January 12, 2008 / 11:59 AM / in 10 years

Swiss Army Knife makers branch out

IBACH, Switzerland (Reuters) -- It was the flip-open tool of the 20th century, but the Swiss Army Knife fell out of favor as mobile phones and MP3 players vied for pocket space.

<p>A worker puts toothpicks and tweezers into Swiss army pocket knives at the production facility of Swiss knife manufacturer Victorinox in the village of Ibach near Schwyz December 4, 2007. REUTERS/Arnd Wiegmann</p>

Now from their base in what is popularly known as Swiss Army Knife Valley in central Switzerland its makers are fighting back, with a range of products carrying the iconic brand as well as the creation of a flagship store in New York.

“We wanted to make our brand more visible and broaden our range of products,” said Hans Schorno, a spokesman for privately held Victorinox -- one of the makers of knives supplied to Swiss soldiers. “All products are inspired by the Swiss Army Knife.”

One analyst said a strong Swiss-made label and perceptions of quality have recently helped lift sales of the knife in the face of cheaper competition and imitations.

Victorinox does not issue public financial reports but said sales totaled 465 million Swiss francs in 2006.

“At the moment this ‘Swiss-made’ brand is particularly cool,” said Landesbanki Kepler equity analyst Jon Cox, who specializes in Swiss retail companies.

With its myriad tools like tweezers and bottle-openers, the gadget was for a time indispensable to the clued-in traveler.

But in the wake of September 11, 2001, when airlines banned knives on board, sales of the knives -- which were often purchased as a souvenir at airport stores -- fell by around a third, said Carl Elsener IV, who runs the company with his 85-year-old father, Carl Elsener III.

“Only in 2006 and 2007, sales started to recover slowly by about five percent per year,” said Elsener, whose family still holds 10 percent of the firm founded by his great-grandfather.

Diversification has been key. Victorinox now sells luggage, kitchen knives, clothing and watches, each emblazoned with the firm’s logo -- a white cross within a red crest. There is even a perfume, which online reviewers have described as “woodsy” in scent.

An updated range of pocket knives, including ones equipped with laser pointers and flash memory drives for storing data or music, has also helped the firm ride out the sales decline.

Besides the knives -- which are actually supplied to more than a dozen armies globally including Germany and also to NASA -- is a broad array of products for the gardener, angler, mechanic or geek.

SHARP TOOLS

Great-grandfather Karl launched his knife-making company in 1884 and supplied the Swiss army with its first Swiss-made knife six years later. His firm was named after his mother Victoria and later extended to include a term for stainless steel -- Inox.

While the term Swiss Army Knife has come to be used as shorthand for any multi-tasking device, Victorinox is one of only two companies that can stake a claim to the trademark.

The other company, Wenger, is based in the French-speaking part of Switzerland was bought out by Victorinox in 2005 in an effort to safeguard national production.

A suggestion that the Swiss Army might in future put production of the knife out to international tender has aroused concern among residents of Swiss Army Knife Valley, but Victorinox says it is confident it can keep meeting military needs -- which make up less than 1 percent of annual sales.

“Since 1897, Victorinox has been supplying the Swiss Army with the Soldier Knife. It is very difficult for me to imagine that the next generation (will not be) made in Switzerland,” said Carl Elsener IV.

Even though the Swiss Army Knife has been featured in the collection of the New York Museum of Modern Art since the late 1970s, a slightly Boy Scout image has stuck.

Comedians including Jerry Seinfeld have mocked the knives by conjuring up images of a militia army defending their country with a nail file and a corkscrew.

However, the knives’ real-world uses are legion. The company has testimonials detailing emergency operations, rescues and even amputations performed with versions of the humble red knife.

John Ross, a Canadian surgeon, wrote to the firm in the early 1990s about how he used his knife, with a saw blade attached, to perform amputations while based in Uganda.

“Shortly after I arrived here, my surgical saw was stolen,” he wrote. “So I took the Swiss Army Knife that I always have with me, and boiled it to sterilize it. I decided to use the saw blade as a temporary amputation device.”

SWISS-MADE

A self-confessed pedant and perfectionist, Victorinox’s senior managing director Carl Elsener III still cycles to work at the firm’s plant in the small community of Ibach, where he attributes the company’s strength to its attention to detail.

To the observer, the Victorinox factory appears labor-intensive: around 1,000 workers assemble 28,000 Swiss Army Knives a day, many of them by hand, as well as 90,000 other tools and kitchen knives.

But analyst Cox said this belief in Swiss quality -- the kind of thorough workmanship that is also a characteristic of Switzerland’s watch-making industry -- has become a key asset for micro-engineering companies like penknife and gadget makers.

The importance of Switzerland’s reputation for quality is clear in the way the company refuses to contemplate outsourcing production to cheaper locations.

“We would not have bought Wenger if we were planning to move production to Asia,” said spokesman Schorno.

There have been attempts to protect the use of the Swiss flag and ‘Swiss-made’ label, but Elsener is unsure how far they can succeed given that most competition for the army knife market comes from Asia, and in particular, China.

“We support efforts to protect the Swiss-made label and the use of the Swiss flag on products made in Switzerland,” Elsener said. “Unfortunately however, it will be very difficult to execute such efforts outside of Switzerland.”

The tools are finding new converts -- 29-year old Erin O‘Connor, a resident of Bermuda, was given Swiss Army Knives as a gift for her recent wedding: “I keep it in my purse for small emergencies. We just need to remember when traveling to keep these little gems in our checked luggage and not in our carry-ons,” she told Reuters by email.

Writing by Tom Armitage; editing by Sara Ledwith

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