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Getting AHV back on an even keel not at expense of pension funds, Thomas Amstutz
echo-interview, August 2016

Getting AHV back on an even keel not at expense of pension funds

ELIPSLIFE ECHO - INTERVIEWS WITH PROMINENT BUSINESS LEADERS

Getting AHV back on an even keel of pension funds

Echo-Interview with Thomas Amstutz, CEO Feldschlösschen Getränke AG

elipsLife echo: Mr Amstutz, Feldschlösschen has been market leader among the Swiss brewers for years now. How have you managed to maintain this position?

Thomas Amstutz: Feldschlösschen has been the front-runner in Switzerland for over 120 years. This fact is gratifying and challenging at the same time. We're rising to the challenge by building on our strengths as Master Brewers, Pioneers and Partners. By master brewers, I'm referring to the quality of our products that we've been demonstrating for decades now. In addition to this uncompromising commitment to quality, there is above all our pioneering spirit that has secured our position as market leaders. For example, Feldschlösschen was the first brewery in Switzerland to establish a direct rail link and the first to begin brewing outside a city. Moreover, we were the first to install an ice-making machine that put an end to the laborious job of sawing up blocks of ice. We also led the way with brewing alcohol-free beer. This innovative drive has been a hallmark of our activities throughout our history. And back in 1972, we also pioneered the installation of a biogas plant, the first company to do so in Switzerland. So we were in the vanguard of the green revolution. Our environmental stance is a central component of our corporate culture.

I regard my most important task to be ensuring that Feldschlösschen, as market leader, continues to live up to its pioneering heritage and does not rest on its laurels.

How significant is marketing in respect to positioning your brand?

We need to differentiate between positioning the Feldschlösschen company, on the one hand, and its brand on the other. The brand Feldschlösschen is the most important among the various others we have and accounts for 60% of our beer sales – a quarter of all beer consumed in Switzerland bears the Feldschlösschen brand. As a company, we have a market share of 42%; besides Feldschlösschen, our brand family includes Cardinal, Warteck, Hürlimann, Gurten and others. To ensure the success of the various brands, we need ongoing innovation. And we need it across the board: in logistics, production, marketing and, most recently, also in digitization.

Switzerland has seen the emergence of numerous microbreweries in recent years. How do you explain this boom?

This phenomenon is a clear trend away from globalization. The consumer demands to know where the product comes from and wants to be offered a wider range of locally and regionally brewed beers. Feldschlösschen, both as a brand and a company, is Swiss; its products originate in Switzerland. The move away from globalization towards regional products is plain for all to see. We, too, have addressed this trend by, for example, spinning off our Valaisanne brand from the Feldschlösschen company. Valaisanne is operated as an independent local company.

Echo-Interview with Thomas Amstutz, CEO Feldschlösschen Getränke AG

Switzerland is home to one of the highest concentrations of brewing companies in the world. Why is beer so popular in our country?

The number of breweries in Switzerland has grown to around 700. This statistic, published regularly by the Swiss Excise Office, rises from week to week. I should add, however, that roughly 96% of the total beer output is accounted for by the 17 largest breweries. You always need to view these numbers in relation to the concentration of brewing companies. The major benefit of so many breweries is that beer becomes a talking point. The numerous microbreweries are helping revive a whole branch of the economy, stimulating competition and doing their part to make beer consumption more socially acceptable. The time was when beer was never served to guests at a reception. This situation is changing. Meanwhile, it has become perfectly acceptable to drink a beer, even in sophisticated circles. By the way, since 2004 the per-capita consumption of beer in Switzerland has remained very steady at between 55.3 and 58 litres per year. This means that compared to elsewhere in Europe, Switzerland has a lower middle ranking.

…so the microbrewers are not competitors, but rather help enhance beer's overall image?

