In a credit crisis people look for timeless designs
Founded in 1906 as a pen-making company, Montblanc transformed itself into a luxury goods maker in the mid-1990s, adding limited-edition watches, jewellery, leather goods and perfume. Today, the writing instruments business makes up less than 50 per cent of the company's total production, while the number of its boutiques has increased to 330 worldwide.
The company became a subsidiary of the Switzerland-based Compagnie Financière Richemont, the world's second-largest luxury goods company after LVMH. Chief Executive Lutz Bethge says the Middle East and Asia are the new focus areas for Montblanc's growth. The firm opened its largest boutique in the Middle East at Dubai Mall last month. Its largest store worldwide is a multi-storey boutique in Shanghai. Excerpts from an interview:
Montblanc has moved from a writing instruments manufacturer to other products such as jewellery and watches. What prompted the diversification?
In the writing business, we became known for our craftsmanship, for classical, timeless design which was the basis for the iconic product. But in the early 1990s, we started to diversify and go into areas where our customers would feel Montblanc would have the basics right. This is in watches, leather products, and jewellery in recent years. Today, the brand is significantly developed in international jewellery. This does not mean that writing instruments are no longer our focus. Writing instruments have changed. Today, writing instruments are much more jewellery that happen to write. And we are taking this to the next level. We are creating special editions. We are inviting our special customers to design their own writing instruments.
To create the Rolls-Royce of pens, so to speak?
The designer and the master craftsman sit with you, ask you what is important in your life. And then they use that information. We take up to nine months to design the instrument; then we start working on it. We create a book that shows the process. And finally, you end up having your own writing instrument made from scratch. These cost a minimum of €12,000 (Dh62,248). Most of them are much more expensive. This is a very special treat for our major customers. We allow them to watch the creation process using the internet. Every customer gets a special internet site.
Writing instruments are a very important part and still close to 50 per cent of our business. The other areas are obviously much faster growing products – jewellery and leather goods are over 50 per cent of our business. In the next three to five years we want to make watches and jewellery as big as the writing instruments.
What sets Montblanc apart from the one-dirham pen, which may write just as well?
It is about the craftsmanship. It is about the image. It's about being the standard for success, for education, for a cultured lifestyle. You can carry it a lifetime. Even after 50, 60 years, if something is broken we can repair it. You can give it to your children. So it is really something quite different… it is no longer only a functional product.
As we grew, we saw that our customers believed in Montblanc – in its craftsmanship, competence, that Mont Blanc creates the highest quality products with the style and design that have sustained value. So when we developed new products we were looking into things which would require the same level of craftsmanship, which would show our excellence in manufacturing. So we started with wristwatches, leather goods and jewellery. And we saw that many, many of our customers would say, OK, 'I know the brand, I believe in the brand. So I can't do anything wrong by buying Montblanc'.
So you are now creating a total Montblanc experience.
Yes, we have created a total Montblanc experience; because the customer believes in us. We had to create the same excellence in watches as well. Since then we have started to create in-house movements. We basically have reinvented the chronograph. I say that with a twinkle in my eyes. We have gone back to the original inventor of the chronograph.
It is named after the inventor of the chronograph, who is Nicolas Rieussec Monopusher, a watchmaker in the French court in the 19th century. He had great passion for betting on horses. So he created a little wooden box with two rotating dials and a fixed stand in the middle where he could put ink. When a horse finished a lap he pushed a button and drop of ink would write the time. Which is why he called it the time writer – hence chronograph.
That is Montblanc's first inhouse movement. The second movement is automatic and it is coming out in a few months. We have taken over a 150-year-old workshop in Geneva where the work is done by hand a selected few – bespoke pieces which are for those people who look for something very special. When it comes to jewellery, we have created the Montblanc diamond cut in the shape of our logo. We use this on our jewellery, on our anniversary pen.
In each of the categories, we have tried to excel, which is what our customers expect. As watch manufacturers we are in Switzerland; as manufacturer of leather goods we are in France, in Italy; in jewellery we are in France and Italy.
So you have multiple manufacturing locations. Has the cost of parts and labour risen in the past year?
Certainly! When gold and diamond prices went up we could feel it. And skilled labour, when you are looking for the best labour, prices go up. But that is something you have to take into account when as a philosophy you have to create something that is sustainable. For me that is very important… We have design studios in Paris. We have Indian designers, Chinese designers, we have Italian designers, French…
In a world where I can just use something and throw it away – such as the mobile phone – is there still a market for products that will last a lifetime?
