UK: Johnson's passion for dirty work. (2 of 2)

UK: Johnson's passion for dirty work. (2 of 2) - Apart from generalised training and standards procedures, the main duty of the new JGC acquiree is to conform to a group-wide accounting programme. Examine the account book of any Hayes, Hartonclean or Pul

Last Updated: 31 Aug 2010

Apart from generalised training and standards procedures, the main duty of the new JGC acquiree is to conform to a group-wide accounting programme. Examine the account book of any Hayes, Hartonclean or Pullar and you will see, in miniature format, precisely the same presentation as that made by each regional managing director, every week, to financial director Mike Sutton.

Apart from this fiercely scrutinised number crunching, interference from JG's minuscule (seven-man) Bootle HQ is, says Sutton, confined to those areas where "centralisation makes for greater efficiency", notably in the realms of purchasing and financial and technical advice. The Johnson operative thus reaps the double benefit of cut-price local advertising rates and national buying clout, the retail equivalent of having your cake and eating it. At the same time, says David Bryant, MD of JGC's north-western operation, Johnson Brothers, local boards are given complete freedom over "everything from pricing to marketing strategy". To the average corporatist mind, such decentralisation would be the stuff of nightmares, but for Greer and his Bootle board it has worked well enough.

Indeed, in the eyes of the Monopolies and Mergers Commission it has worked too well. Having cleaned up some 25% of the existing UK market, Greer is left with a limited range of choices for expanding business growth, short of praying that Britons will suddenly undergo mass conversion to the belief that cleanliness is next to godliness. One, clearly, is to expand overseas: in spite of being the US's largest single dry cleaning company, JGC has only 2% of the extant market. Another is to remodel the existing product, a sterling example of which can be found at ASDA, Hunt's Cross, near Liverpool. ASDA's market research has shown that its customers spend an average of 70 minutes in its shops. JGC outlets (marketed as "Prestige" at this particular ASDA) now offer a one-hour return service, so customers can kill off two chores at once.

One basic spectre haunts all of this corporate wizardry, however: the British tolerance of dirt. While changing trends have meant roller-coaster revenue graphs (down with the invention of wash'n'wear in the 1950s, up with the invention of male vanity - men now spend more on dry cleaning than women - in the 1980s), one immutable factor has been that Britons cease to visit dry cleaners as soon as times get hard. In times of national affluence, JGC's outlets, with their minimal operating costs, are a herd of individual little cash cows, each with its double-digit profit margin; last year, contrariwise, operating profits on JGC's dry cleaning operations fell by a lachrymose 25%, from £13.6 to £10.2 million.

The obvious antidote to these swings is diversification into a more stable sector, but here again the history of such attempts among UK cleaners has been uniformly unhappy. JGC's cautious answer has been a sideways shift into the FT's newly created business services sector, in the form of a textile rental service known nationally as Apparelmaster but marketed under the aegis of each local division, as befits Greer's world view. For the first time last year, revenue from this sector actually accounted for more than half of UK profits, and not simply because of dry cleaning's decline: its own profits were up 22%, from £6.8 million to £8.3 million. "The biggest item in textile rental is capital depreciation, while high street dry cleaning is cash generative," notes Greer, happily. "The two sit well together."

Perhaps the most worrying feature of JGC's annual results came, as so often with Britain's US acquisitions, from across the water. Although Johnson has exported its philosophy of friendly buying, over a third of the company's US outlets are held on franchise and offered as turnkey investments. "Unfortunately," says Richard Zerny, tersely, "the supply of investors with a spare $250,000 seems to have dried up for the moment," leaving an embarrassing gap on returns.

Greer is sanguine about America's eventual chances, noting that an upswing in optimism after the Gulf war has already been reflected by an upswing in dry cleaning spend. Eyes at Bootle are also turned glintingly towards Europe, although JGC's chairman insists that his company will still follow its "multiple cottage industry" line. "There's no way we could go cold into Europe and open a chain of shops from Bootle. I was the person who was given the job of opening Sketchley's branches in Belgium when they tried it. The first Monday morning" - Greer winces at the memory - "I had a call saying 'But weer are ze manageers?' We ended up having to fly people out. And we're certainly not going to go to French shops and say 'Here's our offer: take it or leave it'. They'd say 'Get stuffed'. The only way to do well in this business is to be nice."

(Charles Darwent is a freelance journalist.)

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