Vorwerk's Bonanza

Cooking Up a Storm

Reiner Strecker Vorwerk CEO_Frank Beer for Handelsblatt
Reiner Strecker, Vorwerk CEO.
  • Why it matters

    Why it matters

    The German direct sales retailer Vorwerk is looking to replicate its success with the Thermomix digital food processor in new markets.

  • Facts

    Facts

    • Vorwerk, which makes most of its money via direct sales, set a fresh turnover record last year. Sales jumped by almost a quarter to €3.5 billion, or $3.9 billion.
    • After 80 years as a direct retailer, the company shifted strategy. It now has added an online shop and downtown stores to its business model.
    • Vorwerk’s best selling product by far is Thermomix, which has a sales growth rate of 50 percent.
  • Audio

    Audio

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Every 30 seconds, somewhere in the world, a Thermomix is sold – and, more often than not, via a direct sale at a cooking party.

Back in 1883, Vorwerk made carpets. Today, it’s a direct retailer that has gone from strong to stronger thanks to brisk sales of its digital kitchen helper. The company plans to keep stirring the pot by rolling out the Thermomix in new markets.

The company’s digital food processor, which whips up meals according to set recipes, has been snapped up by busy people who like food but don’t have much time to cook.

“While the Thermomix cooks, you can get on with other things,” explained Vorwerk chief Reiner Strecker in an interview with Handelsblatt. “In one-person households, for example, the Thermomix could replace the whole kitchen.”

And demand for its kitchen machine has helped propel the private company to record earnings in 2015. Vorwerk, which makes most of its money via direct sales, set a fresh turnover record last year, with sales jumping by almost a quarter to €3.5 billion, or $3.9 billion. And that is the latest in a series of records: The historic family-owned firm from Wuppertal, near Düsseldorf, has almost doubled its sales over the past ten years, making it the fifth-largest direct sales company in the world.

The Thermomix gadget, which was invented 35 years ago, is being continually tweaked and updated, said Mr. Strecker, who co-runs the historic firm with Frank van Oers and Rainer Christian Genes.

And right now, with turnover over almost €1.5 billion and a growth rate of 50 percent, the kitchen machine is Vorwerk’s best selling product by a long shot.

“In Spain every tenth household has a Thermomix. That is our goal in other countries too.”

Reiner Strecker, Vorwerk chief executive

The food processor, with its “recipe chips” which guide aspiring chefs through the cooking process, has profited from social trends, according to its Mr. Strecker. He said he first noticed habits shifting during the financial crisis: “All of a sudden people were staying at home and cooking for themselves. Chefs became television stars, from Christian Rach to Jamie Oliver. Meanwhile, there was a clear trend towards healthy eating,” he said. “These specifics continue to help us today.”

To keep the food processor up-to-date with contemporary lifestyles, the gadget it is expected to be able to shop for itself in the future. Recently Vorwerk launched a test with the food delivery company Hello Fresh, which provided people with food boxes to suit Thermomix recipes.

Following on its sales success, Vorwerk seeks to introduce Thermomix into the U.S. and Turkish markets, said Mr. Strecker, who used to work as finance chief at British American Tobacco. Vorwerk has overhauled its entire business model to gear up for the U.S. market, but will stick to its direct marketing roots, holding cooking parties, opening stores and potentially launching a series of online cooking events, he said.

Vorwerk’s product range includes vacuum cleaners, electric brushes, washing machines, ironing systems, water and air filters, as well as a toolkit called Twercs, which it markets especially to women. Its lines sell across Europe and some Asian markets. Spain is among its frontrunners, with its keenest customers based in the capital, Madrid. “In Spain every tenth household has a Thermomix. That is our goal in other countries too,” Mr. Strecker said, adding that its recipes are varied to the tastes of each country.

“We see a lot of potential in Scandinavia,” he added. “Similarly in China and the rest of Asia. The world is still small to us.”

More than 625,000 people work for Vorwerk in more than 70 countries, including around 612,000 self-employed sales people.

But while the Thermomix sales power on, other product lines cannot keep pace. For example, sales at Jafra Cosmetics, which does most of its business in the United States, shrunk sharply from €461 to €427 million in 2014.

But, faced with shifting tastes, the traditional firm has given some of its long-standing classics a facelift, including the old-fashioned Kobold vacuum cleaner. Its dark green color was replaced by a lime shade, to appeal to a younger market and its vacuum robot Kobold VR200 was awarded the prestigious German Red Dot Design prize in 2015.

And the company has been largely successful in keeping up with the times. On discovering that more and more of its traditional customers were out at work during the day, it turned to new sales channels, a shift in strategy after 80 years of direct sales. Since 2011 it has an online shop and plans to have 60 shops in Germany by the end of the year. “All three channels are growing,” said Vorwerk’s co-chief Frank van Oers.

But direct marketing is still king: Only 10 percent of sales are generated by the online shop, while the shops make up 15 percent.

And the company knows it needs to stay on its toes, amid an influx of cheaper copies, including one from the discounter Aldi, seeking to emulate Thermomix’s success.

“We take this very seriously. The competition motivates us as there are going to be a lot of new food mixers over the next few years. This makes it even more important for us to stay number one in the premium sector,” Mr. Strecker said. “We have to keep proving ourselves… 35 years ago, hardly anyone believed in Thermomix.”

 

 

Katrin Terpitz covers companies and markets at Handelsblatt, focusing on Germany’s Mittelstand and family-owned businesses. Thomas Tuma is a deputy editor in chief at Handelsblatt. tuma@handelsblatt.com and Terpitz@handelsblatt.com

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