Where do you see B&O in 5-10 years?

[9_LEE]

As mentioned already we’re seeing a decrease in dealers – and have been for some time.

Do we think this will make the brand more ‘exclusive’ as it will only be in high-end locations, or do you think the ‘normal’ users will all drift away.

Back in the 1970’s when I was a small child, then into the 80’s and 90’s, Bang & Olufsen was a truly aspirational brand. The normal person who had £x for a TV or Stereo would save up or take out some form of finance to go that extra mile and have ‘the best’. It was accessible, on display in ‘normal’ stores, and everyone knew the brand – and were seriously impressed when a friend, family member, colleague or neighbour bought it…

Do we think we’ll ever return to this, or do we think it will become more and more exclusive – with the gulf between price points of ‘normal’ brands and Bang & Olufsen increasing even further?

I do pine for the old days of being able to see and hear B&O beside the other brands. You could then truly appreciate what you were paying for, and what you were getting.  This really made making that ‘leap’ a much easier decision.

Would be interesting to hear people’s views on this subject, which I admit has been covered in the past – but the landscape is ever changing…

 

[NQVHNWI]

My view is that B&O as we know it now will be gone for good in 6 to 12 months.

This is plainly out of the current financial wave about to hit us all.  (I wrote about this a couple of months ago – before the current “conflict” which is not to blame but certainly an accelerant).

B&O will be a brand in name only – like Rolls Royce Motorcars was once and the name sold. A new set of products may emerge under new ownership but it will be detached from its current 95-96 year manufacturing history.

Sorry I cannot foresee a better outcome to all.

[vikinger]

I’m inclined to agree with Mr 10%. Look at a clothing retailers recent history for comparison. Brooks Bros were, at 200 years old, the oldest prestigious US tailor. They got into financial trouble and were bought out by an Italian gentleman who used high quality Italian fabrics but quietly moved manufacturing to China. There are several Savile Row tailors doing the same.

Tastes changed and the demand for suits collapsed. Stores closed. Stock was sold off. Last year you could get a £1500 Brooks Bros suit at Tkmaxx for £75.

Covid has wrecked many markets, including formal wear for the office. Is there a relevant comparison for B&O? Financial difficulties, Chinese manufacturing to reduce costs… Both Brooks and B&O have traded on long long established reputations, but you can only do that for so long. And as stated by 10%, there’s a terrible financial wave about to hit…. a wave that will kill all non essential purchases.

[Emilos88]

So B&O just showed their Q3 result, and even though there is a small loss, they show that they can handle the high extra expense  on freight and components.

Here is some parts of the report that I find interesting:

As a result of steady progress on strategy execution
the company grew revenue by 10% in local
currencies in Q3. This was the seventh consecutive
quarter with double-digit growth.

Earnings for the period were a loss of DKK 16m
compared to a profit of DKK 13m last year.
Free cash flow was an outflow of DKK 14m (Q3
20/21: inflow of DKK 8m). The year-on-year decline
was related to higher component costs and higher
CAPEX.
Available liquidity was stable at DKK 511m (Q2
21/22: DKK 534m)

The two core Asian markets grew by 28% in local
currencies. Sell-out was at the same level as last
year. Sell-out growth was lower than sell-in in the
multibrand and etail channels as the company
transitions to new distribution partners. Also, the
Chinese New Year began earlier this year, thereby
impacting the number of sell-out days in Q3.

Americas grew 32% in local currencies, driven by all
product categories and distribution channels. Likefor-like sell-out grew by 18%.

Year-to-date, the customer base grew by 25%. The
company saw a 32% growth in customers owning
two or more B&O products, partly driven by
retargeting of existing customers

The company maintains the outlook for the financial
year 2021/22, but due to higher component costs,
the company now expects EBIT margin before
special items and free cash flow to be in the low end
of the range

Revenue from speaker sales more than doubled
compared to Q3 of last year. This increase was
driven by all products, especially Beolab 28, which
was launched in Q4 of last year and continued to
see strong demand.

Revenue from TVs was slightly lower than Q3 of last
year. However, last year, the company sourced and
sold TV screens supporting the launch of Beovision
Contour 48’’. This accounted for around 6% of
revenue within the Staged category last year and if
this is excluded, TV sales delivered high single-digit
growth.

Cash flows from investing activities were an outflow
of DKK 75m (Q3 20/21: outflow of DKK 55m).
Investments were primarily related to the product
roadmap and continued development of product
platforms. Investments in tangible assets increased
following investments in retail development and the
company’s aluminium factory.

n Q2 2021/22, the building “the Farm” was
reclassified to land and buildings under tangible
assets because it will be used for own purposes.

Model for scale
Another critical part of creating business robustness
is to build a scalable business model. This means
essentially creating a systemic mix of attractive
propositions, sold through the right marketing and
distribution channel mix, so that the business can
grow organically.

