Dankotuwa supplies John Lewis of UK

Dankotuwa Porcelain recently received a capital infusion from a consortium consisting of Environmental Resources Investments PLC (ERI) and Ceylon Leather Products PLC and is now a subsidiary of ERI. As a result of this investment Dankotuwa has overcome the cash flow difficulties encountered and is moving towards capacity.

The company recently shipped its first container of porcelain tableware to UK's prestigious store John Lewis.

The surface patterns for the two designs were developed by John Lewis designers. The final designs were a joint effort by Dankotuwa and John Lewis designers who worked on it for about an year.

The designer also visited Dankotuwa and spent one week with the local design team to perfect the designs. This relationship with John Lewis was made possible by UK agent Fairmont and Main. John Lewis is a prestigious retail chain established in 1864 with its first drapery shop on Oxford Street.

Today the retail operations are run by the John Lewis partnership established in 1920 and includes Waitrose and Greenbee. John Lewis' original Oxford Street shop is still its flagship and largest branch. John Lewis has 29 stores throughout England, Scotland and Wales and 8 more are on the pipeline.

The slogan of the brand is 'Never knowingly undersold' which has been in use for 76 years. In 2007 John Lewis was voted Britain's 'Favourite Department Store'.

Dankotuwa has seen a gradual increase in demand in UK and Europe after experiencing a significant drop in demand in 2009 and the first half of 2010.

However, the response to the removal of the GSP+ concessions is still not clear. Several customers have demanded price reductions to compensate for the additional cost to the importer in view of the duty now being imposed.

Sometimes the agent has been forced to bear this loss. According to Philip Harrison, the Chairman of Fairmont and Main, the agent in UK, "The loss of GSP+ is going to be painful in the next 12 months".

However, Dankotuwa's approach of establishing strong relationships with its foreign customers has paid off with several of them continuing their relationship for over a decade.

The thin margins due to competition from countries such as Bangladesh, where the quality level has significantly improved recently, and where several new factories have commenced operations in the last couple of years, is still a major problem, which is further compounded by the decline of the euro compared to the Sri Lankan rupee.

The fall in gas prices over the last three months has helped Dankotuwa to reduce its losses. But unfortunately the Government introduced a new excise duty which has increased gas prices for bulk users from September 2010.

The Ceramics Council has appealed to the Government to reconsider this new excise duty at a time when tableware companies have been hit by the removal of the GSP+ duty concession and the decline of the euro.

In January 2008 John Lewis Oxford Street was awarded a royal warrant from Her Majesty the Queen as suppliers of haberdashery and household goods. John Lewis has a unique system where all its permanent employees are partners in the business.

Dankotuwa, through its agent Fairmont and Main, has been supplying many prestigious stores in UK such as Selfridges and Bhs and has been able to command a premium price because of its superior quality and its business model where it develops partnerships with prestigious stores and retailers.