 Years Later with the New Baby Aston !

True, it's election day today, but did you really expected an a propos post from me today ?

Well, to my point of view, nothing to enjoy really, French Presidential Election campaign has been one of low level and whoever is chosen, I must admit I will not be thrilled. At this very moment, 10AM sunday, my wife still doesn't know who she is going to pick (as I'm concerned, I know, and I can tell there's a "o" in both the first and family name...). The only exciting thing in fact is that this 1st round looks extremely open, with many scenarios still possible.

Anyway, let's dream for a while and fly northbound to get some truly inspirational pictures !

Back in 2003, I was lucky enough to enjoy a extended week-end trip to Iceland, a terrific country, just 3 hours fly from Paris. Totally thrilling and refreshing, a volcanic land with solid lava, glaciers, geysers, a unique light, and with almost no one on the roads...

I there shot the famous and impressive Skogafoss waterfall :

Browsing through the Aston Martin's online brochures, I found the following picture for the brand new baby Aston, V8 Vantage Roadster (here to download) :

I therefore concluded I needed the same one !

Just kidding...

Another great shot, I wish I were driving the car on this open road ! Isn't it tantalizing ? That's what I love with dreaming, it's free, uses up no gas, doesn't spoil the land, etc !

La Course à l'Elysée de Sarko et Sego !

Sarko et Sego, si loin...et pourtant si proche : ICI.

Amusons nous aujourd'hui, demain ce sera sérieux !

Mes pronostics à 1€ :

1) Sarko sera autour des 24% +/- 1%

2) Sego et Bayrou à 22% +/- 1%. Je crois que ça va être très serré entre eux

3) Le Pen dépassera allègrement les 16%.

Disclaimer : j'ai évolué dans la nuit de samedi à dimanche !

MAJ Dimanche 20h05 : j'avais donc tout faux, Nico à 31%, Sego à 26%, Bayrou à 18% et Le Pen écrasé à moins de 11%.  Le 2nd tour s'anonce de nouveau très serré, tout va dépendre de Bayrou et de l'ouverture ou pas de Sego vers ce dernier.

Whole Foods' Proud Entry into the UK !

2 days ago I was telling my friend Jeremy (who continues to write excellent posts on his blog) that although WFMI stock hasn't performed that well since I purchased it 8 months ago, I hadn't the faintest doubt over the long term.

What I wrote 8 month ago about the company is still very valid, all I have to do is wait and to be patient...

Out of the 193 units the company now manages, there are only 3 in Canada and 6 in the UK. But those ones really have nothing to do with the regular Whole Foods US units. While US stores have 30.000 to 70.000 Sq Ft retail space, British units display a pale 4 to 6.000 Sq Ft retail space, 1/10th that of the US.

All told, it's really not the same concept, and they don't even use the same name. Whole Foods' presence in the UK, concentrated in London in fact, today is "Fresh & Wild".

But this is soon going to change : Whole Foods is to open its 1st super center in High Street Kensington in London, with over 80,000 Sq Ft retail space. Simply said, it  will be the largest Whole Foods unit on earth. In comparison, NYC Time Warner Center Whole Food is just below 60,000 Sq Ft...

The opening of the London unit , which is due in July, truly marks WFMI's foray into foreign land. Let's keep an eye on how well they do.

Sarkozy, l'Homme qui Fait Peur ?

Offensive non concertée à la fois de Marianne qui titrait "le vrai Sarkozy" (en filigrane dans l'article, cet homme est fou, c'est un dictateur en puissance), ce qui d'après son directeur JF Kahn a fait battre des records de vente au canard, et de Libération ce matin "l'inquiétant Monsieur Sarkozy", sur la personnalité même du candidat de l'UMP.

L'homme est de fait un nerveux super ou hyper-actif, souvent en proie à des tics, des grimaces ou des mouvements d'épaules. Lors de son passage au JT de 20h avec PPDA dimanche ou lundi dernier, à la fin de l'émission lorsque la caméra prenait du recul pour le générique de fin, j'avais été marqué par le net trépignement de la jambe qu'on pouvait observer chez Sarkozy.

Pour un peuple qui recherche un chef serein, c'est pas forcément un détail favorable !

Dans l'article de Libération justement, il y avait une interview de Michel Winock, historien, qui précisait que dans l'imaginaire national  "la France demande un chef, un sauveur".

C'est tout à fait exact et c'est symptomatique. Car les américains, par exemple, ne demandent  pas la même chose, loin de la (sinon Georges W n'aurait pas été élu !), et d'ailleurs l'élection de leur Président ne les enthousiasme pas plus que cela puisque seulement la moitié ira voter contre plus de 80% chez nous.

Face au pragmatisme business des américains, qui ne demandent finalement à leur Président que de défendre leurs intérêts (et pas vraiment d''être un leader charismatique ni un fin stratége mondial ni un humaniste), nous français avons une haute opinion du rôle que doit tenir la France dans le monde, et demandons en conséquence beaucoup à notre Président...

Voila donc les français en quête d'un "sauveur", et pour cette élection avec les candidats qu'on a, bon courage pour le trouver !

