I have to admit, while I had heard of the Swiss Army Knife and had always wanted to own one, I wasn’t aware of the company that manufactured it. Victorinox is the company that manufactures the line of very Swiss, very red, multi tasking pocket knives which can have as many as 141 functions (they acquired Wenger in 2005). I had a chance to visit their HQ in Ibach, Switzerland, during my student exchange program at the University of St.Gallen.
Ibach is a small town in the central part of Switzerland, 34 km away from Lucerne. Set against the backdrop of the famous Swiss Alps, the HQ is a modest multi-story building for a company with annual revenues of half a billion CHF.
The meeting with the HR manager begins at sharp 2:00 PM. He begins by reiterating everything that Swiss people are known for and proud of, Swiss standards for time, cleanliness and order and of course their mountains. Large glass windows dominate the conference room with views of the majestic Mythens. This reminds me of a story that I had heard from one of the locals. Heidi, the most famous Swiss character before Roger Federer became popular, suffers from Swiss Malady (home sickness). A Swiss can not stay away from the mountains for too long.
In the past, they tried targeting 6 segments, positioning 5 of their products to appeal to their most profitable customer – the traveler. Travelers, inevitably need these five things to accompany them always – apparel, fragrances, watches , Swiss army knives and of course the travel gear. But unfortunately, they are shutting their apparel business as it hasn’t been very profitable. The failure of the apparel product line was partly attributed to the division being based in NY because of which coordinating with HQ in Switzerland became difficult. The sixth product segment is the cutlery division.
Victorinox employs 2500 people worldwide with 1300 of them working in Switzerland. They have 72 retail shops across the globe with 10 located in the United States of America. The vulnerability of this heavy dependency on other channels like in-flight shopping proved to be an expensive strategy for them as within a day, 40% of their revenue channel was wiped out when selling Swiss Army Knives (SAKs) was banned on flights post the 9/11 tragedy.
The next 15 years after 9/11, the company has focused on building their brand emphasizing on quality, functionality, innovation and iconic design. After the traveler segment, the second largest market for SAKs is the collectors market. Sale of SAKs to rescue teams from India, Germany, Netherlands, Swiss and Indonesia account for a small portion of the overall revenue (0.03%).
The company is family owned and is headed by Carl Elsener the fourth. There is intense emphasis on protecting the jobs of the locals as they are dependent on it for living. A majority of the employees complete their tenures at Victorinox and Carl Elsener personally holds a ceremony to congratulate the long-serving employees on their work anniversaries, some of which have lasted for 30-35 years. Every year, Christmas is a big deal and the CEO makes it a point to personally handover the festive gifts to the employees. While 80% of the SAK’s production is automated, 20% of it is still manufactured by humans. The margins on the knives produced by labor is lower but the company is very adamant about protecting its workforce. Human workers usually handle customized orders from corporate which are of a batch size of 1000.
As the tour across the factory shop comes to an end, I can’t help but wonder for how long the power of the brand will help Victorinox maintain its customer base? A Chinese manufacturer can sell the same product for 1/10th the price and still make profits. What use does a Swiss Army Knife have for a non-traveler? Will it forever remain a good gift to give or will it translate to an aspirational product that a traveler will consider to be indispensable?