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We have to face demographic realities, Carl Elsener
echo-interview, July 2016

We have to face demographic realities

ELIPSLIFE ECHO - INTERVIEWS WITH PROMINENT BUSINESS LEADERS

We have to face demographic realities

Echo-Interview with Carl Elsener, CEO and Chairman of the Board of Victorinox AG

elipsLife echo: Mr Elsener, Victorinox is a world-renowned brand. How did a pocket knife become so unbelievably successful?

Carl Elsener: Quality and function certainly play a decisive role. Thanks to their many uses, Victorinox pocket knives are much more than just useful and reliable tools. They go with people everywhere, not only in their daily lives but also when adventure beckons, whether to the North Pole, Mount Everest or a tropical rainforest. Victorinox knives are even used in space, as they are part of the official gear issued to all space shuttle astronauts. A journalist wrote once that a Victorinox pocket knife is “a friend, not just a knife”, in other words, a companion for life. In his autobiography, the Canadian astronaut Chris Hadfield talks about his experiences in space and describes what happened when the space shuttle docked to the Russian space station Mir. When he could not open the hatch, he remembered his Swiss army knife, which he used to break into the space station. His conclusion: “Never leave the planet without one!”

Victorinox AG not only sells pocket knives, but also offers travel gear, clothing, watches and even perfumes. How would you define your company today?

We see Victorinox today as an authentic Swiss multi-product brand, but the Swiss army knife is and will always be our core product. It also serves as the inspiration for all our other product categories. We try to apply the values that made the pocket knife successful to all other product categories.

What are these values?

Customers everywhere in the world trust the quality, functionality, innovative strength and iconic design of the Victorinox products. These four values always take centre stage when we develop new products. The common element linking our product categories is the fact that all our products, whether pocket knife, clothes, watch, travel gear or perfume, accompany people in their everyday lives. Perfume is actually the only product category that did not originate in our heads, but was added to our product range with the products of Wenger, a company we took over in 2005. Wenger already sold perfumes 25 years ago.

Victorinox embodies the term “Swissness” like no other brand. How important is Swissness for the company's future strategy?

For me, the term Swissness encapsulates all the attributes that are expressed by the brand Switzerland. These include quality awareness, reliability, a high level of work motivation and modesty, but also a cosmopolitan attitude and forward thinking. Our competitive advantage clearly lies in the strength of our Swiss brand with its history going back more than 130 years. This strength is derived from the interaction between history and tradition as well as from the brand's openness and innovation. Victorinox is synonymous with quality, reliability, innovative strength, courage and a pioneering spirit. These are typical Swiss values and a strong part of our identity. These values will continue to play a decisive role for us in future, too.

Carl Elsener in an echo-interview

Where are the production facilities of Victorinox AG located?

Most of our products are manufactured in Switzerland, in particular the pocket knives and our household and professional knives. The watches are produced in Delémont and the perfume is made in Möhlin. For the clothing and travel gear we have to depend on foreign production facilities that can guarantee the specialist, staff and material resources needed for cost-effective production. However, our brand promise applies equally to the products manufactured abroad and those made in Switzerland.

As said before, the pocket knife is the core Victorinox product that serves as inspiration for all our product categories. It is globally seen as a symbol of Swiss excellence, regardless of where the products are manufactured.

What are the most important sales markets?

Our most important sales markets are the US, Switzerland, Germany, Mexico, China, France and the UK.

What do you see as the ingredients needed for success in business?

Business success always depends on the people behind the company. The personal qualities and professional skills of the employees and their satisfaction shape our products as well as our image. We therefore promote and challenge our employees to develop their strengths and do their work with motivation and passion. If you wish to be successful in the global market, your products and services also have to meet the needs of the customers: without satisfied customers no company can remain successful in the long term. At Victorinox we try to do this by offering our customers convincing products and services. We have also always tried to refine and automate our production processes to ensure that we remain competitive in the global market and offer our customers the highest possible value for their money. And finally, hard work, great commitment and some luck are needed for success. Successful businessmen also need specific qualities. They must be credible and authentic with a clear understanding of what is possible, be receptive to new developments and single-minded when it comes to the implementation of their ideas.

Victorinox AG employs around 2,000 people. How many of them work in Switzerland?

Of our 2,000 or so employees, some 1,200 work in Switzerland, 900 of them at our headquarters in Ibach in Schwyz. The other 800 employees work at sales subsidiaries in the markets that are most important to Victorinox.

elipsLife echo-Interview with Carl Elsener

Does the topic of retirement provision and retirement benefits play a role when you employ new people?

