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Interview: Bang & Olufsen boss Kristian Teär on market niches, turnaround plans and the chip crisis

2021-07-16T05:16:08.944Z


Kristian Teär has made the Danish audio and TV luxury provider Bang & Olufsen profitable again for the time being. Now he is struggling with the chip crisis, Corona and Apple.


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Too much music with the electronics component prices:

The uncertainties in purchasing continue to worry Bang & Olufsen CEO Kristian Teär (pictured)

Photo:

PR

manager magazin: Mr. Teär, Bang & Olufsen - B&O for short - is not really at home in the high-end niche as an expensive, upscale audio and TV brand, but neither is it positioned in the mass market.

What does your brand actually stand for?

Kristian Teär:

Our target group are people who like design, love music, are wealthy and expect something that is different. So we're not going mainstream, we're not making consumer electronics out of black plastic. We try to create works of art, we value outstanding craftsmanship and sound. In order not to make ourselves too available for "normal" consumers, we have developed a system. We divide our products into very good, better and best types. It's like with Porsche or Audi. They can start out into their world with an entry-level vehicle and then grow with the brand into the higher segments.

In the past few years, B&O has tried a lot of different things without being particularly profitable. You designed audio systems for cars and brought noise-suppressing headphones onto the market - but they weren't really successful. What went wrong?

First of all: our brand is extremely strong worldwide. We have been around for 96 years, we are present with partners in over 70 countries. Of course, there have been ups and downs over the years. Since October 2019, when I took over the CEO position, we have been trying to focus much more. We're a big brand with a pretty small company. From a brand perspective, we're fighting way above our weight class. We have therefore decided to concentrate on eight core markets: six European countries, China and South Korea. We chose those because we see the greatest chances of gaining traction quickly there.

In addition to audio products, B&O continues to offer televisions - something that has become rare for European consumer electronics companies. Philips sold its TV business, the traditional German television brands Loewe and Metz had to give up because the competition from South Korea and Japan is too strong. Do you want to keep fighting in the difficult TV market?

Televisions are part of our core business.

But a few years ago we changed the business model.

We have given up flat screen production, get our screens from LG and concentrate on the speakers and integration.

It works very well.

LG offers the best picture quality, we provide the best sound and our own design.

With this we achieve the best of both worlds.

Because mass manufacturers often do not offer good sound quality.

We are seeing good demand for our televisions.

We will continue with that.

The current delivery difficulties for semiconductors could cause them problems.

How badly are you hit by the chip crisis?

There is a global shortage of electronic components that affects a lot of industries, including consumer electronics, of course.

We are no exception.

It takes a lot of extra effort to keep production going.

Of course, the chip crisis creates problems for us.

How exactly do they express themselves?

We have longer delivery times in purchasing.

We have to pay more for components than we usually do.

We have to fly components around the world, which drives up costs.

So far it has worked for us, but not without extra effort and extra costs.

The car manufacturers are taking production breaks because of the shortage of chips.

Do you have to?

We are revising our production plans.

We certainly could have sold more without the chip crisis, we know that.

But we manage that as good capitalists, it's just part of business life.

There was also the corona pandemic, in which many retailers had to close their shops for weeks.

You operate numerous Bang & Olufsen stores around the world.

Are you now planning to change something in this sales model?

We sell expensive and large products such as televisions or floorstanding speakers.

Customers want to experience these products, see them, touch them and try them out.

So it is extremely important for us to have partners with real businesses.

The operators of our flagship stores are very satisfied with the strategy and product changes.

We also work with retailers such as Media Markt, but also with online retailers such as Amazon.

We also operate our own online shop.

What role does online trading play?

Online shop sales grew by 71 percent in the last financial year, but we are doing this business together with our stationary partners.

Depending on the market, they are weighted very differently.

We have many stationary trading partners in continental Europe.

In North America we have significantly less.

Digital channels are an opportunity for us to get to customers that we would otherwise hardly be able to reach.

One of the most important trends in consumer electronics is the control of many different end devices in the "smart home" - with a single app.

Apple, Google and a number of smaller players offer this as manufacturer-independent as possible.

What strategy is B&O pursuing?

Do you prefer your own B&O system or more open standards?

We do both.

We believe we must offer our customers a unique B&O experience.

This should enable customers to better network several B&O products - regardless of when they bought them.

To do this, we have to build our own ecosystem.

We recently launched two new platforms that allow us to pursue this vision.

But we will continue to offer other ways to network our products and thus satisfy different customer needs.

Apple now sells

luxury headphones

, the Apple TV TV box, smart speakers and operates its own streaming service.

With all due respect for your design: How do you want to hold your own against such a financially strong competitor?

I believe Bang & Olufsen is in a niche market, namely luxury audio experiences.

Nobody else can offer that and is perhaps a little too narrow a market for others.

But for us this niche is big enough to grow.

We will find ways to create long lasting "magical" experiences for our customers.

That will keep us relevant in the years to come.

Their most recent predictions could use some magic too.

Although B&O sales increased by 30 percent in the past financial year, you announced an operating margin of only two to four percent for the current year.

Why are you so cautious when consumer electronics companies are among the pandemic winners?

First of all, our main goal was to get back into the black.

We did it.

Our second goal now is to build robustness over the long term.

To do this, we have to improve our systems, our development models, our processes - and we have to invest more money in software.

We do that now.

In addition, there is still great uncertainty as to how much money we will have to pay for purchasing electronic components.

We prefer to take a long-term view.

wed

Source: spiegel

All news articles on 2021-07-16

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