The company’s Recreated Classics initiative was
further expanded with the launch of BeoSystem 72-
22. This system was created exclusively for the US
and Canada and only 30 units were made of this
limited-edition system which were all sold within the
first day

Another product programme is the Bespoke
programme launched in Q2. Throughout Q3, the
company experienced a consistent inflow of
product requests without significant marketing
activation. The vast majority of bespoke requests
year-to-date (95%) were customisations, where
customers mix and match existing colours, materials
or finishes for a specific product. The remaining 5%
were bespoke orders, where products are tailored
exclusively to the individual customer. The
programme is a deliberate effort to increase
relevancy and attractiveness towards specific
subsegments of the company’s target audience in
the Very High Net Worth Individuals and WellEstablished customer segments

In Q3, the company launched a limited-edition
Beosound A1 speaker in partnership with the
streetwear label and lifestyle brand CLOT. The
collaboration was designed to tap into CLOT’s
creative movement in bridging Eastern and Western
cultures in order to drive awareness and affinity
with a younger segment of, particularly, Chinese
consumers.

The company’s strategic decision to win in London
continued to yield strong results. UK performance in
the quarter was testament to the positive impact of
this approach, with year-on-year revenue growing
11% and sell-out growth reaching 31%. For London
specifically, sell-out growth in company owned
stores reached 80%, outperforming both the rest of
the UK and the EMEA region. In addition, brand
awareness, customer base and repurchase increased
significantly compared to last year.

Brand Partnering activity remains a critical
component of the business model as it drives
awareness and new customer acquisition.
Performance in the quarter grew by 9%, primarily as
a result of aluminium sales related to Harman’s
addition of the Genesis car brand.

The launch of 1+ product innovation in Q4.

[Foxtrott]

I’m afraid that I have to join the rather pessimistic crowd that foresees B&O’s end in the near future. I agree with Mr10Percent that the brand name will propably survive in a corporate group or some other ownership, but I can’t imagine that this future will be somehow along the long tradition/heritage of B&O as we know it now.

Besides the problems related to the global economic crisis the we are facing right now with all its apsects (and I am afraid that it is only the beginning), I think that some bad descisions in the product strategy/developpment (that have been identified and discussed in great length on Beoworld) have added some more nails in B&O’s coffin.

Personally I think Lee hits a point here:

9_LEE wrote:Back in the 1970’s when I was a small child, then into the 80’s and 90’s, Bang & Olufsen was a truly aspirational brand. The normal person who had £x for a TV or Stereo would save up or take out some form of finance to go that extra mile and have ‘the best’. It was accessible, on display in ‘normal’ stores, and everyone knew the brand – and were seriously impressed when a friend, family member, colleague or neighbour bought it

Taking the Shape as example, I really like the concept and I considered more than once “going that extra mile” of saving up founds (and therefore having to wait) to buy one. Butin the end I simply couldn’t justify doing it. In my case it was the “user interface” that has put me off. I would have wanted a dedicated device (something like a Beolink7000) with all propriaty B&O software to control everything and not having to use a third party product (Ipad, tablet, mobile phone) and rely on (not to say “beeing at the mercy of”) third party software like chromecast or airplay for it to work.
I know thats the way the audio industry has developped and B&O had not much choice than going the route they did, but I don’t want to go down that road and all that comes with it (but this is not the subject here). Just let me put it this way: If I have to go down the “I have to use some third party” road to play digital music through B&O gear, I might as well use other products that cost less an attach them to my existing (non smart) B&O gear…. no need to spend that extra money on new B&O gear.

I my opinion B&O just misses some (or at least one good) unique selling point to survive in the current market situation. Some products (like stage, A9 or Beolab 28) are really good an will appeal to customers, but I doubt they will generate enough profit for B&O to survive.
If they choose the luxury market (where people still have enough financial liquidity for luxury goods), B&O will really need to step up there game when it comes to customer service and product support as this still seems to be a week point. But I am afraid that B&O has neither the know-how, nore the founds to achieve this in a short period of time.

So in the end I do come back to my initial point: In the current global economic situation B&O’s future doesn’t seem bright to me. Sad but this is the way I see it.

Foxtrott

[NQVHNWI]

I think the report/presentation is generous and time-sensitive. I see a number of key fundamentals which will hurt all/every business (excluding arms manufacturers perhaps?):-

1. Interest rates will rise dramatically. This will hurt B&Os efforts in recent years to re-finance
2. They may have reduced ability for additional borrowing facilities (Cashflow is collapsing)
3. Non-staged sales. Millenials will have a lot less disposable in 2022/23
4. Overall, can see a compounding of UK outlook, disposable income with Sales hit
5. Can expect to see a compounding of German outlook, disposable income with Sales hit
6. Raw materials (particularly Aluminium, Nickel and polymers) price increase as western currencies devalue.

[MaxH]

Well, I must be the only optimist around ?

First look at the global luxury market. Just try to buy a Rolex, Patek or Vacheron. The stores are empty and that’s not a lack of computer chips or shipping costs.
No. The luxury market is not suffering – whatever may happen to average consumer spending – and B&O has never been a market for the average hi-fi consumer.

What is vital is that  the brand’s legacy of a combination of great design and sound is given even greater emphasis because most of us were recruited – like all great brands – on the basis of aspiration.
The other vital aspect is that the product range be relevant to the way the market is going and, indeed, demanding for success.
Does it make sense for my additional audio spending on a very expensive streamer to not be with B&O?
Does it make sense for my son to not have a B&O base product that will stream to his headphones, add streaming music services and allow him to add speakers as he settles to a more home-based lifestyle?