En ce qui me concerne, je suis plutôt américain dans mon approche, je ne demande pas énormément au Président, je n'aspire pas à avoir un chef sauveur, car je pense qu'il est avant tout l'instrument de l'Histoire. Je suis carrément hégélien, c'est la Raison qui gouverne le monde et qui se réalise dans l'Histoire (relire à ses heures perdues "la Raison dans l'Histoire"). Tout ce que fait et peut réellement faire un Président c'est surfer sur les événements et s'adapter à l'Histoire...

Si Libération et Marianne insistent sur la personnalité même de Sarko qui pourrait faire peur, on pourrait également pointer l'inexpérience de Sego qui pourrait faire tout aussi peur, ou le plus consensuel Bayrou dont on peut aussi avoir peur de l'immobilisme paralysant car il aura du mal à établir une vraie majorité.

Bref, on pourrait toujours trouver une raison d'avoir peur.

Mais, hommes de peu de Foi, de quoi avez-vous peur ? Avançons sans peur dans l'Histoire, elle est conduit par la Raison, même si celle-ci peut parfois ruser !

Bon, ok, mais tout ça ne me dit pas pour qui je vais voter dimanche soir ! Je sens que je vais mettre 3 boules dans un chapeau et vais tirer au hasard ! Peut-être que la Raison conduira mon geste...

Smoby Désormais Américain, des Erreurs Stratégiques !

On apprenait hier le rachat de Smoby par l'américain MGA, un industriel du secteur.

Une suite logique, je n'ai jamais vraiment cru aux possibilités de la famille fondatrice Breuil, qui en détenait encore la majorité il y a quelques jours, de pouvoir créer un acteur fort et rentable.

Ma femme s'enthousiasmait sur les produits Smoby il y a 5 ou 6 ans quand elle en faisait les relations presse, mais je la tempérais alors déja fortement !

La notion de taille critique est essentielle dans ce métier, pour l'amortissement des frais de R&D, l'obtention et l'exploitation des licences (clé pour faire de bonnes ventes), réduire ses coûts de production (qu'ils fussent en France ou en Chine) et peser sur la distribution qui se concentre.

La mécanique stratégique est simple et limpide, soit on se spécialise fortement dans un segment donné, soit on grossit vite pour atteindre une taille suffisante, soit on disparaît ou on se fait racheter.

Même n°2 européen, Smoby était un encore petit acteur globalement et ce n'est pas le rachat au clairon de Majorette ni après de Berchet qui pouvait changer la donne. Bien au contraire, l'entreprise s'est massivement endettée pour faire ces acquisitions et la dette totale atteignait l'année dernière près des 2/3 du CA, fragilisant de façon extrême l'entreprise qui a du se placer sous procédure de sauvegarde il y a quelques mois. Au niveau de Smoby, ces acquisitions représentaient plus une fuite en avant qu'une réelle stratégie conquérante.

Il y  a quelques temps, on pouvait lire que la famille Breuil était disposée à ouvrir le capital et accueillir des partenaires, mais aujourd'hui c'est bien 100% du capital qui est aux mains des américains, la famille s'étant totalement dégagée. Ce qui pour le coup me semble faire du sens. Garder une participation mioritaire ne servait pas à grand chose et n'aurait pas laissé les coudées totalement franches à MGA.

Walmart Scales Back Ambitions in Organic Food, Another Merchandising Mistake !

I'm a big fan of Whole Foods, both as a customer (when I'm in the US) and as an investor (though my investment in the stock, which dates back to last summer, hasn't ben particularily fruitful so far, but investing is over the long run).

I've posted many times on the company, you may find all posts on Whole Foods here and last august I thoroughly explained why I was a strong believer in WFMI, investment-wise I mean.

1 or 2 weeks ago, we learned that Walmart was scaling back its ambitions in organic food. Though I was rather happy to hear the news, it wasn't a big surprise as it was pefectly in line with my august post. Whole Foods does have a very strong competitive advantage and even Walmart, world's largest retailer, has difficulty in competing with this category specialist.

Merchandising is the art to have the right product in the right place, at the right time, at the right price and with the right atmosphere and display. Obviously, this depends on your customer basis. What works for retailer A doesn't automatically work for retailer B as the latter may lure a different customer profile.

Walmart learned it the hard way with fashion, more upmarket clothes : it simply didn't work.

And it's now the same story again with organic food. One year ago, they launched an agressive organic offensive, announcing with much fanfare they would double the number of items in stores (to about 400) and offering them at Walmart prices. Today, the strategy hasn't really paid off, along in fact with other high-end initiatives Walmart launched.

My take is the following, there's a triple issue here : its an image, a customer profile and an atmosphere mismatch.

- Walmart means "everyday low prices" before all, it doesn't stand for quality stuff at a premium.

- Its customers are very price conscious and price-sensitive, not exactly the same ones that have a propension to pay a premium for quality stuff. Sure Walmart has many higher-income customers, but price-sensitive ones !

- You don't easily sell premium stuff in a "cheap" environment.

Obviously, Walmart has lost its sense of "merchandising" with its recent high-end initiatives. I don't say that they will never succeed in the category, but you don't turn out to be a premium stuff seller overnight !