They influence how people perceive beer, in a positive way. Let me just point out that brewers don't refer to one another as competitors but rather as peers. Our industry is based on mutual respect. In principle, the market has room for all kinds of brewers. However, a microbrewery could never cope with the demand from one of Switzerland's large wrestling festivals. That said, the microbrewers do indeed present a challenge for Feldschlösschen. They help diversify supply, shape trends and address the changing needs of consumers. This keeps us on our toes. We must always be ready to adapt – this once again puts our pioneering spirit to the test.

It's not only the new microbrewers entering the market. The demand for foreign brands has also risen sharply. Since 2000, the market share of imported beer has almost doubled to over 26%. How is the market leader addressing this challenge?

It's true that since the turn of the millennium, imports of foreign beer have almost doubled. However, this trend has stabilized over the last three years. Approximately 50% of beer from abroad comes from Germany. The reason for this two-fold increase in imports was, above all, the cheap brands from Germany. Nowadays, a cheap German beer costs between 29 and 50 cents per half-litre can. In contrast, a can of Feldschlösschen costs between CHF 1.70 and CHF 1.80. So for the price of a half-litre can of Feldschlösschen, the consumer can purchase four to five cans of German beer. We have no other choice than to prove to the consumer on a daily basis that the higher quality of our beer justifies a higher price.

Does Feldschlösschen brew beer exclusively in Rheinfelden?

We brew beer in Rheinfelden and Sion. We don't have any operations abroad. The international premium beer, Carlsberg, is brewed in Switzerland for the Swiss market. We do, however, import other brands from the Carlsberg Group, for example selected speciality beers such as the French 1664 brand for the market in western Switzerland. We don't import beers for the low-cost market.

Does Feldschlösschen sell its beer abroad?

No, there are, admittedly, breweries in Germany that are also called Feldschlösschen, but this is merely a coincidence. You can't buy our Feldschlösschen beer outside Switzerland. It's a pure-play Swiss product, straight from the "Schloss" – only for Switzerland.

In your view, what do you need to be a successful entrepreneur?

In Switzerland above all, successful entrepreneurship has to do with innovation, with a pioneering mindset. Because Switzerland is an expensive production location, we need to go on reinventing ourselves and differentiating ourselves from our peers in Europe and overseas. To achieve this goal, we need to invest in exactly those areas where we want to stand out. What's necessary, of course, is a regulatory environment that facilitates such investment, instead of a growing number of restrictive measures that hinder the free market economy.

Thomas Amstutz in an echo-Interview

How many people does Feldschlösschen Getränke AG have on its payroll?

In Rheinfelden, around 650 and in Switzerland as a whole roughly 1,300.

Does the topic of old-age provisioning and benefit payments come up during the hiring process?

No, it doesn't – and this is most probably wrong. Especially, because our company has its own, very efficient occupational pension scheme with a healthy funding ratio and a conservative investment strategy. We should set off our pension scheme benefits against the wages we offer employees and emphasize the additional security our pension plan offers. Up to now, we haven't done this often enough. On the other hand, job interviewees rarely ask about the benefits provided by our company pension plan. Feldschlösschen is an attractive employer. The main topics during job interviews, especially for the younger generation, are leisure and recreational opportunities, special rates for the purchase of beverages and also what Feldschlösschen does for the environment and society. Questions concerning our pension scheme do not arise until employees get older.

Gaining an in-depth understanding of the proposed changes to the retirement and benefits system in Switzerland (AVG 2020) will require a communications effort. Is this a topic in your company?

It hasn't been up to now. Questions surrounding the topic of old-age provisioning have not been accorded the significance they should have. I find this both misguided and astounding. All of us know that we're running into a major problem here. It's as clear as the nose on your face. You only need to look at demographic development. But here's the rub: Politicians are voted into office every four years. Why should they try to push through such an unpopular measure as the reform of the pension system with the inevitable raising of the retirement age, when they know full well it's just not politically feasible?