Yes, in the past few years retirement provision has become a topic of interest for new employees. Previously it was enough to refer to modern social benefits, but these days candidates and employees expect in-depth information on social insurance plans. The funding ratio of the pension fund, the interest paid on retirement savings and the conversion rate are questions that are often asked. As Victorinox has its own pension fund, we can provide them with first-hand information.

We have read that Victorinox has never yet let anyone go for economic reasons. Is this a result of continued business success, or is it based on a specific conviction?

This is the result of a special focus and a specific conviction. The approach to cooperation in the Victorinox family is strongly shaped by values that go back to the company's founder who not only designed the world-famous Swiss pocket knife, but also embodied and entrenched the values by which the company continues to live. These values are openness, mutual trust, respect, gratitude to one another and to suppliers and customers, and humility that keeps our feet on the ground, regardless of our success. The company's success does not depend on individuals, but on successful cooperation between many teams. These values are very important to our company and we do our best to keep them alive in the minds of our employees and to set an example in our daily work.

Are these also the criteria that you apply in managing your company?

Yes. In addition to our four pillars of success – employees, customers, products and brand – our corporate culture and the values by which we live are important success factors. For me, living an example is the best way to successfully manage people.

With its three-pillar system, Switzerland has a well-developed pension system combining state and private retirement provision. How do you see the future of this system?

Personally, I am convinced that it is an exemplary system. The three-pillar model is still seen as an international example, as the OECD has repeatedly confirmed. I believe that the future of this system is absolutely assured, but current demographic trends and declining returns on capital pose enormous challenges.

echo-interview, July 2016

Our ageing society and low interest rates are putting pension funds under pressure. Will pension funds – and therefore all of us – become victims of unfundable benefit promises?

As said before: demographic challenges and falling returns on capital present problems that many pension funds find almost impossible to solve. Retirement provision is likely to become a focal topic for politicians as well as the broader public in the coming years. The deciding factor will be whether a new, sustainable intergenerational contract can be established and acceptable solutions can be found.

Pensions 2020 can only be understood if the proposals for reform are studied in detail and communicated. Is this topic relevant for your company?

As Victorinox has its own pension fund, we are very familiar with the concerns of our people in this area. The Pensions 2020 reform is not yet a very urgent topic. We are following the political discussions in the media, but have not yet studied the issue in detail. Although we are relieved that our pension fund can still offer excellent benefits with an interest rate of 4% and a conversion rate of more than 7.8%, we have to start thinking seriously about how long we will be able to sustain these benefits under the current circumstances.

Do you think the pensioners should be involved in the rehabilitation of the pension system – or are vested pension rights taboo?

I believe that making changes to vested pension rights is a very sensitive issue. However, if we believe in victim symmetry this option cannot be totally excluded. In the end, everybody should help and shoulder some of the burden. But politically, this is a huge challenge.

Carl Elsener, CEO and Chairman of the Board of Victorinox AG

What do you think about the increase in the retirement age for women to 65?

Adopting the same retirement age of 65 for men and women seems a logical and long overdue decision to me. At the moment, a further increase in the retirement age to more than 65 is not likely to be supported by the majority of the population, but this could well become an issue in the future. We will simply have to face demographic realities.

If you could give pension funds some advice, what would you tell them?

I think that we should always try to look ahead. This means that the adjustments that are needed should be identified at an early stage and solutions should be found step by step. If we do this, we can avoid being forced to suddenly take and implement profound, serious, even dramatic decisions. My advice would therefore be to never exaggerate and to think in the most sustainable manner possible. What our pension fund has also always done is to diversify its investments as broadly as possible. This has served us well.

Personal Profile
Carl Elsener
CEO and Chairman of the Board of Victorinox AG

Carl Elsener, born in 1958, from Ibach-Schwyz is the great-grandson of Karl Elsener, the founder of Victorinox. He studied business and marketing in Switzerland and abroad, mainly in North America, where he completed many advanced courses in management and corporate governance. He has been directly involved in the family business for more than three decades and took over as the head of the company in 2006. Carl Elsener strongly believes in humane, sustainable and fair business practices. He made a decisive contribution to the evolution of Victorinox from a simple knife maker into a global icon. In 2011 he won the Swiss Award for Business. And he is passionately dedicated to the unique approach to design and rich tradition of product development and manufacture in Switzerland.