Bang & Olufsen enterprise business will grow the fastest

High-end properties in Dubai are set to witness a surge in luxury products from Bang & Olufsen as the Danish electronics company bolsters its presence in the emirate's growing leisure and hospitality sector. The publicly listed company is in the process of moving its fastest-growing division to Dubai and doubling its sales force to capitalise on the emirate's current building boom.

B&O's worldwide enterprise unit covers business-to-business relations with hotels and developers. The firm has signed contracts with prominent developers and new hotels in Dubai – to be implemented in two to three years' time – to fit out upcoming top-end residences with its latest range of audio and video products. The company's current list of hotel projects in the UAE includes the Shangri La Hotel, Jumeirah Beach Hotel, Emirates Towers, Monarch Hotel and Desert Palm Resort in Dubai.

Peter Thostrup told Emirates Business about the company's new focus in the Middle East, the fastest-growing region for the company.

Thostrup said working with hotels and developers in Dubai as part of the firm's enterprise unit makes up the bulk of B&O's business in the region.

Can you tell us about your expansion plans in the Middle East?

We have two ways of growing in the Middle East. One is expanding the consumer business – which is our classical business – through our store network here. [It involves] opening more stores and selling more through the stores that we have. The new thing for us in the Middle East has been a very dedicated sales effort to expanding, what we call, business-to-business leisure and hotel projects. [These are] high-end development projects where we pitch to become part of the package, whenever developers work on new projects or new hotels. That has been growing for us very nicely in recent years and our global management team for the entire hotel business is actually just being re-located to Dubai. That's where the bulk of the activity for the enterprise business is taking place in the world today, and the enterprise business will grow the fastest, that's my perception.

What investments have you made through expansion?

We've only made investments in a professional sales force and a bit of modifications in the products, but very little – the products are essentially the same. To interface with hotel systems, we have to have software that can interface with a reception system so we have to make investments for that. But I would say it's not a big investment – its more investment in people than in products, because we already have the products.

What percentage of B&O's overall Middle East business will the enterprise unit make up?

My guess is more than half of our Middle East business will be enterprise – it's bigger than the consumer business. The enterprise segment drives the bulk of the company's growth in the region.

Do you have examples of where you have done this before? What was the nature of those deals?

Limited – we have done a few in Europe but the whole enterprise segment is only four or five years old to us. It's more a question of getting the timing of it right combined with the tremendous property development in the Middle East. We've done individual resourcing, but where it will take off the most is in Dubai.

What attracts you to the Middle East?

As a company we have 80 per cent of our business in Europe. We try to portray ourselves as a luxury goods company, or at least we belong to that category. If you look at the other traditional luxury goods companies, they typically have a third [of their business] in North America, a third in Europe and a third in the Middle East and Asia Pacific. We have 80 per cent in Europe and maybe 10 and 10 in the other regions. So if the other brands can succeed outside of Europe, we believe we can. To us it's potential new markets, and that's the main attraction. We can grow, and hopefully a lot faster than we've been growing in Europe.

Do you see any Middle East competitors to your brand?

I don't think we have head-on competition; I don't think anyone fits the exact bracket as we do. But there's no doubt that we lose business to the high-end range of Sony, Philips, Panasonic, Samsung and Bose on the loudspeaker side. Then we have another type of competition more on the private consumer level. What is your choice as a consumer – how do you want to spend your money? Do you want new B&O equipment or do you want a new car?

What are your thoughts on Dubai and how it tackles luxury?

There are different degrees of luxury and we are Scandinavians, so we come from a relatively homogeneous society. We also have some affluent people but there are very few private jets in Denmark. I prefer the word excellence; I would like our products to be excellent for what they are, the way they function, the way they look, the way they perform. Exclusivity is like you want to leave somebody out but we are not out of reach. I think we fit in well to be part of the trends [in Dubai].

Are you still on track to grow into a $1 billion company by 2010?

That is our dream. We're a little off this year. This year's been very tough, partly because Western Europe has been very slow after the stock market crash. That was the target until nine months ago, but I think we need an extra year or two at the end to do it.

Do you have plans for more retail outlets in Dubai?

I can't say there isn't room for another store. The way we approach the Asian and Middle Eastern markets is very much a big-city approach, meaning that we need to be in the big cities. So the question is how many relevant shopping districts are there where the people shop at.

What was your turnover last year? What was the growth the year before?

We had a turnover of €588 million (Dh3,411m) in the last financial year against a turnover of €566m in 2005/2006.


PROFILE: Peter Thostrup, Executive Vice-President, Bang & Olufsen

Thostrup joined Bang & Olufsen in 1993 as Head of Finance. He was promoted to Director of Finance in 1995 and has held the post of Executive Vice-President since 1996.

He started his career in the financial sector in Privatbanken (The Private Bank) in Denmark and has also worked at Unibank in London.

He is also chairman of Nordic Bioscience, a privately owned biotech company with business operations in medical research, and has served as a member of the Executive Board of B&O Medicom for several years.