STATING ITS CASE
Samsonite steps up its game to beat rivals
THE iPhone flew up, twisting and turning above our heads, landing heavily on the concrete floor. The boss of Samsonite retrieved it, hurled it once again across the desk of the luggage maker’s showroom at its factory in Oudenaarde, 50 minutes east of Brussels. Ramesh Tainwala’s Speck protective phone case is one of nine brands owned by the firm. The chief executive is embarking on a high risk demonstration to show the strength of his latest innovation.
Samsonite, founded in the US in 1910, emerged out of private equity ownership in 2011 to float on the Hong Kong Stock Exchange. The luggage maker, whose European nerve centre is in Belgium, shunned the more obvious markets of London and New York, to list close to its main manufacturing and customer base in China.
Four weeks ago it posted a 5.8pc rise in net profit to £121m for 2014. In the next few weeks the firm will launch a range of limited edition Liberty floral print bags, aimed at moving Samsonite into the world of fashion. It is also working on a smart bag fitted with a microchip allowing travellers to track its location, as well as a bag with an engine that ‘self-propels’.
‘We are trying to encourage people to change their bags every six months to keep pace with trends,’ says Tainwala, who joined the firm 19 years ago.
Those of us who stick with the same battered luggage for decades may be reluctant given that some of his products sell for upwards of £600 a piece, but he is adamant that suitcases are entering a whole new trend-conscious world.
To encourage people to upgrade their baggage, Samsonite is planning to offer a trade-in programme, similar to a car dealership, where customers can do a part-exchange deal to get the latest model.
As for the discarded old cases, Tainwala has teamed up with charity Mango to ship them to Sudan, where they are used as containers to protect grain, maize and barley from rats.
Samsonite is a global brand which is the market leader in Canada, Japan and South Korea and with its American Tourista brand it also has the second position in a number of markets.
With annual sales of $2.3bn it dwarfs its closest competitor Tumi, which has a $500m sales.
Tainwala does not believe his business is at risk from the trend for business users to communicate online or through ‘ telepresence’ which can make it appear as if people are attending a meeting when in fact they are thousands of miles away. Nor has the downturn stopped people travelling and buying luggage.
Tainwala says: ‘ Since Christopher Columbus, travel has always been a major thing that people like to do. When economies worsen and people get fired they want to travel to feel better.’
The firm owns factories in Belgium and Hungary but 70pc of its product is made in the Far East by suppliers. Spiraling wage inflation has crippled many international firms but Tainwala says it has little bearing on the business.
‘Labour only forms 14pc of our total costs and as wages increase we look more towards automation.’
The state of the art factory in Oudenaarde is light on labour, employing 759 workers, with many of the roles replaced by robots.
The hard-cased luggage is made from pellets of polypropylene. The pellets are a by-product from the oil industry so the price of the raw material is linked to crude oil.
The pellets are melted into strips which are stretched five times to give strength and flexibility and then woven together to form a sheet a bit like carbon fibre.
This is used for Samsonite’s upmarket Curv range. The sheets are then pressed into an aluminium mould where a 1,200 tonne weight forces it into the shape of the top or bottom shell of a suitcase. Just one block of aluminium, costing the price of a mid-range f amily car, i s milled f or each template.
Heated to 2,500 degrees the process takes 60 seconds, and this one machine churns out 1,200 cases a day, 24 hours, five days a week.
Both shells then work their way down a production line where various elements such as wheels are added manually.
A random selection of the end product then enters what is called the torture room. It is as bad as it sounds. The bags are generally abused by a number of machines aimed at testing their wear and tear, durability and robustness.
The bags, many filled with clothing and garments to simulate real travelling conditions, are then burnt and waterboarded.
A machine recreates rays from the sun, while another simulates humidity, another rains on the bags while others freeze them in sub-zero temperatures.
Few would have expected the humble bag to go through such pain. But given Samsonite’s journey and subsequent turnaround under its private equity owner a bit of pain seems to be in its blood.