Miele's recipe for success: High-end product, low-key structure
MILAN -- Kitchen porn reached tantalizing new heights at Eurocucina, the biennial spring show in Milan.
Airport-sized exhibition halls were stuffed with the sleekest and most technologically sophisticated kitchens and appliances money can buy. Some kitchens had built-in libraries; others looked like the USS Enterprise's command bridge, with blinking, chip-laden appliances all digitally yakking to one another.
If there was one appliance maker that managed to combine luxury, a touch of glam, tank-like durability and innovation both clever and perhaps a bit mad, it was Germany's Miele. Witness the top-of-the-line G595 XXL dishwasher - yours for €2,200 ($2,800) - featuring interior LED lights. Open the door and the stainless-steel interior flashes up like a disco.
"I guess it's a feature that is not really a necessity," said Ditmar Vierbuchen, the director-general of Miele's Spain division, who was explaining the machine's features. "But the lights can help you clean the filters."
Whatever.
Innovation and the reputation for quality have kept Miele alive and thriving since 1899, said Markus Miele, the great-great grandson of the company's co-founder, Carl Miele. Mr. Miele is managing director and shares the management and ownership of the company with Reinhard Zinkann, whose great-great-grandfather was Carl Miele's partner.
The company's first product was a wooden butter churn, one that didn't break down. More than a century later, Miele makes its living with a broad range of sleek, tech-laden - and expensive - appliances, from dishwashers and laundry machines to ovens and vacuums. Sales in the last fiscal year were €2.77-billion, and sales in Canada were about $100-million. Profits are not disclosed, but Mr. Miele claims the company has never had a losing year, save for the Second World War.
Miele is a remarkable story of brand development. Even though the company is fairly small by global standards, with 16,000 employees, it is a household name in Germany. A consumer awareness study done in 2009 by market research company GfK Marktforschung awarded Miele the "best product brand" within Germany, putting it in the same league as Porsche and BMW.
Miele stands out for another reason: From a governance point of view, it should not be able to function.
The company has no boss and no one with the CEO's title. Miele is governed by a management team consisting of one managing director from each of the shareholder families (Markus Miele and cousin Reinhard Zinkann), plus three unrelated directors. In theory, a simple majority is required to approve big projects; in practice, decisions are made by consensus.
"Normally, we need 100 per cent [approval] or we don't do the project," Mr. Miele, 41, said. "If everyone is happy, then we start the project. A director could veto a project, but that has never happened. We wouldn't start a project if someone didn't like it."
While Mr. Miele said the directors have had arguments, there is one thing they always agree on: The company shall remain private and family controlled, now and forever.
Miele has been bombarded with proposals from investment bankers. They would love to transform it into a company with traded shares, all the better to give it access to public capital. Each time, the answer was Nein.
"There is no long-term debt," Mr. Miele said. "We like to grow organically, using our own capital. If someone offered us a lot of money, where would we invest it? We don't even know what our company is worth... We have never estimated anything like this because it's meaningless to us."
Miele machines are designed to last 20 years and come with 10-year warranties. Almost all of the products are made in Germany - the company has one assembly plant in China with no plans for a second - which helps the company leverage off the "Made in Germany" merchandise mark.
Research and development is the key, with 5 per cent to 7 per cent of sales going into innovation. Some of the innovations, like the interior dishwasher lights, seem like marketing hype. Others, like energy and water efficiency, are important selling features. The latest Miele washing machines will use a mere 39 litres of water per load (almost a century ago, the first Miele washing machines used 400 litres). Miele has developed ovens with steam injection to keep fish and other foods from losing moisture, and dishwashers whose doors automatically crack open during the drying cycle to allow steam to escape.
As long as Miele's engineers keep the clever gadgets coming, Mr. Miele will sleep soundly at night. His senior officers seem confident about the company's ability to stay ahead on the innovation front. "We don't really have competitors," Jan Heck, president of Miele's Canadian division, said only half-jokingly.
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RISING APPLIANCE STAR
Miele may have tradition on its side, but Chinese manufacturers are the emerging stars of the home appliance world. Chinese corporations are now the world's largest suppliers of so-called white goods - refrigerators, washing machines and the like - doubling production between 1996 and 2006, according to a report by Freedonia Group.
$18-million
Annual global sales of the Haier group. Founded in 1984, Haier now manufactures home appliances in more than 96 categories through more than 240 subsidiary companies.
160 per cent
Sales volume of appliance units increased this amount in May, compared to a year earlier. China began to subsidize spending on home appliances in rural areas by about 13 per cent beginning in February, 2009.
Andrew Binet
