Samsonite chief wants to take luggage maker to new heights
Shareholder and top executive Marcello Bottoli is aiming to transform the firm without losing its regular customer base
HOW DO YOU make a suitcase sexy? Marcello Bottoli, president and chief executive of Samsonite, struggles with this question continually as he embarks on a journey to reinvent the largest luggage maker in the world.
His plan is to move the brand upmarket while retaining its established customer base. Easy to say but not so easy to manage, considering Samsonite is a US$1 billion company with production facilities and supply chains that span the globe.
A glance at his resume would suggest that he might be more than able to turn luggage into luxury. Two years as chief executive and chairman of the board at Louis Vuitton counts in his favour. That post was the pinnacle of a career that began at consumer products giant Procter & Gamble in the mid-1980s and took him to British-based Reckitt Benckisser, which manufactures and distributes household products. So he also understands less fashionable products like pharmaceuticals and crisps.
Now he gets to combine the two extremes of his career in one maverick vision and he has a very personal stake in its realisation.
In the dark years following September 11, 2001, 'enplanements', as they say in the travel industry, fell precipitously. No one was making travel plans and no one was buying suitcases.
For Samsonite, this dismal state of affairs ushered in what Mr Bottoli considers the third and current phase of the company's history. Three private equity firms - one each from the United States, Britain and Canada - stepped in and recapitalised the company in July 2003 and Mr Bottoli came on board as a fourth shareholder. They wiped all bank debt off the books and appointed him president and chief executive at the beginning of last year.
The company has travelled a long way since its inception in 1910 in Denver, Colorado. Founded by Jesse Shwayder and his brothers, Samsonite marketed just one product - a sturdy travel trunk built to withstand the rough standards of the American West. After the second world war, the company began mass production and through the 1950s and 1960s, grew into a household name.
Shwayder died in 1971 and the company went public in the early 1980s, bringing to a close the first phase of its existence. During its second phase, it underwent a number of changes of ownership and a period of volatility that culminated in the events of September 11.
Today it is four or five times bigger than its closest competitor and retains its status as a household name.
'I'm not trying to brag but I believe we have one of the best brands in the world,' says Mr Bottoli. 'Anywhere you go, from Chile to New Zealand and every single country in between, 70 to 80 per cent of the population knows the brand.
'Every piece of innovation that has come out in this market for the last century has come from Samsonite. Wheels, for example, or the changing shape from horizontal to vertical luggage, piggy backs; these were all initiated by us.'
The company's innovations and initiative have invited imitation. And if imitation is the highest form of flattery, then piracy is high praise indeed - and one of Samsonite's biggest headaches.
But Mr Bottoli takes a tolerant view, saying he considers the flow of knock-offs a useful gauge of how hot his brand is.
Of course, Samsonite still aggressively fights counterfeiters in the courts and has pursued 25 intellectual property cases in China over the past three years with varying levels of success.
'Our problem is not really with the judicial system in China but rather with the lightness of the penalties there,' he says.
This problem will become increasingly important for Samsonite as its Asian business continues to grow faster than that anywhere else. Business grew 33.6 per cent last year in Asia compared with 17.6 per cent in Europe and 12.8 per cent in the Americas.
The Americas account for 40 per cent of Samsonite's business, Europe 40 per cent and Asia 20 per cent. The hope is for this ratio to even out across the three regions. 'A business balanced across the world is the goal because it acts as a shock absorber when tragedy hits the travel business,' Mr Bottoli says. 'It's when, not if, there will be another Sars or another September 11. To deal with the next disaster we keep costs low and variable and we keep diversified across regions and products.'
As he talks about the Asian market a possible flaw in the plan for this part of the world emerges. Products positioned to appeal to the 'Asian consumer' are designed in London with fine-tuning applied in Tokyo and Hong Kong. Then they are sold across the continent, a monolithic single market. A suitcase is a suitcase but surely, if you are building a luxury brand, you have to make some distinction between a consumer in Tokyo and another in Wuhan?
Such distinctions will no doubt be realised when the company opens its first wholly owned store in Shanghai some time in the next year.
China's estimated market for travel products is US$85 million to US$100 million and Samsonite captures roughly US$15 million of that. The number of travellers and people who can afford its products in the nation is growing exponentially and Mr Bottoli expects business to triple there over the next three years.
More production is likely to move there too, but not all. At present only 25 per cent of manufacturing takes place in Samsonite's own factories in Belgium, France, Eastern Europe, India and Ningbo. The rest is contracted out to third parties in China, Vietnam, Thailand, Taiwan, the Philippines and Sri Lanka.
'You have to remember in this business that proximity to markets is very important,' Mr Bottoli says. 'Logistics represent a very large proportion of costs because [with empty suitcases] you are essentially shipping air.
'You see a lot of small companies with no profit that get transformed like a glove turned inside out because they have nothing to lose,' he adds.
'We have a US$1 billion business, which is profitable and growing. The trick will be transforming this company without losing our shirts in the process.'
Marcello Bottoli, 43, has been president and chief executive of Samsonite since March last year.
He began his career at Procter & Gamble in 1985 and moved on to the Boston Consulting Group and then Reckitt Benckiser, a manufacturer and distributor of household products. He took over as chairman of the board and chief executive at Louis Vuitton in 2001. He holds an Italian doctorate in business administration from Bocconi University in Milan.