“People know each other, trust each other, respect each other and help each other”

Interview with Victorinox CEO Carl Elsener

by Stefan Barmettler, Journalist “Handelszeitung”

(21 February 2023) Carl Elsener has been CEO of Victorinox since 2007 and is not thinking about retirement. He is a model entrepreneur. Now, Carl Elsener has been voted “Leader of the Year” by the Swiss “Handelszeitung” readership for the second time.

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Stefan Barmettler: You’ll be 65 next summer – and then you’ll be cutting back?

Carl Elsener: I have been with the company since 1978 and in charge since 2007. I am still fully motivated.

That means Carl Elsener will stay until he is 70?

My work gives me great pleasure. However, a suitable succession plan for Victorinox is very close to my heart. In order to make a good transition possible, I am happy to stay with the company beyond the age of 65, health permitting.

These are bad signs for the next generation who may have new ideas.

They are already contributing these ideas today. I too am and will stay up-to-date. I am kept on my toes by my wife and my eight siblings, that’s for sure.

Victorinox, a family business

There are currently two generations working in the company, the fourth and fifth. How do you keep people involved?

In the fourth generation, we are eleven siblings, four girls and seven boys, eight of whom are in the company, plus three spouses, my wife for example.

And in the fifth generation?

There are eight family members. They are between 15 and 30 years old. Our goal is to keep the family involved. It is an extremely motivating task to promote a traditional Swiss brand all over the world. And the family members have the opportunity to contribute to the company according to their abilities.

The family decides who tackles what

Who decides on who goes into production, who goes into marketing, into product development or into management?

The family and ultimately the board of directors decide who will work where. Strengths, training and education, and interests play a role. So far we have done well.

And if an external person is better than a family member?

Then we would prefer the external solution. But in a similar constellation, the family member has priority.

Are your three children also ready for the family business?

My wife and I have always made sure our children receive a good education. It is undoubtedly the case that there are candidates in the fifth generation who have the skills to take on responsibility at Victorinox.

Your son?

Carl is still young, has just finished his bachelor’s degree at Jacobs University in Bremen and is going to complete the mandatory 18 weeks basic military training next year. For the time in between, he is working in marketing with us. He is very motivated, graduated at the top of his class at school and brings the heart and soul which is needed.

Your two daughters?

We are also very proud of them. Johanna spent ten years in England, completed two master’s degrees, one in business, one in engineering. She currently works for a management consultant in Zurich. She recently became a mother for the first time and we became grandparents for the first time. With her, too, I could imagine her taking on a position at some point. The younger one, Marie-Louise, studied design in Pasadena, California, and has worked internationally, including in China. She is now doing an internship year with us, in the Customer Experience Team in e-commerce.

The young generation is focusing on work-life balance. You too?

This next generation does it very well, they can step on the accelerator and don’t forget to allow for a recovery phase in between.

How many hours does the boss work?

It depends. There are days when I go home between 6 and 7 p.m., then again between 10 and 11 p.m. if there is something urgent to do.

Together through good and bad times

There's an old saying: the first generation builds, the second manages, the third studies art history, the fourth goes downhill.

The fourth would be us. Now we are the fifth generation, and still successful (laughs). Our family continues to put a lot of energy and enthusiasm into our employees, our clientele and our brand. We have inherited these pillars of success from our father, with whom I worked in the same office for 34 years. If we get it all right, not much can go wrong.

You are every management consultant’s nightmare because the family does not focus on performance.

Hire and fire doesn’t exist with us. Today, we are a larger medium-sized company, but we have managed to maintain the atmosphere of a family business even here at the headquarters, where 950 employees are working. People know each other, trust each other, respect each other, and help each other. Together, we want to go through good times, but also through bad times. That’s what we try to exemplify with the family.

You have mastered many a crisis without any layoffs?

The company was founded in 1884 and has been through a lot. Two world wars, oil crises, recessions, 9/11. Back then, pocket knife sales plummeted by 30 percent and with joint efforts, we managed to keep all the jobs. This contributed a lot to loyalty.

