Tuesday 6 December 2016

Making a Miele of it: the scion who has high end Irish kitchens cooking

His labour costs are high by US or UK standards, and his products are at the top of the price range. But in the tradition of BMW or Audi, quality is worth the cost, Miele boss Markus Miele tells our technology editor.

Published 10/09/2015 | 02:30

Dr Markus Miele (right) demonstrates the tech giant's high-tech blackboard fridge
Dr Markus Miele (right) demonstrates the tech giant's high-tech blackboard fridge

Very few of the world's best known companies have scions at the helm. Fewer still are run by descendants carrying the name of the actual company. Markus Miele is one of those few. The 46-year-old German is the great-grandson of Carl Miele who, together with Reinhard Zinkann, started Miele in 1899.

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Now, the fourth-generation Miele is managing director of what has become the world's most upmarket home appliance company. And it is a company still owned almost jointly by the Mieles and Zinkanns, with a 51pc to 49pc split among the 70 descendants of the two families.

In Ireland, Miele invested a lot of money in 2008 with the opening of a 'gallery' centre in Dublin's Citywest business park. It has only started to recoup that in the last two years, says Miele.

"If you look at the crisis in Ireland, we have been affected of course," he says in a small conference room in Berlin. "There have been some tough years there. But the last two years have been great. And Ireland was clearly a good investment because we think in the long term. We absolutely see a good future there."

Miele makes washing machines, dishwashers, cookers and vacuum cleaners that cost a lot of money, usually over €1,000. But, like Mercedes or Audi, it is competing more on technical issues than on price.

When it started 116 years ago, the company's first product was a butter churn. According to company history, the first Mr Miele said that he could make it longer lasting but he'd have to use different wood and charge a higher price.

This, says the fourth generation scion, is the basic philosophy of what Miele still does today.

As such, things aren't going too badly. Its last financial results showed a rise in revenue of 8.3pc to €3.5bn (with profits not disclosed). Even if some of that revenue rise is due to a weakness in the euro, it still shows steady growth for a company that makes products it knows only a limited number of people can probably afford.

(Miele himself has challenged this notion of affordability before with an oft-repeated story of people having Miele washing machines for 30 years. This, he says, shows that they can be relatively cheap when viewed as a long term investment.)

For US or UK companies, the allure of a top brand and some financial success seems always to be accompanied by takeover or acquisition rumours. But despite being one of the hottest brands in the booming 'white goods' market, Miele shows no inclination to cash in. The concept of a "long term" is taken seriously by German firms, even if it rarely is by US or British (or Irish) firms.

"We've being doing this well for 116 years," says Miele. "Hopefully this will stay a family company for a long time. We don't have to have investor conferences and all of these things. Of course, we do explain how the business is running to all of our family members at the end of November or beginning of December. But as long as they're happy with what we're doing and how we are doing things, then it will stay as a family company."

But isn't it difficult to run a family company?

No," he says. "As long as you generate a proper result at the end of the year. This is very important, to keep the family members happy. But as long as I can remember, we have always generated a result. Sometimes it has been higher and sometimes lower, but we have kept the family members happy. We're growing, generating results."

Despite the pride in family and history, running the company was not Miele's childhood ambition.

"No, it was only after I finished my doctoral thesis that I was asked by the family whether I wanted to join or not. And then still I wanted to see whether I really wanted to work for a family company or not. Because there are some differences between family companies and other kinds of companies and I wanted to try one out first."

So Miele went to work for another family-based firm, the car parts company Helle. There, he decided that the family-owned structure was one he could work in, so, after a formal recruitment process, he joined his father's firm. While Miele and (Reinhard) Zinkann are the two co-proprietors of the company, there are three others at the firm who help to run it. Of these, financial director Olaf Bartsch has a key role as facilitator between the Mieles and Zinkanns if agreement on an issue can't be reached.

But this is usually a very workable situation, says Miele. The company is streamlined and decisions can be made quickly. "The best thing about being in our position is that you can take your own decisions," he says. "It's a coin with two sides. If a decision works out, then great. If it doesn't work out, you can stop it quickly so that you don't lose so much money."

Between 5pc and 7pc of all sales are invested in research and development, says Miele, with 80pc of the company's manufacturing done in Germany.

The company could probably try to outsource more manufacturing to China or somewhere else cheaper. But that might compromise the German industrial traits of continuity, precision and control.

"I think it's only when you have a great foundation in production that you can really optimise the product," says Miele. "We're very well located. Our region in Germany is not only good for the production for washing machines but also has a lot of excellent supplier companies. That's great for our region and helps us to innovate."

In other words, the core production processes of Miele equipment - like so many other German products - is based on people who are invested in the product rather than isolated tiers of separately based designers, logistics managers and (otherwise disinterested) assembly line staff thousands of miles away.

It's a thorough, long term philosophy that used to be a standard one in countries such as the US and Britain but is now largely gone from those countries in favour of service industries.

Where Aanglophone rivals look to labour costs as a deterrent, German firms adapt around them.

"Germany has, of course, high labour costs," says Miele. "So then we strive for optimisation, we look to do things more effectively. The question is always there about to make something quicker or faster or whatever. It's pressure, but we do it. It's about the long term. The most important thing for us is whether we might be successful in five or ten years' time. This is our basic thinking all the time, our strategy."

Looked at in this light, Miele's Irish investment may prove to be a decent one. The company hosts hundreds of events and demonstrations in Ireland every year as it bids to lock down the top tier of home lifestyle arrangement. The people who attend these events, says Miele, are sometimes time-poor and looking for a little guidance on getting things done more smoothly.

In this vein, several of the company's newest products have started to ramp up automated or 'smart' features that allow manual operation to be minimised. An example includes Miele's new high-end cooking ranges and ovens, which use sensors and other technology to make key decisions on how an item is actually cooked.

While this might make sense for someone (like this reporter) who has little interest in preparing food, doesn't it clash with aspirational types who now associate the preparation of food with art? Is Miele about to upset the food snobs?

"With any new appliance you always keep different customers in mind," says Miele. "That may not necessarily be two different persons but it may be a person who just wants to get a quick meal during the week but wants to throw a dinner party at the weekend. That's when this person might want to take full control of everything and be among friends when doing it."

In other words, while new Miele cookers might be turbo-powered with tech under the hood, there's a general 'off' mode that lets you play master chef.

"When you look at TV, cooking is very much in vogue," says Miele. "I'm not sure that too many people cook what's actually shown on TV. But people like to cook and that helps companies like us that make the kitchen appliances."

How long will Miele march on as a prestige brand in home appliances? Its white goods category is turning into one of the most keenly contested sectors in the electrical business, with giants such as Samsung and LG stepping up investment to try and spread business away from the lack-lustre, overly commoditised television industry. Everyone wants to be thought of like Miele. Few competitors probably will be.

"You could say we have had a headwind," says Miele. "In our last fiscal year we had a little bit of wind from the back, even if some of it was due to a weak euro, especially in countries like the US and Australia. But things are good."

Miele's eldest son in now 20. There are no immediate plans for a fifth Miele in the company's hot seat though, with industrial history is littered with warning stories of offspring pushed into positions they weren't really interested in. For now, Miele is happy to keep planning. "It's long term," he says. "It's always the long term."

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