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TWST: Can we start with an overview of Bang & Olufsen (Copenhagen: BAOCB.CO) and the core activities?

Mr. Thostrup: Bang & Olufsen is an old and well-established company that has chosen a niche strategy. Specifically, we operate in the high-end consumer electronics segment where we make televisions, audio systems, loudspeakers, and telephones. Our core competence is in the areas of design, integration of products, main-machine interface. I think there's no doubt that people choose us because of design, quality, aesthetics, and functionality. The design strategy has in recent years been supported by a selective distribution strategy, where we have moved from the traditional multibrand retailers in the audio and TV world, to a distribution system of a few select dealers. A good bulk of them are 100% dedicated to Bang & Olufsen or B1 stores, as we call them; they only trade Bang & Olufsen products. In a number of European countries, we still have part of our distribution going through the classical multibrand channels, but these are very dedicated, highly specialized stores where we have established shop-in-shop concepts. So, we're not trading through your traditional mass retailers or capital chains like mediamark.com, Dixons, Best Buy, etc. These two pillars are basically the strategic cornerstones of the company - a well-known product strategy differentiation and selective focused distribution. We then combine it with a market strategy that portrays the image of a high-end brand.

TWST: It is a good segue into a question on competition, because it seems to me that you are under the umbrella of consumer electronics, but I don't see any direct peers. I'm curious as to how you define the competitive environment.

Mr. Thostrup: I think your observation is very correct and I can tell you that all the analysts who follow our company have the exact same problem. What is the correct peer to Bang & Olufsen? Are we a luxury goods company? In some areas perhaps we are, but then that categorization does not recognize the complexity of the technologies and the production and upstream facilities. Are we a consumer electronics company? Yes, to some degree we are, but we operate under a completely different price scheme/margin scheme than any of the big players like Sony, Philips, Samsung, Hitachi, who all need market share to be visible and profitable. I think the only company that can be considered a regular peer is a German company called Loewe, which is primarily big on televisions. I think we are the oddball in the industry in the same way as Harley Davidson is the oddball in the motorcycle industry or Porsche in the car industry.

TWST: Both those companies have quite a distinct customer profile. Is that the case with Bang & Olufsen?

Mr. Thostrup: We actually have a fairly varied mix of customers, but there are some common traits. The typical customer is age 35+, but the age does not necessarily have anything to do with brand preference, i.e. you may well have a preference for the brand long before you are 35. To a large extend, it has to do with income -- you are at a point where you both want to and can afford to buy a Bang & Olufsen. It is also still to some degree a male purchase. So, if I have to narrow down the customer, he is typically male, aged 35+, often an independent professional person -- a lawyer, accountant, dentist, doctors, a white-collar business person fairly high up the corporate ladder. But we also definitely have a segment of what you might call a hedonistic customer -- people who are willing to sacrifice a lot to get the very best in some particular area. This would be someone who is determined to own the best Bang & Olufsen above all else. He does not care about cars, he does not care about his apartment; he just wants a Bang & Olufsen.