A consulting firm would also tell you that you could grow much faster if you opened up to the capital market or to efficiency measures.

As far as production is concerned, they are wrong. We have automated a lot in our operations and focused on efficiency, so we can be compared to the Japanese kaizen efficiency principle.

More growth?

Yes, we could have grown more and faster. But we never wanted to grow by any means. Sustainability was always in the focus. Yes, we had dozens of consultants knocking on our door, offering U.S. companies, parts of companies or plans for digital strategies, for buying gadgets. We always said no.

Sustainable way to grow

Every company has the ambition to grow and to carry the brand into the world, perhaps with a stock market launch bringing in new capital. The Victorinox brand has much more potential.

It may be we could have exploited more potential with a more aggressive style, but our sustainable way of growing fits our family.

Conquering the USA?

The U.S. is our most important market, but clearly there is more to come. We have already had quite a few experiences in the USA (laughs). Our distribution partner was a listed company, so two philosophies clashed. The aggressive listed company from New York and the sustainable family business from the canton of Schwyz. When it was no longer working for us, we acquired the company in 2002, took it off the stock exchange and put our own management in place. This made a lot of things easier.

The legal wrangling with U.S. lawyers remained.

For many years. It was often about trademark disputes, for example about the Swiss Army Knife. We wanted to protect the Swiss Army brand, but regularly argued with Wenger, our Swiss competitor at the time. At some point we decided we could cooperate with each other. Finally, we filed a joint trademark in the USA for Victorinox and Wenger. We were the first companies in the USA to do so. However, the dispute continued, simply with other companies. At the time, I was in court in the USA several times. Finally, we won and secured the Swiss Army trademark.

You still pay royalties to the Swiss Army for the trademark rights?

Yes, since 2004, and the contract is still in force today. Accordingly, we pay a royalty every year on the watch and perfume sales under the Swiss Army label.

How much has come together over the years? Is it enough to buy a tank?

No, but it’s enough for a few assault rifles (laughs).

Shop window displays with our products

Why so hesitant about the trademark rights?

For the first hundred years we produced knives, so branding was not a priority. We simply adapted our production to the demand. We only started after 9/11 to protect our brand section more strongly. We took our first step in 1980 when my father was very concerned about all the copies from Asia challenging our market. At that time, we tightened the reins legally for the first time. But there was a second effect.

Namely?

We thought about how to strengthen the brand and came up with the idea of displaying our products in the shop windows. In the past, our knife assortment was in drawers. However, with displays in the shop window, sales increased by a third.

You later expanded into other areas, such as perfume, outdoor, clothes, watches or suitcases. That doesn’t appear like a targeted strategy.

With our success with the pocket knives, consultants and retailers from all over the world came to us and asked if we could offer other products under the Victorinox brand, with the same product promise, with the same quality. So we used surveys to test which additional products we could sell. In those days, outdoor products and travel items were at the top of the list. Initially, we started with watches. The first collection came out of the cooperation with a U.S. distributor. Today, we make 36 percent of our turnover with pocket knives, 34 percent with kitchen utensils and cuttlery, 17 percent with travel gear, 10 percent with watches and 3 percent with perfume.

Your venture into the clothing world failed.

You could say that. We put our heart and soul into it, but at some point we had to admit that it would be a botch-up and did not really fit our brand.

As an entrepreneur you take risks

A mistake?

As an entrepreneur, you take risks. Of course, we should have reacted earlier.

How much money did you lose? Was it a double-digit million amount?

We have lost several million, but we only ever put up as much money as we could digest ourselves. It was a hard day when I flew to the USA and had to tell the team, which had been there for years working with incredible passion, that it was all over.

You have made acquisitions in the USA and Switzerland, Epicurean and Zena.

With Epicurean, we have an even stronger presence in the USA in the kitchen and cooking sectors.

Epicurean produces wooden chopping boards. These are not premium and do not fit with Victorinox.

Well, they do, they are quality products in the USA. Strictly speaking, the boards are made of paper composite. And the brand has helped us to establish ourselves more strongly in the specialised trade sector.