This is the other area that really needs attention.

So, why the optimism?

B&O have great brand values and a loyal ( if somewhat grumpy ) user base which is a hell of a lot more than many competitors but I have seen evidence over the last year or so that things are changing

I hope I am right ?

 

 

 

 

 

 

[NQVHNWI]

MaxH,

Glad you are optimistic. I am just being realistic I feel.

I too watch the watch markets with a relatively good collection. Unfortunately, the forums like this for Rolex, AP, PP more lately VC are full of idiots who think it is great that their 3 year old £5k Sub is now £12k.  I feel that they are basically speculating by either putting their disposable cash (or even borrowing) and wanting and un-earned return – except they dont sell, thinking they will get an extra £x k before they consider selling.

Great I say……Hope they do. However, there may come a time when everyone dumps there SS Rolexes onto the market all at the same time and……

I think they call this tulip mania.

 

Further, I could go on about the Dealers. Sure there is making hay while the sun shines but there are so many Authorised Dealers now who are either quietly trying to bundle or insist you have a good six-figure spend to be “moved up the list”

I don’t mind the capitalist bit – in fact I embrace it. I just don’t like the snobbery and snootiness of those who forget 5 years ago……shifting £10k and plus plus watches (especially stainless steel ones) was a rare event normally reserved for city boys getting their annual bonus.

As mentioned in another forum….I stated that I will wait patiently on the side for another 6-12 months until I spot the AD in an overcoat trying to shift gear on the street corner for cents on the dollar.

It has happened before…and it will happen again.

[Carolpa]

Mr10Percent wrote:

My view is that B&O as we know it now will be gone for good in 6 to 12 months.

…….

Sorry I cannot foresee a better outcome to all.

On the previous forum there were several forecasts of the diminishing of B&o in near futures, but until now it still exists. You could be right that B&o as we know will be gone though.

But does this mean, by all means to be negative?

[MaxH]

The point I was making about watches and luxury goods in general is that there is plenty of cash about – even refurbished turntables at £10k fly off the shelves!
Whether buyers are foolish speculators . . . who knows . . . but that’s not really my concern in this thread.
It’s a basic truism that the biggest fans of anything tend also to be their harshest critics ( fings are never what they used to be!) and there are certainly severe challenges in most consumer markets but this challenge is simple if not entirely easy.
Give the market, who have the means to buy B&O, great design and great sound wrapped into todays and tomorrow’s incoming tide of technology.

The people I know who spend a lot of money on B&O also spend a lot on other audio equipment outside of the B&O range. This is low-hanging fruit!

Take a well-appointed streamer such as the Hi-fi Rose. Not overly expensive and certainly not a good looker by any means but it’s made for attaching speakers to so today’s systems can keep on growing and updating.

Actually, all it is is an Android phone inside a large case with more connections and better quality components than a phone. Most of the features that are needed to be relevant in the audio market today are already available.

There are opportunities to be taken and my opinion is that I don’t believe it will be a lack of spending in the luxury end of the market that will hold B&O back.

If the positive signs from the company continue I believe my optimism will be justified.

Fingers’ crossed ?

 

 

[Emilos88]

Mr10Percent wrote:

I think the report/presentation is generous and time-sensitive. I see a number of key fundamentals which will hurt all/every business (excluding arms manufacturers perhaps?):-

1. Interest rates will rise dramatically. This will hurt B&Os efforts in recent years to re-finance
2. They may have reduced ability for additional borrowing facilities (Cashflow is collapsing)
3. Non-staged sales. Millenials will have a lot less disposable in 2022/23
4. Overall, can see a compounding of UK outlook, disposable income with Sales hit
5. Can expect to see a compounding of German outlook, disposable income with Sales hit
6. Raw materials (particularly Aluminium, Nickel and polymers) price increase as western currencies devalue.

1. Yes a higher interest rate will hurt all sales for all companies. But this is needed if we want to slow down the economy, which are very much needed.
2. B&O have much more Cash and bonds than they have debt. They can continue in many years on Zombie mode. This is not the case right now, as they are investing a lot in product development, which will be good for the future.
3. You cannot say this for certain, in Denmark the employment rate is as high as it gets. This means that the younger generation can pick a job by their choosing, and get very high start salaries. Some might get fired if things slow down, but most will keep their high pay.
4. Yes but nothing wrong in things slowing down. Right now they cant produce the amount they can sell.
5. Same
6. The raise in price on these materiels have been raising mostly because of higher demand. If the demand slows down, as you suggest, These thing will get a more normal state, and the prices will be lowered a lot. Off cause a small inflation dent will stay but it will be small if they have succes in slowing down the economy.

Slowing down is hard without crashing, lets hope.

 

[Millemissen]

Double post

However, the other one disappeared ?

[Millemissen]

MaxH wrote:

Well, I must be the only optimist around

No, you are not….I just find this kind of rhetorical questions a bit over the top.

Not worth spending much time answering IMO

MM

[Author]

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