Peter York: The luxury brand that lost its cool

Wedgwood survived many near-deaths by innovation in design and manufacturing

In 1770 Josiah Wedgwood was commissioned by the Empress Catherine of Russia, to make a cream-ware dinner service, each piece painted with different views of British scenery, houses and landmarks. This commission, as Wolf Mankowitz said in his definitive history of the firm, "established the fashion for it in high places".

It endorsed the rise of the Wedgwood business from just another of the growing group of ceramics producers around Stoke-on-Trent to being the definitive brand, the manufacturer at scale, a proto Industrial Revolution British triumph.

Josiah Wedgwood was prodigious – as a businessman, design manager, technologist – constantly inventing new ways of producing and decorating ceramics – and, as we'd say now, as a marketeer. He recognised the emergence of a wealthy growing urban middle class which wanted to express its new status with dinner services with Imperial associations, and who wanted pairs of vases in the classical style to sit at either end of their smart new marble chimneypieces.

Wedgwood has been out of fashion and pronounced dead many times since then. It has survived through innovation in manufacturing and design. In the 1920s, it was seen as a Victorian cult brand when the fashionable directions were Modernism, Deco and primitivism. But Wedgwood drafted in a new stable of designers and expanded in its more conservative American markets.

So why is the business in administration now? The first fundamental problem – one that all the world's premium china brands have been facing for the last 25 years – is that the market has been plateauing as the importance of ceramics of all kinds has declined through the generations.

The sitcom etiquette guru Hyacinth Bucket may have defined her status with "candle-lit suppers" using periwinkle-patterned Royal Doulton china – a Wedgwood-owned brand. But Hyacinth is 70-something now, and her grandchildren's version of those dinner parties will be kitchen suppers with primitive plates, or shared bills in gastro-pubs. The dinner-service spend has been replaced by the £600 handbag spend, as high-end Western china manufacturers have been relegated to a back seat in the global luxury-brands boom of the last 10 years.

At the same time, manufacturers' costs have been increasingly pressured by competitors in Asia. European skilled labour costs have been around 20 times higher than those in developing countries. Slowly Wedgwood and its peers have had to outsource to China and Indonesia, losing the "Made in Britain" mark.

To grow the brand and maintain volume and profitability, the firm's owners tried everything, particularly "giftware". They hoped to lift the brand out of the mumsy, low-footfall department stores' china halls and dull specialist shops. Giftware was sold in airport duty-free and Hong Kong malls, and it suited the Japanese present-giving rituals.

They brought in new management, new people, new ranges ("casual dining"). There were designers drafted in from fashion-land, like the hugely effective Jasper Conran. Arguably, they did too much under pressure, achieving tactical successes, but eventually losing the strategic game, which is to add value to the brand by keeping it understandable and fantastically desirable in changing markets.