Zena produced potato peelers. Aren’t they mass-produced?

A potato peeler from China is not premium, however, the one from Zena is, which is why it costs five times more than the Chinese product. The quality is better, the longevity is greater. In addition, we offer a worldwide service. The REX peeler is top-notch and also a Swiss icon.

A pocket knife is an analogue product

Ten years ago, you launched a pocket knife with a USB stick, and since then there has been little that connects to the digital world.

Yes, we built an MP3 player into a pocket knife, but we soon realised that this player would fit better into a mobile phone. Today, it is clear to us that a pocket knife is an analogue product. A Victorinox pocket knife lasts a good fifty years. We even get pocket knives for repair which are seventy years old and were perhaps a confirmation present from a grandfather. So there are many customers who have emotional ties to the knife. This is not true for a USB stick.

A solar panel on the pocket knife casing or a WLAN hotspot?

We’ve considered all that, yet the mobile phone can do a lot better. Besides, technology is much more short-lived than a pocket knife, and then there’s the issue of adapting to the various technology standards. No, we stay analogue. I can see from the sales figures and the popularity of our carving courses, which are always fully booked, that the pocket knife can survive in a digital world.

Sales via the online channel?

We started relatively late with this too, a few years before Covid-19. When the pandemic broke out, we were ready and grew by 50 percent a year. Today, it’s 20 percent in the U.S. and single-digit growth in Europe.

How big is the return rate at Victorinox? At Zalando, it’s 50 percent.

Our returns are between 2 and 3 percent.

Christian faith is important for our family

Wooden crucifixes hang in your offices and in the production facility. Isn’t this out of time?

Not for us. The Christian faith is important for our family, it gives us inspiration for our life, for our work. Of course we are open and tolerant towards other cultures and religions. In employment, religious or cultural background plays no role at all. But our family always draws strength and support from the Christian faith.

So no rosary before the board meeting?

No (laughs). I talk to the Lord from time to time and ask him to help me with decisions so that we can find the right solutions.

Do you get an answer from Him?

Not directly, but He gives me strength and reminds me of our values.

Selling the company not possible

In 2000, you transferred the company to a foundation. This rules out a selling, even a merger.

At that time, we transferred our shares to the foundation without any compensation. This also means that the family has no possibility of drawing dividends from the company. A sale is also not possible and would contradict our family values. Instead, we want to use the reserves to ensure that the company can survive worse times. Which is not always easy.

You were able to take over the Wenger Company because it was over-indebted.

The banks got nervous when sales collapsed in 2001 and no quick recovery was in sight. Our takeover during the 9/11 crisis showed that we took the right way. No one from the company has ever enriched themselves. My father still rode a simple bicycle to the office every day when he was eighty. Today we manage a turnover of over 400 million Swiss francs.

And the profit margin?

We don’t publish it.

With a pocket knife you always have a piece of Switzerland with you

How about your salary? Does it amount to 400,000 francs?

Not quite. The first digit is a three. Once again, maximising is not our thing. We do what works for us. That’s true for a lot of family businesses in Switzerland. They keep a low profile and think long-term about their company, their employees. And we are happy when everyone at our company is passionate about what they do. And our customers are proud of our products. Recently, a customer said on television: with a pocket knife from Victorinox, she always has a little piece of Switzerland with her.

And how is 2022 going?

In 2020, sales dipped by over 30 percent, and we were in the red. The following year, 2021, brought us strong growth again and in 2022 we are also slightly in the black. The result has improved significantly again. How high it will be depends on the Christmas business. The last few weeks are very important, especially for pocket knives.

Source: https://www.handelszeitung.ch/unternehmen/victorinox-chef-carl-elsener-verrat-im-interview-dass-er-ab-und-zu-mit-gott-spricht-557207?utm_medium=social&utm_source=linkedin&utm_campaign=article_traffic, 22 December 2022

Reprinted with kind permission of the publisher.

(Translation “Swiss Standpoint”)