Stoves is a company with big ambitions - to be famous for quality, innovative and Number One. It is braving the recession well, reports Geoffrey Foster.
Let's launch a market leader, shall we? Let's found a world class manufacturing company with an outstanding reputation for quality and innovation. Making consumer durables - gas cookers, perhaps. Obviously the whole notion is absurd. Life is not like that in Britain, where all that the aspiring entrepreneur can do (even when business is good) is to seek to ensure survival, and let others worry about who the market leaders are.
It goes without saying that you have to match competitors on quality, but the first essential is to generate a bit of revenue while preventing costs from running away. Right? Moreover, gas cookers must be a bad idea. There could hardly be any less promising area for breaking into right now than domestic appliances - mature markets whose health is directly related to levels of consumer spending and housing starts. The appliance sector is probably still overpopulated, even after prolonged shake-out. As a result, the cooker market is shared between half a dozen large groups, including multinationals.
Nevertheless, it was expressly "to be a world class player" in the arena of gas cooker manufacture that John Crathorne, 54-year-old managing director of Stoves Ltd, put together his management team less than 30 months ago. "We were not aiming to be the biggest," he says blandly, "but to be able to hold our head up in world markets because of our quality and innovation." And that was before Crathorne and Co went into business. They were still talking to potential backers, and had barely decided on whether to look for a greenfield site or to buy an existing business - the chosen solution in the end.
The initial impetus for the improbable project came from advertising man Sean O'Connor, group development director at the advertising agency Lowe. He was convinced that "a tremendous opportunity existed in durables" for a British manufacturer capable of producing "for the benefit of the customer rather than of the factory". "It was probably all founded on sand," says O'Connor self-deprecatingly, but in 1987-88 the evidence seemed to hang together. Forecasters were predicting social change with emphasis on design.
A little market research led O'Connor to Crathorne, then chairman of THORN EMI's major domestic appliance division. It was a meeting of minds. And it was Crathorne, the industry insider (he had previously been managing director of TI New World), who argued that the proposed new branded, upmarket, consumer durable product had to be a cooker.
Through a City connection, merchant banker Chris Chataway, O'Connor was put on to Roger Brooke of Candover, the buyout specialist. He received a sympathetic hearing. But Candover's interest grew enormously later when Yale and Valor's cooker division turned out to be a possible acquisition. Here was an existing cash flow and bricks and mortar (a biggish factory at Prescot on the rim of Liverpool) to encourage banks to lend. At first, as Candover's Doug Fairservice recalls, Yale and Valor appeared to have unrealistic ideas about what it might get. But it was making heavy losses, and in May 1989 it virtually gave the assets away.
The vehicle used for the buy-in was an off-the-shelf company which Crathorne and O'Connor renamed Stoves, after a defunct business which used to make cookers at Prescot before it was bought by Valor 16 years ago. The other shareholder-directors included a couple of master practitioners whom Crathorne had already cherry-picked: Wally Street, formerly the sales director at New World, and Ben Gostelow, a technical wizard from Electrolux. A sole Valor Cookers executive, Jeff Kane (recently arrived from the motor industry), was invited to join the management team as manufacturing director.