Last week, UK supermarket group Waitrose took over the rights to manufacture, distribute and sell the niche organic food brand, Duchy Originals, set up almost 20 years ago by the Prince of Wales. Ben Cooper asks if Duchy has found a good match.
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It has to be said that making a match has not been the strong suit of HRH The Prince of Wales. Back in the 1970s, his delay in finding an appropriate spouse was the subject of national debate and when he finally did choose, things obviously did not turn out too well. He was nearly 60 before he finally settled down with the woman he loved and, what is more, she had been there all the time.
It has been widely hoped that his children will make a better fist of things. And now we have the chance to judge. Just for the sake of clarity, this is not the scoop of the century, about to reveal the secret wedding of a royal prince
But last week, Duchy Originals, the company founded by Prince Charles in 1990 and born out of his devotion to organic farming, announced a tie-up with UK supermarket group Waitrose. The question since has been ‘is this a match made in heaven or more akin to a match made in Windsor?’
On the face of it, the portents are good. “I think the positioning of the two brands is ideally matched,” says Neil Saunders of Verdict Research. “They’re both premium-end food offerings. I think it’s a good fit.”
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By GlobalDataBut the logic of the match goes further than that. Like other retailers, Waitrose is attracted to the ‘good-better-best’ segmentation idea that most major retailers are now following with basic, standard and premium own ranges. Having already launched its Essential line, the arrival of Duchy provides the retailer with its top-tier offering. It will be rebranded as Duchy Originals from Waitrose.
However, as its own core brand is effectively marketed on a quality proposition, it may suit the retailer to have a premium range which is well differentiated from the core brand.
“If you were to say Waitrose Premium, that’s more problematic because it suggests the core Waitrose brand is a bit subdivided,” Saunders says. “Whereas if you have this, which actually has been separate, has been something different, and does have a slightly different positioning to Waitrose, I don’t think it’s as problematic because you’re actually spinning off a completely separate branding in effect.”
In order to achieve this, there is likely to be some price repositioning for the Duchy brand, which some analysts believe has generally been pitched too high. “Just having a look at the price point and reengineering that will help the sales volumes because I think that will just make it a little bit accessible,” Saunders adds.
Other facets of the Waitrose link-up will support that repositioning. The move will be positive in scale terms, with the brand getting far greater ‘traction’ through the Waitrose stores themselves, with much more in-store promotion and prominence. In addition, the positioning of Duchy Originals lends itself perfectly to be sold in John Lewis department stores as a luxury food gift item, particularly at Christmas time and other holidays.
The range will be sold in Waitrose’s 214 UK branches, through online retailer Ocado and wholesale through independent and niche retailers. The brand also has strong export growth potential, and while this is not necessarily an area of great focus for John Lewis, Saunders believes it is an area of the company will be looking at.
The company plans a multi-million pound investment programme with the view to boosting marketing and extending the product line from around 200 to in excess of 500. Waitrose taking over responsibility for some of Duchy’s manufacturing will facilitate scaling up.
“They’ll be able to bring a lot of their expertise into that and a lot of their efficiencies because of their scale,” says Saunders. “So it takes something that’s quite niche at the moment, actually retains the niche and specialness of the branding, but puts it under the control of a group that has much better purchasing power. So the brand will become more economical, it will become much more efficient, and therefore it will make more profit.”
Clearly making Duchy more profitable is key. The company posted profits of GBP1.5m in the 2007 financial year, but profits fell to GBP57,360 in 2008, with the company moving into loss in the year to March 2009.
While Prince Charles’ principal private secretary, Sir Michael Peat, denies that Waitrose was “bailing out” the premium food firm, it is clear that the company has suffered acutely during the recession, as organic sales have declined. Peat says that while Duchy Originals had retail sales of GBP50m, it did not have the reserves to move the business forward and this was the reason behind the deal with Waitrose. It was “all to do with moving to the next level”, Peat said.
The brand’s strong links with the undoubtedly weakened organic sector and proposition perhaps represents the biggest worry about the deal. But for brands such as Duchy Originals, there is a sense that the organic tag is a proxy for quality as well as saying something about the sustainable way the food has been produced. As well as believing that organic sales in general “will bounce back” after the recession, Saunders feels that the organic stamp will support the brand’s positioning in Waitrose.
With the Duchy brand’s philanthropic ethos – it was originally set up to make money to donate to Prince Charles’ charities – and its link to the organic movement to which the Prince is so committed, the company arguably had to find a particular type of partner that would be in tune with those values.
Simply selling out to a multinational would have been a far less attractive option and may have required a substantial reappraisal of how the brand is positioned and marketed. In Waitrose and John Lewis, a quintessentially British operation with a long heritage which is generally regarded as a ‘values-driven’ company, the brand has arguably found a partner which best meets both commercial and cultural criteria.
Duchy Originals is to remain an independent company, wholly owned by the Prince’s Charities Foundation, with the Prince retaining a “key, hands-on supervisory role”.
Under the terms of the deal, Waitrose will pay a fixed percentage royalty to Duchy Originals on the sales of the brand which will therefore be able to continue to support some 21 charities in the arts, the environment and education. Since its creation, the company has donated some GBP7m to charitable causes. If Waitrose successfully scales up the brand, the outlook for those charitable activities is obviously positive.
