Porcelain house Meissen takes on luxury titans

MEISSEN, Germany (Reuters) - After 300 years crafting baroque porcelain for French kings and Russian tsars, Germany's Meissen has launched an in-house revolution to weather the economic downturn.

Under an energetic new manager, 39-year-old Christian Kurtzke, Europe's oldest porcelain manufacturer is pursuing a new strategy to position itself as a luxury brand to rival Louis Vuitton and Bulgari.

Europe's china and porcelain industry has suffered in recent decades as firms have failed to adapt to young tastes which rarely favour display cabinets or large dinner services.

The problems were highlighted earlier this month when Irish china maker Waterford Wedgwood called in receivers, prompting its German unit Rosenthal to file for insolvency.

"For 300 years Meissen has stood for the art of luxury. Now we want to be the world's leading German luxury brand," said Kurtzke, a former manager at the Boston Consulting Group who took over as head of state-owned Meissen four months ago.

He wants to reposition Meissen, which is based in the eastern state of Saxony, by cornering the market for young professionals and offering services for meals such as pasta or sushi rather than Germanic feasts of pork and venison.

Kurtzke knows he's in for a bumpy ride. Bernstein Research in London expects the global luxury market to shrink by 10 percent or more in 2009. Like its rivals, Meissen's revenues fell in the last quarter -- by about 15 percent.

"We will be hit by the economic crisis. But our aim is to compensate for that with new initiatives to boost revenues," an animated Kurtzke, whose fashionable suit and mauve tie strike an incongruous note at traditional Meissen, told Reuters.

With an eye on Italian and Chinese markets, Kurtzke also wants to position Meissen more strongly as a brand for watches, jewellery, pens and interior design -- sometimes with partners like German watchmaker Glashuette or pen maker Mont Blanc, owned by Switzerland's Richemont.

Aesthetics aside, porcelain's value is a big attraction.

"Shares and money lose value but porcelain doesn't. It's always got a fundamental worth and can even be used as currency," said Kiel-based porcelain assessor Hans Benemann.

Former East Germany's communist government, which took over Meissen after World War Two, earned hard currency from selling porcelain to the West during the Cold War.

There is even a rumour, which the firm says could well be true, that U.S. rock singer Bruce Springsteen was paid partly in Meissen for a concert in East Berlin in 1988.

Experts welcome the modernisation, but say Meissen must avoid diluting its brand by branching out too much.

"You have to modernise but not necessarily in manufacturing. I'd be extremely careful with these ideas. I'd focus more on expanding internationally than on new products," said Benemann.

RICH HERITAGE

The Meissen brand is certainly in Kurtzke's favour, as it embodies the birth of European porcelain.

It has its roots in alchemy: in 1705 Johann Friedrich Boettger, who claimed he could make gold, was incarcerated in the town's Gothic Albrechtsburg castle by a cash-strapped ruler, Augustus the Strong, until, persuaded by a fellow alchemist to lower his sights, he instead discovered the secret of making white porcelain in 1708.

Two years later, Augustus set up the castle as a factory and Europe's first porcelain maker was born.

Blue and white "Onion pattern" plates, baroque vases and intricate figurines of animals, birds and humans won acclaim and Meissen's crossed-swords, one of the world's oldest trademarks, soon graced the tables of Europe's aristocracy.

Exports grew over the years and now account for half the firm's revenues with strong demand in Japan, Taiwan and Russia.

Today, visitors to Meissen's red-brick factory, in the picturesque medieval town set in wooded hills, can step back in time. Moulders pour a grey mix from copper jugs, and painters at wooden tables mix colours on palettes with miniscule brushes.

Such is the quality, older items fetch a high price and have a strong following among collectors.

"People want the best quality and that's what you've got with Meissen," said Philip Howell, head of the European Ceramics Department at auctioneers Sotheby's.

"(Some) models are like miniature sculptures: they are three dimensional so however you turn them, they work."

The stable ceramics market offers a safe bet compared with more fluctuating areas such as contemporary art, said Howell.

Meissen, whose antiques compete with France's Sevres and the UK's Chelsea, still fares well at auction. A coloured harlequin model from around 1740 fetched 400,000 pounds ($571,200) -- nearly 10 times its estimate -- at one auction house recently, said Howell.

Germans who buried their Meissen in World War Two so they could sell it later also understood its long-term value.

However, many collectors buy Meissen simply to enjoy it.

"I live with art," said collector Dietrich von der Heyden from Moritzburg, who owns several hundred pieces of Meissen. "I eat off my Meissen. Food won't taste good if isn't served well."

THE ART OF PROFIT

Nonetheless, Kurtzke faces a battle if he is to turn Meissen's artisanship into significant profits.

Being owned by the state of Saxony, which took the business over from the former East German government in 1991, Meissen has been shielded from global competition.

But although Saxony has no intention of selling -- not least to preserve the 800 jobs Meissen provides and the 280,000 or so tourists it draws every year -- times have changed.

"Before, our goal was not to optimise profits but to preserve Saxony's cultural treasure. Now we must be more financially independent," said Kurtzke.

"The goal is double-digit profitability," he said. Meissen lags other luxury businesses which mostly have profit margins well above 10 percent, as Saxony has been content with breakeven.

Meissen's challenges are those of the whole sector.

Employment in the German porcelain industry has fallen to 6,200 from 10,600 in 2000 and 28,000 in 1991. Waning demand and overcapacity have also spurred consolidation among Czech, Polish and British china and porcelain makers.

Peter Frischholz, head of Germany's Ceramics Association, says the branch faces tough times, mainly due to a slump in exports: "It'll be hard but most of those left can survive."

While Kurtzke talks about taking on Bulgari and Louis Vuitton, he is also determined to do what others have not -- work more closely with a network of global dealers to boost sales, and use the internet to lure new custom.

"Many people don't know Meissen. I want to show them what it means," said Kurtzke, sipping tea from a finely decorated red and gold Meissen cup. "We will reach people who love culture, enjoy art and are receptive to the sensuous side of life."

(Editing by Sara Ledwith)