Insider Media Limited

This is a tale about one of Britain's biggest tampon brands. Right, now that we've got that out of the way for the squeamish and easily embarrassed among you, let's get on with the business story.

Because in Lil-lets you'll find the recent story of Midlands manufacturing in a microcosm: management buyouts, off-shoring, the need to build brand and new markets and product innovation.

And although it may not have the cache of one of the big luxury Midlands brands, with some 300 million of its products sold each year, Birmingham's Lil-lets is arguably as big a name as any, and arguably more useful.

And all this is contained within Lil-lets chief executive, Duccio Baldi, who's sitting through his first press interview after appointing a new PR firm.

He's a bit nervous, but needn't be. He gives a clear and well argued case for his products. Despite, or perhaps because, of his Italian heritage - his parents emigrated to Slough in the 1950s - Baldi comes across as the almost archetypal conservative English businessman, complete with nicely polished shoes, rolled up umbrella and slightly battered leather briefcase.

He is quietly spoken, a little reserved and unfailingly polite. You get the feeling that if manufacturing hadn't claimed him for its own, then he would have been at home behind the desk of a traditional bank.

This is not damning Baldi with faint praise. Safe, cautious, reserved and secure are exactly the qualities I want from someone making the most personal of products for the women in my life.

And it's all the more surprising that this most reserved of men should be in the middle of such a public battle: days before we meet, trade union leaders and politicians held a protest in the middle of Birmingham to demonstrate against the company's decision to close its Victorian factory in Alum Rock and move production to Taiwan. That decision led to the loss of 136 jobs and turned Lil-lets into a £325m turnover sales and admin business employing just 16 people in Solihull.

For the unions the closure ticks three of their favourite boxes: private equity, offshoring and pensions. Baldi feels more than a little aggrieved about the way he's been treated.

He says: "There had been plenty of speculation about the future of Alum Rock for years, so when we made the announcement in November 2007 it was a perhaps a shock, but not a surprise.

"We gave them all eight to nine months' notice that the factory was closing and gave them a pretty generous pay-off. We helped people find new jobs."

Lil-lets faces the same problems as any other Midlands manufacturer who decides to shift production overseas: managing the fallout at home while ensuring quality and supply overseas.

Baldi says: "Quality control is vital. Obviously we can't test every tampon, but we can achieve a huge amount via electronic means. We looked around the world, literally, for the right partners - we had to find someone who was an expert in these products and there aren't many around, as most brands make their own products. We've also retained a vast amount of control over the production process. It's not just our intellectual property - we still own many of the machines these products are being made on."

The transformation of the Lil-lets business model over the past year has been more than matched by the rapid changes in the business's ownership.

At the start of the decade the company was part of the consumer arm of healthcare giant Smith & Nephew (S&N), along with brands like Simple soap, Elastoplast and Nivea. S&N, deciding that "it preferred talking with clients like surgeons and consultants rather than Tesco", decided to get rid of the businesses, which led to Lil-lets and Simple being sold to a management team for £3144m, backed by ABN Amro, and then through a secondary buyout in 2003 to Duke Street Capital for £3225m.

Unsurprisingly, it emerged that soap and tampons were perhaps not the most obvious of partners, so, in December 2006, Lil-lets UK formally parted from Accantia Health & Beauty in a £378.5m management buyout backed by private equity house Electra.

Baldi says: "I can't express the feeling of freedom we felt after the management buyout. Before we felt that we were part of a group, but not part of its focus. Within a group you constantly have to pass things up to higher levels or fight turf wars with colleagues over agendas and budgets.

"We completed the deal on my birthday, 20 December, at some stupid time in the morning. And although the lawyers cracked the champagne open, I still had to go to work after only two hours' sleep just to formally break the news to the staff.

"It's strange, but it was a huge anti-climax after a couple of weeks of really intense work. Perhaps it's inevitable after so much work and the excitement about finally owning the business."

Understandably, as someone who has to answer to people who legally own the majority of his business, Baldi is happy to sing the praises of private equity. But his attitude is that as long as he keeps the company in line with the business plan agreed with Electra there should be no issues. And as for claims that private equity is short-termist, a few years seems an eternity compared with life in a quoted company.

All markets have their own particular foibles and quirks, but sanitary protection has more than most. Perhaps the most striking is a rock steady brand loyalty.

The way a woman applies a tampon - digitally or through an applicator - and the brand she chooses in her teens and early 20s is probably the brand she will stay with. Some 90 per cent of British and Irish women use the former system, championed by Lil-lets: most women on mainland Europe prefer the latter.

This makes sales forecasting a doddle, growing market share an upwards task and breaking in at all almost impossible. It's also led to little innovation or research and development spend in the market - most of the fundamental designs have remained unchanged for almost half a century.

This is why Lil-lets is putting so much emphasis on breaking markets in the Far East, which are still relatively untested. Put simply, the first brands to get market dominance there will probably maintain it indefinitely.

And the key stage in any marketing has to be at that crucial age, covering just a few years. And that really means influencing peer groups, as most young women choose their brand after taking advice from friends, mothers and sisters.

And although marketing in the £3100m UK sanitary protection sector is comparatively liberal compared with how it once was - remember all the fuss about the first Bodyform television commercials - a distinct prudishness among middle class, middle-aged males imposes distinct limits on marketing.

So the obvious question is how does Lil-lets get itself out of a marketing cul-de-sac?

Baldi says that the business is launching ten new products over the next few months, including its smallest tampon yet as a way of making the product more acceptable to younger women and establishing that vital brand loyalty earlier still. It is also to source sanitary towels in 2008 from another supplier and extend the brand.

But he admits that this will be a difficult struggle: while Lil-Lets has two thirds of the UK market, its great rival Tampax holds more than twice that. Indeed, Tampax has the killer advantage of being a synonym for the tampon market generally, in the same way that Hoover was interchangeable with the vacuum cleaner.

That's a thought that cheers Baldi up nicely. "We're challenger brand, but it doesn't mean things always have to be that way," he says. "Look at the way Dyson changed the vacuum cleaner market, caught them out. Yes, I want to do a Dyson on our rivals."