Keeping the brogue in vogue: profile: John Church

The economics of shoes is not a subject that necessarily sets the pulse racing. But it is a central feature in the life of John Church, the donnish, soft-spoken chairman of the eponymous shoe company whose classic brogues adorn the feet of a fair portion of the world's great and good. To him, the subject is fascinating, largely because the continued existence of Church & Co, the family-controlled and publicly listed shoe maker and retailer, depends on it.

Shoe economics are simple - on the surface at least. You match supply to demand, and produce the highest quality for the lowest price. Big deal, you might think. Anyone can do that.

John Church smiles. "The problem with making shoes in this country is the cost of labour. Nowadays shoe manufacturing gravitates towards the low labour cost countries like South Korea and mainland China," he says. "It means that only upmarket brand operations such as ourselves can survive in England."

Church & Co is a study in contrast. While four out of every five pairs of shoes sold in England are imported, two thirds of Church's 400,000 pairs annual production goes for export. As the shoe business in Northampton has collapsed over the last 40 years, Church's has expanded, first by buying production facilities and then by buying and growing a network of shoe shops to sell its products.

The fact that it remains in Northampton, employing 1,800, when all but a handful of manufacturers around it have fallen, has a lot to do with the power of its brand, synonymous with high-quality black brogues worn by Englishmen (close examination of the latest James Bond film reveals a pair on the feet of 007 actor Pierce Brosnan) and Anglophiles the world over. It is no coincidence that the only other shoemaker of consequence remaining in the town is Griggs, makers of the ubiquitous Doctor Marten boot, one of the strongest brands in the shoe industry outside the Nike-Reebok sports brand axis.

The Church brand has been carefully nurtured since 1873, when John's grandfather and his two great uncles founded Church's. John, now 61, has been in the business since 1964, having qualified as an accountant, and his son William, 30, a qualified chartered surveyor, and Jonathan, 35, also work there.

Inside the bustling Church's factory, a Victorian era building that has the air of a prep school, it is William who leads the tour. For brand value here, read cost: the factory is labour intensive, uses high-quality raw materials, and takes an inordinately long time to produce the goods. The production cycle for a pair of shoes can range up to seven weeks. The tanned calf hides go under the knife of the "clickers" - craftsmen who cut out the pieces of leather for the shoe's upper with a click of their razor-sharp scalpels - and through the stitching and shaping process. Then they are put on "lasts" - essentially plastic shoe trees that stretch the leather upper into a shoe shape - for up to two weeks, before getting their leather soles and final polish and being boxed up for delivery to retailers.

The time spent on the last - and the shape of the last itself - is the trade secret, and a chunk of the expense, says John Church. "We cannot compromise the lasting process - it is the reason our shoes keep their shape and the reason our customers will pay up to pounds 200 for our shoes."

The problem has been that tying up stock for two weeks means that shoe economics begins to work against you. Everyday shoes tend to be lasted for a few hours at most. Five years ago the company was caught in the middle of a recession, facing stiffer competition from the upmarket Italian shoemakers, and losing money.

The John Church solution was to attack the other major cost centre: labour. It has taken a few years to implement, but in certain areas of the Northampton factory the linear production method of years of making shoes has been discarded. Instead, workers operate in teams of four or five in a roughly horseshoe-shaped arrangement of machine tools. There are more machines than people and each team member knows how to operate all of the machines, doing what is necessary to get the batches through the process.

According to Church, the results have been extraordinary in the areas where teamworking has been introduced. Production time has been slashed from seven weeks to about a month, saving Church about 5 per cent of the cost of every shoe. "We were a bit apprehensive about introducing teamworking, and we took our time about it, but the results have been really encouraging," says Iain Kennedy, Church's managing director. They now intend to roll out the system to all parts of the production line dealing with the higher volume products.

The stately progress of Church's towards teamworking is a characteristic reflected in other parts of the business. Teamworking has been around for years in the shoe industry. The company's brand licensing efforts have also proceeded slowly, and at times fitfully, as the occasional deal has soured. The Church's shop in London's Jermyn Street now offers branded ties, men's grooming accessories and luggage, but the offerings take second fiddle to the shoes.

Indeed the whole shape of the company has an unfashionable air about it, at least from the management guru's perspective. It owns old plants in high-wage areas, and persists in owning a retail network of over 100 shoe stores in the UK and a far-flung network of overseas outlets. "It works," counters Church.

In the last two years it certainly has. The recently announced 1996 results saw profits up 18 per cent to pounds 5.3m on turnover of pounds 79.7m. The headline figures, however, concealed stronger progress. Last year the company's net cashflow was pounds 9m, which paid off another pounds 4m of debt (the debt levels have dropped to pounds 3.5m from pounds 11m in 1995). The cash also allowed the company to buy pounds 2m worth of equipment last year.

William Church is standing by one of those recent purchases, a hideously complicated machine tool that uses an octopus-like embrace of metal rods to pull the leather upper of a shoe over its last to shape it. What differentiates it from a grimier looking machine to its right which is doing the same thing is the computer monitor which asks the operator to tap in what kind of shoe needs to be shaped and does the shaping automatically. It cost pounds 50,000, he says, and they will be getting another soon - "if the accountants will let us".

The younger Church, who has only been in the business for two years, is working a lot on the property side, looking for new retail sites for the company - which according to his father could now include out-of-town shopping centres.

William knows shoe economics too, and takes more than a passing interest in new machine tools which, he says, will reduce human errors in the process, speed things up, and with luck pay for themselves inside five years. The interview, and the lesson in shoe economics, is drawing to a close, and the patriarch of the Church clan is off on a well-earned holiday. "We are a gradualist company. We don't believe in expanding too fast - you can't just wake up one morning and manage a network twice the size. We are happy doing things our way."

The Church creed: 'We are a gradualist company. We don't believe in expanding too fast - you can't just wake up one morning and manage a network twice the size. We are happy doing things our way'

Photograph: FT