People are losing trust. We are talking about a credit crunch etc. People don't even trust themselves to lend money anymore. In such a situation, people will look for products with timeless design, which have proven to be successful and have sustainable value. But also in the past I have seen that people who have been dressing according to the latest fashion, following trends, having the latest phone – they still like to say, 'Can I trust this product, can I rely on it? Can it become my lifetime companion?'
You mentioned the credit crunch. Do you think this may be the wrong time to open such a large store in Dubai?
You have to be careful when you open these types of stores. There are areas in which there is potential and there are areas in which you have to be more careful. I believe that in the Middle East in particular, business for us is still going on. I believe the Middle East and Asia – China, for instance – has a good growth opportunity for us in the years to come. Other countries may be affected much, much more severely.
Which regions in this year have seen the largest growth in sales and expansion?
This is a very difficult question to answer. We certainly are shrinking in certain areas – the US, for example, has become very difficult. But I'm not saying we will exit that market. Yes, there is a credit crunch. Yes, it will affect us one way or another. Every company, every brand will feel the effects. Even though today the US is no longer the biggest market for us – which is now China – it is still number two and this still has potential for us.
Do you expect your sales to take a beating due to lower spending power globally? How will you counter that?
Globally we have seen the start of a loss of trust. We are at the start of a situation where nobody knows how long it will last or how severe it will be. People are losing jobs significantly. We see this as an opportunity because well-established and authentic brands like ours will become stronger. By authentic I mean brands that have their own manufactory, which do not compromise on quality; which show sustainable value and timeless design. These products are not too many. These will gain because people will be more careful in selecting what to buy.
If you were to pinpoint three attributes that make Montblanc a preferred brand, what would these be?
I would believe in craftsmanship, high quality and timeless design.
How do you know what your customer wants? What is your process of market research?
We all travel a lot. All our management is supposed to work in one of our stores at least once a year. Because I believe that in the end you have to listen to the customer. It is not enough that you are creating strategy. You really have to experience how the customer reacts to your products. And the best thing to do is to stand in the boutique for a day and talk to the customer and understand what he really wants. You see a lot of surprises. When I spend time at a boutique, I always return with a list of things we have to do something about.
Your products are geared towards male users. Research shows that most buying decisions are made by women. How do you get men into your store?
First of all, I don't believe that it is a brand for men. It is a masculine brand, that's true. And masculinity comes from its roots, from the power, from the success elements that have been male attributes for generations. I think this has changed.
A lot of women executives use executive tools like their male counterparts. We see that 40 to 50 per cent – depending on the region and the time of the year – of our store customers are ladies. They start by buying presents for men. Because once you have them in the store, they get a nice environment where they can spend some time to discover things, discover new products. When they are in there and they believe in the quality of the brand they say, 'Oh, this is interesting for me'.
This has helped us develop new categories. We have categories in watches in certain ranges where 50-60 per cent of that range goes to the ladies. For example, we have at least 30 per cent that are pure ladies' products. But the ladies are buying even masculine watches.
You are turning women into men!
I wouldn't want to!
What level of sales do you expect this year and the next?
I cannot reveal numbers, but I think in general we will see less sales than last year.
What are your plans for this region? How many stores do you have and how many do you plan?
We have 12 boutiques in the UAE and 20 across the region. We are opening boutiques even as we speak – in the UAE, Lebanon, many other places. We will see much more significant growth in this region than in any other.
Among those who have reportedly opted to use Montblanc pens are royalty and heads of state. Ernest Hemingway was reputed to have loved Montblanc. In fact, in 1992, the company named a limited edition pen after the writer. Mikhail Gorbachev is said to have signed his resignation as president, a day before the Soviet Union was formally dissolved, with a Montblanc.
India's first prime minister, Jawaharlal Nehru, had a Montblanc. His successors, Indira Gandhi and Rajiv Gandhi, likewise owned the brand. Other leaders said to have used Montblanc writing instruments are Emperor Hirohito of Japan and President Sukarno of Indonesia.
PROFILE: Lutz Bethge, CEO, Montblanc
Born in 1955 in Hanover, Germany, Lutz Bethge joined Montblanc as Financial Controller in 1990 after a long career in corporate finance.
He was then appointed Executive Vice-President and Chief Financial Officer of Montblanc International in 1995, and went on to become its Managing Director in 2004 and Chief Executive
Married with two sons, Bethge holds a master's degree in business administration (economic science) from the University of Berlin, and likes to ski and play golf.
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