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Thursday, May 03, 2007

Tired brands: Moulinex

Going up in smoke

Moulinex, the French-based electrical household appliance manufacturer, filed for bankruptcy in September 2001. The action placed the brand in immediate jeopardy, but was seen as necessary. ‘If they want to keep going but the shareholders wouldn’t agree, they had to do this, otherwise it would have meant liquidation,’ said one analyst at a Paris-based brokerage.

As the company neared collapse, Moulinex’s 21,000 employees started to resort to unusual methods in order to keep their jobs. One microwave factory in northern France was occupied by workers and then set on fire. The following day employees returned and threatened to detonate homemade bombs to destroy what was left of the plant. According to Business Week magazine, union officials even kidnapped the government appointed mediator to try and get a better deal on lay-off packages. ‘I am somewhat detained, but it’s not a real drama,’ was the message the nabbed mediator managed to phone in to the press.

These dramatic events constituted only the final chapter in what had been a slow and steady slide for the company. Under the management of Moulinex founder, Jean Mantelet, the company failed to anticipate the economic slowdown of the early 1980s, and from 1985 onwards losses began to mount up. Another problem related to the company’s core product offering – microwave ovens. Asian manufacturers were flooding the European market with similar products, and often at lower prices. But still Moulinex continued to spend money, with a strategy based on the takeover of other companies, such as the luxury coffee-maker specialist Krups, which Moulinex acquired in 1987. Debts steadily grew, and in 1996 Moulinex tried to return to profit by laying off 2,600 workers. This tough measure worked, at least in the short term.

In 1997, the company declared a profit for the first time in years. However, the celebrations were short-lived. Not only had the job-cuts damaged the brand’s reputation in France, the following year saw the new collapse of the Russian economy. As Russia was Moulinex’s second largest market, sales were dramatically affected and the company went back into the red. Things got even worse with a similar economic crisis in Brazil, a country where Moulinex had made various acquisitions.

In September 2000, the company merged with the Italian company Brandt. This did nothing to prevent declining sales and rising debt. The bankruptcy filing in 2001 was a drastic, but almost inevitable last resort.

As Moulinex is still struggling to find a buyer, the omens are not good for one of France’s most famous brands.

Lessons from Moulinex

  • Watch the competition. Moulinex was caught off guard by the influx of microwaves from Asian manufacturers.
  • Watch the economy. When economies are in trouble, so are brands. Following the economic crisis in Russia, Moulinex lost a major part of its market overnight.
  • Keep employers on side. The numerous disputes did more to damage Moulinex’s reputation in its native France than anything else.