Thomas Amstutz, CEO Feldschlösschen Getränke AG

Switzerland has a well developed three-pillar system, which combines government and private provisioning for old age. How do you assess future prospects for this system?

It's a sensational system - the only smart way to go! Switzerland has once again demonstrated that it's capable of pioneering achievements. One part is shouldered by the state and the other by companies and employees. Thanks to the three-pillar system, individuals can undertake additional provisioning, just as they want. And it's still tax deductible. Is there anything better than the three-pillar system? We need to preserve it at all costs.

The unions and parties on the left want to strengthen the AHV at the expense of the pension funds and private provisioning. Is this the right way to go?

In my view, this is absolutely the wrong way to go about it. We shouldn't create even more state-subsidised pensions. On the contrary, the reform of the AHV should be tackled from within the system itself. This is what needs to happen now. The pension funds should not be touched. These systems ae separate and should not be comingled. It would be fundamentally wrong to use the pension funds to get the AHV back on an even keel. I'm totally convinced that there will be no majority for such an idea.

Our ageing society and rock-bottom interest rates are putting pressure on our pension funds. Are they – and indeed all of us – going to fall victim to financial promises we can't keep?

When I look at my annual pension fund statement, I see the benefits that should be due to me when I reach the age of 65. These benefits are projections, calculated with the aid of the technical interest rate and the conversion rate. When we finally reach the age of 65, we won't receive them anymore. I my view, the current projection-based calculation in respect to the retirement age of 65 needs to be removed from the pension fund statement. Such projections are based on parameters that can change. It would be smarter and fairer, in my opinion, to only include benefits in the pension fund statement that reflect what has actually been paid in up to retirement age. Projections based on the technical interest rate and the conversion rate could be illusory and provide employees with a false sense of security.

Should pensioners also have to do their part to recapitalize the retirement benefits system in Switzerland – or are already acquired pension rights taboo?

This is a thorny question. It will rather depend on how the situation unfolds. But I don't believe we'll be able to put the house in order without including the pensioners in these efforts. In my view, already confirmed pension benefits shouldn't be touched. However, because there's a risk our politicians are going to miss the bus in this respect, I fear the pensioners are going to have shoulder part of the burden as well.

echo-interview, August 2016

What's your take on raising the pension age for women to 65?

I think it should happen immediately. When the AHV was established in 1948, the retirement age for women was 65. Moreover, I'm certain the retirement age in future will rise to 67 or even 70 because there are simply too few people paying into the system. Our politicians are dithering. Nobody is willing to speak openly about this issue, let alone do anything about it. But one day the pressure will be so strong that there will be no alternative but to take action.

If you could give advice to the pension funds, what would it be?

I would counsel the pursuit of a conservative, safe strategy especially with respect to investment. The pension fund managers should never forget that they're dealing with employees' funds, not their own. My advice: Invest across as broad a spectrum as possible and invest as safely as possible. And bear in mind that the share and bond markets are not always the safest of havens. The experience of recent years has repeatedly shown this to be true.

Personal Profile
Amstutz Thomas
CEO Feldschlösschen Getränke AG

Born in 1967, Thomas Amstutz has been CEO of Feldschlösschen Getränke AG in Rheinfelden since August 1st, 2012. A former top handball player with St. Otmar St. Gallen, Amstutz gained an economics degree from the University of St Gallen in 1992. He began his profes-sional career with Unilever in 1992, first as Brand Manager in Zurich and, from 1995, as European Innovation Manager based in Paris. In 1998, he moved to Hero, first as Marketing Manager for Hero Switzerland, and from 2001 as General Manager Hero Switzerland. Six years later, he was appointed to Hero's Management Board with responsibility for Switzer-land, Italy, France, the Netherlands and Japan. In 2005, he became CEO of Feldschlösschen Getränke AG and in 2008 joined the Carlsberg Group as CEO of Brasseries Kronenbourg, based in France. He returned to Feldschlösschen as CEO in 2012.