Bang & Olufsen Plans Sub-Brand To Expand Base

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New York - Bang & Olufsen plans in November to launch a sub-brand of lower priced, but high-quality design-oriented products to expand its customer base, president/CEO Tue Mantoni said.

The company also plans to expand its store count in the U.S. and BRIC countries while cutting back outlets in more mature European markets where B&O-branded stores operate in far greater numbers as a percentage of the population, he said.

In an interview at a B&O store here in lower Manhattan, Mantoni said distribution of the as-yet unnamed subbrand will be available not just in Bang & Olufsen-branded stores but also through other retailers, such as upscale department stores and other non-traditional CE retail venues "to expose new customers to the brand." The subbrand will also be available in Apple's online store and less than 10 brick-and-mortar Apple stores. Select B&O products, such as in-ear headphones and an iPod speaker, are already sold in those Apple outlets.

The company isn't likely to sell the new products through A/V specialty dealers or CE and CE/appliance specialty chains, Mantoni told TWICE.

The subbrand will be limited to what Mantoni called standalone, easy-to-carry products such as iPod speaker systems, headphones and perhaps wireless speakers that would stream music from smartphones. The subbrand will not include core integrated products, such as home audio systems that provide multiroom capability and audio systems and TVs that integrate with such home systems as lighting, security cameras, and the like, Mantoni said. He didn't rule out subbranded TVs without integration capabilities in the future.

The subbrand will launch in November with a product category new to B&O, and new products will be rolled out every two months, he said. The initial launch will be in B&O stores and the current Apple outlets in which select B&O products are already available, he said.

The subbrand will add to B&O's traditional demographic, which consists mainly of families with a "fairly high income" whose heads like technology, integrate it into their house, and favor B&O products' clean lines and Scandinavian design influence, he said. The subbrand will attract young professionals who might not have settled down and won't make a big commitment to B&O's more expensive integrated products, he explained. The subbrand might also include a "riskier" design, he said.

The products will attract "people who don't currently come to Bang & Olufsen stores," he said. "It's a way to get them into our brand and we hope in time to make them fall in love with the Bang & Olufsen brand."

Mantoni expects 80 percent of subbrand volume to occur through B&O stores.

To get new consumers into the B&O stores and into other outlets, the company will take a different marketing approach and do more digital-media advertising, more in-store events, and participate in design-oriented events "to bring new blood into the business," Mantoni told TWICE.

In other remarks, he said that although the company plans to close B&O-branded stores in "mature markets," the mature markets are in Europe where many more B&O stores operate.

In the U.S., the company could add up to five stores in the next year and has identified five of the top 25 markets where it sees the most potential.

In Denmark, Mantoni noted, more than 80 stores operate in a country with only 5 million people, whereas the U.S. has only 53 B&O stores for a population of more than 300 million. A total of 14 of the U.S. B&O store are company-owned, and the rest are independently owned.

The stores' design will be revamped to update their current 10- to 15-year-old designs and by Christmas, all 53 stores will feature a "solutions wall" that will feature live products and illustrations to better demonstrate the ability of products to integrate with home systems and distribute music throughout the house.

In August, the Danish company

announced

that it turned around years of losses in its latest fiscal year and announced a five-year growth plan whose initiatives include store redesigns and the subbrand.

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