IST, Dibeyendu Ganguly , ET Bureau

Luxury CEOs don’t always stay in luxury hotels, fortunately. When the Oberoi and Taj hotels in Mumbai were attacked by terrorists last week, Alexander Bennouna, global CEO of Victorinox Swiss Army Watch SA, was safely ensconced at the Cricket Club of India. By the time we called to enquire about his well-being the next day, he had already flown off to Hong Kong.

Victorinox, the maker of the iconic Swiss pocket knife, has already suffered its share of pain from terrorism. The biggest blow came when sharp tools were outlawed on flights after the 9/11 attack. Till then, everyone visiting Switzerland would carry home some version of the red handled Swiss knife — with its emblem of the cross and shied — as a souvenir in their hand baggage.

But once it was removed from the duty-free shops at the airport, sales of the Victorinox knife plunged by a massive 30%. It was a good time for the 125 year old company to diversify.

As luck would have it, the North American distributor for Victorinox, called Swiss Army Brands, had already diversified into watches, travel gear, apparel and perfumes. In 2002, the Swiss company acquired and merged with its American distributor, creating Victorinox Swiss Army.

Today, pocket knives constitute 50% of the company’s sales, and this core business is looked after by the founding Elsener family. The other divisions — watches (20% of total revenue), travel gear (20%) and apparel & perfumes (10%) — are headed by professional CEOs.

Though Victorinox Swiss Army watches have always been sourced from Switzerland, the division continued to be headquartered in the USA and headed by an American CEO, Sue Rechner.

In 2004, Alexander Bennouna was brought in from Swatch as vice-president for international sales with a mandate to globalise the brand, which was still very American. “When I joined, 85% of the Victorinox watch sales were in the USA and Canada and the collection was very North American in style,” he says.

American watch design favours blue dials, bracelets and quartz movements while Europeans prefer their watches with automatic movements and leather straps. Asian markets tend to lean towards European tastes, with the added requirement of smaller diameters to fit smaller wrists.

Armed with these insights and based out of Bienne in Switzerland, Bennouna has managed to internationalise the Victorinox brand quite effectively. “We have created styles for every market and non-American sales are now 60% of our total revenues,” he says.

Last year, Victorinox Swiss Army finally moved the operations of its watch division to Switzerland, and promoted Bennouna to the position of CEO. Since then, the company has also moved its perfumes division to Switzerland, though the apparel division continues to operate from New York and the luggage division is headquartered in St Louis, USA. “It made sense to concentrate the strategic functions of the watch division in Switzerland, since the business is deeply rooted here,” says Bennouna.

Switzerland produces 25 million watches a year, which is just 2.5% of global production in terms of volume, but 40% in terms of value. All watches made in Switzerland are thus luxury products . Bennouna places Victorinox number three in the Swiss watch rankings by volume, after Swatch and Tissot, but admits he’s nowhere in the top rankings by value.

With prices ranging from $200 (for a quartz) to $2,000, Victorinox are far less expensive than brands like Omega and in these recessionary times, that can be an advantage. “We’ve always projected the idea of practical luxury in our branding.

It is more in tune with the new economic situation where functionality is good. People do not want shoes that are good for driving a Ferrari but can’t stand water,” says Bennouna, who has a Bachelor degree in anthropology and a Masters from the Paris Institute of Political Studies.

Horror of horrors, people actually want some utility out of luxury products and that classic Coco Chanel definition of luxury ending where need starts no longer seems to apply. But as a brand associated with practical tools — the advanced Swiss pocket knife comes with everything from a screwdriver, scissors, can-opener, corkscrew to a pen, toothpick and nail-file — Victorinox is in a position to ride the trend.

“All luxury brands will have to adapt to the reality of practical luxury, where there is less impulse buying and more conscious buying,” says Bennouna.

Preferring to wear a $1,000 Victorinox rather than the most expensive in the range, Bennouna himself lives by the credo of practical luxury. His decision to eschew the Oberoi, right next to the Victorinox office at Nariman Point, for a relatively inexpensive room at the Cricket Club of India, is a case in point.