V&A finds a licence to make money

The London museum has discovered an enterprising way to compensate for cuts in its operating grant.

The advisers who help companies float on the Stock Exchange would be rubbing their hands with glee if they could get their hands on it.

With a 10-year track record, 300 per cent-plus profits growth both last year and this, and a global brand name, V&A Enterprises would be an attractive new growth stock. But the possibility of seeking a listing is out of the question, says Michael Cass, managing director of the Victoria & Albert Museum's marketing subsidiary. "The trust- ees would have a collective heart attack."

On Thursday, the company is expected to unveil 1995 profits of more than pounds 500,000, up a third on the year before. The current fiscal year, ending in February, is likely to repeat the accomplishment.

Although it has been in business only a decade - compared to New York's Metropolitan Museum, which has been marketing its brand for 60 years - the V&A has become the biggest institutional licenser in the world. The products it sells through a network of 84 partners now constitute a global business with total sales of pounds 70m-pounds 80m.

The cash is badly needed. The V&A saw the Government's contribution to its pounds 30m operating budget fall by pounds 1m last year, and indications are that the Department of National Heritage will make similar swingeing cuts this year. Although it cannot yet cover the shortfall, and probably will never be able to fund the entire museum operation, the efforts of V&A Enterprises have ensured that the new pounds 5 entrance fee introduced last week was no higher.

V&A Enterprises began as an ordinary museum gift shop, but with the arrival of Mr Cass five years ago it embarked on an ambitious expansion campaign. The company has a unique advantage over bigger competitors such as the Met and the British Museum. Its parent institution was founded with the profits from the Great Exhibition in 1852 and its 19th century role of inspiring design - it was originally called the Museum of Manufacturing - is still one of its principles. "A lot of our rivals are just there as temples of art," says Mr Cass.

Tucked away on the V&A's 13-acre site in Kensington, with its eight miles of galleries, are enough classic patterns to keep any designer busy for a lifetime. The company's best-selling pattern to date is called Kalamkari, a rich pink and blue design from Indian wall hangings now used on bed linen by licensee Dorma, a division of Coats Viyella.

But the range of products that carry the V&A logo extends to an ornate Ormolu Dolphin Clock, art deco lamps, a Gauguin umbrella, Spode spice jars and Persian bowls. A new line of blouses and nightwear from Coats Viyella is expected to appear in Marks & Spencer shops next spring.

Some of the designs are being used in radically new contexts. One Japanese company is using patterns from Spanish altar cloths to make kimonos. Another set of sweet wrappers could soon be used on textiles. "A lot of what we do is not straight reproduction," says Mr Cass. "We try to steer our licensees towards things that will fit with their product."

Which is not to say that the company is cavalier about how designs are used. The trustees and curators of the museum are naturally conservative, and insist on both a high standard of quality and historical accuracy. Mr Cass is careful to ensure that the brand does not become devalued through overuse, as happened to Yves St Laurent. Some partners - such as one Japanese towel company - had to be dropped because the company did not think their goods came up to the mark.

While the profit figures are expected to look good, the returns from licensing will probably be even better - double last year's. About pounds 3m of the company's sales come from items it commissions directly to be retailed in its gift shop.

Last year, the shop's sales were flat, a reflection of the museum's exhibition calendar. While the British Museum attracts 6 million visitors a year, and the Met up to 5million, the V&A drew only 1.4 million last year because it did not run any big shows.

The company hopes its in-house business will improve with the construction of the controversial new Boilerhouse, designed by architect Daniel Libeskind. How much space in the angular annexe will be devoted to profit-making activities is still being debated. "Space is already at a premium in that building," says Mr Cass.

He is also refocusing the company on marketing rather than attracting new licensees. When the programme began, V&A Enterprises spent much of its time looking for partners. Now they are banging on its doors, and it has to turn away more than it accepts. The total number of licensees probably will not grow much beyond 100. Some 20 per cent of its revenue is ploughed back into joint promotion at the moment, and the percentage could rise in future years.