During Milan Fashion Week this month, the arches of Villa Meissen, the Italian showroom of the German luxury porcelain and fashion house, were adorned with white butterflies as models floated through wearing snow-white creations shimmering with lace and pearls.
The presentation of the 2015 Meissen Couture collection at the store in Via Montenapoleone was a first for the 300-year-old company. Fashion journalists were there, along with buyers and the German actress Anna Maria Mühe. But the event also masked a dilemma currently facing the publicly owned company: Should it consolidate or expand?
Christian Kurtzke, chief executive since 2008, has dreamed of turning Meissen into a lifestyle brand, offering accessories, furniture, fabric and haute couture. But the German state is holding him back.
“Without this spending slowdown, we would have grown 20 percent this year.”
The company is ultimately owned by the German state of Saxony, and it has not yet released a budget for Meissen this spring. It wants to wait until it receives the results of a report from its auditors KPMG this fall before it releases new money. Recent state elections have brought even more insecurity.
Meissen has had a spending freeze since March. “I have not been able to undertake very important investments for the future,” Mr. Kurtzke said. “Without this spending slowdown, we would have grown 20 percent this year.” As it is, growth is expected to be between zero and 15 percent.
Mr. Kurtzke, however, is confident politicians will ultimately back his plans. “I expect that KPMG auditors will confirm that my strategy had no alternative, because it secured jobs and preserved the [Meissen] name and cultural asset.”
Mr. Kurtzke, a former Boston Consulting Group executive, has already cut several jobs, as part of his plan to return the company to profitability.
He recognized that global demand for luxury china and porcelain figurines was shrinking, and decided to build new product lines. The brand now has three divisions: fashion and accessories, jewelry, and home and art collections, which includes classic porcelain.
The state of Saxony has invested almost €15 million ($19.2 million) in the venture since 2012. Mr. Kurtzke promises the company will be back in the black in 2018.
But the diversification strategy makes many Saxon politicians anxious. They are scarred by the experience of SachsenLB, a state-owned bank that had to be bought out in 2008 after overstretching itself in foreign markets.
“We are not questioning the strategy itself,” said Stephan Gössl, spokesman for Saxony’s finance ministry. “Meissen must position itself more broadly in more business areas. But we want this strategy to be more deeply examined, to understand how intensely we want to accelerate it.” He did not say how much the strategy would cost the state.
One alternative would be to bring a private investor on board. But the former state finance minister, Georg Unland, made it clear the company could not be privatized under any circumstances.
From Mr. Kurtzke’s viewpoint, the company now has a choice: “Either we call off the growth strategy, which would mean a massive loss of jobs, or we continue to build the brand. But if we don’t want a private investor, we need to invest.”
After broadening the product portfolio, Mr. Kurtzke aims to expand the traditional brand into worldwide markets. In the next four months, two new Villa Meissen stores are due to open in China, one in Beijing and one in Shanghai. They will showcase the brand’s full portfolio, from bridal gowns and handbags to upholstered furniture and tea sets. Istanbul will come next, followed by seven stores in the Middle East, Russia and the United States.
Only time will tell if the strategy pays off.
The author is a correspondent at Handelsblatt, reporting on Italy’s economy and politics. Contact: email@example.com