A passion for photography and an appetite
for risk inspired Andreas Kaufmann to invest in Leica Camera AG eight years ago.
Today, as Chairman of its supervisory board,
he has helped to cement the company’s reputation
as one of the most exclusive camera brands in the world
By Rhea Wessel
The portrait of Che Guevara that became a symbol of revolution. The Vietnamese girl who screamed under a napalm attack. These are just two of the iconic images that owe their existence to a Leica camera.
As a young man, Andreas Kaufmann noticed that almost everyone he spoke to was convinced that Leica cameras were among the best in the world. That’s why, in 2004, the investor’s interest was piqued by the opportunity to take a stake in Leica Camera AG. There had to be a reason why the brand had such a cult-like following.
Keen to play his part in the regrowth of this prestigious brand, Kaufmann decided to buy a 27.4% stake in the company through his investment holding, ACM Capital Management. Six months later, however, it became clear that Leica needed restructuring. Kaufmann’s brothers, who were then partners in the investment firm, split amicably and divided assets, each striking out on his own. Here was Kaufmann’s chance to indulge his appetite for risk by taking a hands-on approach to turning the company around, despite his lack of experience in the industry.
This entrepreneurial spirit came, in part, from Kaufmann’s roots in a German-Austrian industrial family business that owned Austria’s largest pulp, paper and packaging company for more than 100 years. Yet he hardly grew up talking business at the dinner table: in 1971, the family declared that none of its members should manage the business at the operational level. They could, however, participate as members of the supervisory board.
“We were totally free to do what we wanted. I studied German literature and political science,” recalls Kaufmann, who became a teacher at a Waldorf school before playing an active part in the family’s business. Kaufmann’s father had always advised his sons that, regardless of their choice of vocation, they would succeed by creating moments of inner quiet and learning to separate the essential from the non-essential. “Even now, I actively try to retreat, reflect and find out what’s necessary and what’s not,” says Kaufmann.
This ability to prioritize the most pressing issues has proven invaluable for Kaufmann in his role as Chairman of Leica’s supervisory board. Having failed to make the transition from analogue to digital photography, the company had almost become insolvent in 2005, so Kaufmann’s first challenge was to steer sharply toward the digital realm and repair Leica’s finances. He invested in R&D, made management changes and revamped the way the company sells and distributes its high-end cameras and lenses. By 2009, Leica had turned a corner. From then on, it kept growing: it saw record sales of €248.8m (US$329.8m) and a net profit of €36.3m (US$48.1m) in the financial year ending in March 2011.
The second phase of Kaufmann’s strategy is to expand Leica’s presence around the world through new distribution channels, flagship stores and partnerships with luxury brands such as Hermès, a former investor in Leica. He is doing this with the private equity group Blackstone at his side; in October 2011, Blackstone bought 44% of Leica’s shares from ACM, which remains the majority shareholder. Under Kaufmann’s leadership, Leica has revamped its distribution strategy in Japan, Switzerland and France. The company has bought back its distribution networks and has changed contracts with dealers to ensure that they meet quality standards, hit price points and distribute selectively. In addition, the company has begun launching flagship stores in prime shopping areas that feature only the Leica brand and offer exhibition space for the work of local and international photographers. In 2006, Leica opened the first such store in the Ginza district of Tokyo; by early 2012, it had 34 franchised, stand-alone Leica stores and 50 Leica boutiques (areas within larger stores) in 18 countries. Before Kaufmann became involved in the business, Leica had no physical presence outside Germany; today, the brand is present in 54 markets.
In 2009, as part of the drive to strengthen Leica’s image internationally, the company launched a fresh approach to product development that saw all R&D conducted with an eye toward price levels. “In the past, if an engineer had an idea to improve a camera, we might have pursued that with abandon. With our new process, we first make sure that any developments working their way through the pipeline will be ones that will sell at a particular price,” explains Kaufmann. “We’re not a luxury brand, but we are elite, and price plays a role in how we see products.”
Leica certainly seems to have found the right mix of technical quality and distinctive design at prices acceptable to the market. While its cameras may — to the untrained eye, at least — appear “retro” in style, customers are still willing to pay tens of thousands of dollars for them.
In 2010, Leica asked Volkswagen’s design chief, Walter de’Silva, to rework the M9 Titanium for a limited edition. “De’Silva is considered a god in design,” says Kaufmann. “We were able to hire him because we found out that a large number of Volkswagen board members are Leica customers.”
The company produced 500 copies of the model, which each cost €22,000 (US$29,160). “We sold out in three days,” Kaufmann states. Building on this success, Leica plans to launch another special edition of the camera later in 2012, this time co-designed by de’Silva with a Hermès case and retailing for an estimated €40,000 (US$53,017).
Where next? While product launches of this kind help to reinforce Leica’s exclusive image — not to mention boost its revenues — the company still has only a tiny share of the global market for cameras and there are plenty of growth opportunities ahead. Kaufmann is making changes in Asia, and looking to expand into South America, India and the Gulf, where Leica is hardly present.
To take advantage of strong demand for high-end products in Asia, Leica has focused its expansion priorities there in the past few years, having set up a distribution company called Leica Camera Asia Pacific Pte. Ltd. in Singapore in 2009. It also entered a joint venture in Korea in 2011 to focus on sales and marketing, and there are plans to do the same in China in 2012. The stage is set for accelerated growth.
Now, however, the challenge for the company is to ensure that the pace of production keeps up with the rate of expansion and the introduction of additional distribution channels, such as internet sales. Leica is building a new factory in Portugal as part of its efforts to increase this pace.
“We have a backlog of probably 35% of our annual turnover,” says Kaufmann, acknowledging that the waiting list for certain handmade, high-end lenses can be up to a year long. “Producing at Leica is a tricky process. It’s not automated. We’re increasing productivity, but it still makes sense to do some things manually.”
It will take time to find the right balance between speed and quality, but Kaufmann — like his father before him — has never been one to rush things. “We usually live under continuous time pressure, so creating the space to reflect is not easy,” he says. “My father’s advice was among the best I ever got, and his words keep ringing in my ears.”