Market focus USA – Part 2:New factory fuels Swiss Army quality

January 2007

Victorinox Swiss Army opens own factory in Switzerland, plans to move up-market.

Victorinox Swiss Army, in a move to have more control of quality and supply, has opened a new factory exclusively for watches in Porrentruy, Switzerland. Already, 100 percent of Victorinox Swiss Army quartz watches are being assembled there, while the plan in the future is to assemble all mechanical products there as well. Currently, the highest priced mechanicals, like the new Victorinox Swiss Army Limited Edition Ambassador XL Chronograph (150 for the United States and 150 for the rest of the world, priced at US$1,395, with a five year warranty) are assembled in Porrentruy.


The new factory in Porrentruy and Sue Rechner, CEO of Victorinox Swiss Army

Having control of quality will also allow Victorinox Swiss Army to move up-market, while not abandoning their core market segment of US$300 - US$600.

The beginnings
Victorinox Swiss Army started in one small workshop in Ibach in the Swiss Alps in 1884. The great grandfather of the current management founded the company, named after his mother (Victoria), based on one model of knife, a very versatile and durable tool that was adopted by the Swiss Army. The knife operations are still run out of Ibach, more than 120 years later.
“My great grandfather started with the knife and I think he would be impressed with what he created,” says Charles Elsener, President, Victorinox Swiss Army SA and the Chairman of Swiss Army Brands Incorporated. “He had no idea that the Swiss Army knives he made in a small village would become such an icon and the root of a global brand. As part of the fourth generation, I am responsible for continuing what the previous generations have built over so many years.”
The Victorinox Swiss Army Knife is really a symbol of quality - everyone knows that the knives have a lifetime warranty, no questions asked, and as Victorinox Swiss Army expanded into other products, they knew that there had to be some sort of a connection to the knives and the same adherence to quality construction, reliability and versatility.
“For more than 100 years, our company was really the Swiss Army Knife,” Elsener continues. “We did a consumer study in the United States and the results showed us that people expect other products with the same values and attributes as the Swiss Army Knife. We looked at lots of different products, as well as our Swiss roots, and thought that watches were the first products that would match this. We started with watches in the United States and it was impressive how sales grew very quickly.”


The AMBASSADOR XL Chronograph

The move to watches and other products
After the initial success of watches, Swiss Army brands got a little complacent and sales dipped. The company in the United States was public then and the Elsener family was unhappy with the management's short-term profit approach to the business. Two moves really turned things around - the Elseners decided to take the company private again and they brought in Sue Rechner to run the United States company.
“The United States has been and will always be the most important market for Victorinox,” Elsener explains. “It has been a family business, fourth generation now, and we have always had a long-term vision. It was important for us to have management that had a long-term vision. We were very impressed with Sue Rechner, so in 2002, we felt comfortable enough to have her become the President of Victorinox Swiss Army Brands.”
This is where things get a little complicated. In the United States and many English-speaking countries, consumers know the brand as ‘Swiss Army’, but in other countries, the brand Victorinox is better known. The cross and shield symbol, which the company started using in 1909, is what unites and defines the brand.
There certainly have been challenges to Victorinox's success. After the September 11th terrorist attacks, the company's sales of knives in airports all over the world disappeared overnight. The company looked hard at its distribution and made changes that increased profitability and more than made up for the loss in revenue.
After knives and watches became successful, the company started looking at other products that made sense. So far, clothing and travel gear (backpacks, suitcases, briefcases, etc.) have made it into the mix, all overseen by Sue Rechner, and there will be more products in the future.

The new Porrentruy facility
One critical part of Swiss Army's move towards higher quality and higher-end watches is the commitment to doing more themselves. In the past, a third party contractor assembled most of the Swiss Army watches and carried out quality control, but this new facility changes all that.
“The main reason for the new watch factory was to get the quality control into our hands, because quality is one of the key attributes of our brand,” says Elsener. “On the knife side, we have always invested lots of time and money into quality control. When we decided watches were an important part of the company, we knew that we had to do the assembly and the final quality control. We decided to do this in 2002 and the new factory is a result of this decision.”
Victorinox Swiss Army's commitment to assembling all the watches in this new facility requires skilled watchmakers, in short supply everywhere. “We are adding staff to assemble our entire mechanical product there, but the problem is that we need watchmakers,” Rechner says. “In Porrentruy, we are close to a watchmaking school, which should help us. We will continue to upgrade quality and our brand to move further and further in the mid-level price point. Right now, we are happy to have our assembly and quality control situation stabilized.
”We compete with the huge groups, so it's important for us to build something that is different,“Rechner continues.”We have to have our own facilities and to build from the inside up. We want to do it ourselves."
The facility is very impressive. Located in the small, picturesque village of Porrentruy, about an hour from Bienne, where the headquarters of Victorinox Swiss Army are located, the facility is very modern, clean, well lit and very organized. Like any other watch factory, watchmakers and technicians slave over benches, assembling and testing watches every day.
Swiss Army makes a lot of watches, estimated at about 900,000 a year. According to Rechner, one in every five Swiss watches exported to the United States is a Swiss Army watch.

The direction of Victorinox Swiss Army watches
Swiss Army will continue to develop what Rechner and everyone else in the company considers a relationship with their customers. “When customers have an emotional attachment, and have an experience with it, it's different from just buying a product,” Rechner says. “The knives give us such credibility in all the categories we launch, but it's definitely a challenge to live up to their heritage.”

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Source: Europa Star December-January 2007 Magazine Issue