The Craft Movement: Swiss Maker Edition (#23)

A craft brewer is someone who focuses first and foremost on the quality of what they deliver. — Arthur VIAUD

The market hasn’t seen any innovation in the last 20 years. So, if you look at running shoes back in 2010, they all look the same, and they all feel the same. — Marc MAURER

[00:02:55.05] Ben: Marc, maybe let’s just start with you just telling us, for our listeners’ sake, what is On?

Marc: On is basically a sports company that started out with running shoes back in 2010 and it started with a cushioning technology. So, On has a very specific cushioning technology that allows you a soft landing and a firm push-off. And the way we do that is with holes in the sole, which we call ‘clouds’. So, it’s the only engineered cushioning solution and it comes with very innovative and sleek designs. So, it’s a very approachable and a very versatile product that you can not only use for running but also for casual wear. That’s how it started and it started with running-only and in the last 10 years we went into outdoor, we went into lifestyle, On went into apparel — so it’s become a full-fledged sports company.

[00:03:53.26] Ben: And when the three founders came up with the idea and they came up with the technology, why were they confident they could be successful? Because it’s a very big market — I think I read that it’s something like a $370 billion market for performance footwear, but it’s clearly one that’s dominated by 10-ton gorillas in the form of Nike and Adidas. So, how come those guys thought that they could take on the giants and be successful?

The mission comes to life when you step into or when you wear our products. — Marc MAURER

Marc: I think when you stepped into the first product, you felt something different. So, it was a completely differentiated product from everything else that was out there. And the market hasn’t seen any innovation in the last 20 years. So, if you look at running shoes back in 2010, they all look the same, and they all feel the same. So basically, we felt there’s an opportunity in this market — it hasn’t been any innovation and no strong direct-to-consumer brands. And the market is huge, you’re absolutely right, but that’s an advantage because it means if you only get a relatively small share in that big market, that’s already quite sizable. And it’s a growing market. So, this is why, back then, in 2010, the guys decided to start the company.

[00:05:03.23] Ben: And what’s the company’s mission?

Marc: The mission comes to life when you step into or when you wear our products. And, originally, we always said we want to put the funding to the run. So, the idea is that you have a very different running feeling or a very different feeling when you’re moving and that, eventually, allows you to move more and that eventually allows you to run more. So, you’re spending more time outside, you’re spending more time being healthy. And we really believe in what we call ‘the human spirit’, and that people can do amazing things when they’re given the opportunity to, and On’s products are allowing you to do so.

[00:05:41.19] Ben: The technology is really at the heart of the shoe and the lightweight running sensation you feel when you’re outside and it came out VTH in Zurich, it’s patented, but how difficult would it be for somebody to imitate it or get close to the technology?

Marc: I think it would be relatively difficult because when you look at running shoes, actually, the way you produce them, you need tooling, you need molds, there’s lots of 3D drawings going into it, you have the foam that needs to have a specific kind of cushioning level and so on. So, there’s quite a bit of engineering that goes into it to come up with the same running feeling. So, it’s quite difficult, but we always knew, at some point, eventually, someone will do it. So that’s why On always said, “Hey, we need to reach a certain scale within a certain time. When eventually someone comes up with it, then everyone knows who or what On is, so it’s very clear that this is an imitation.” And we’re very lucky that we made it so far and that we’re in a position right now where that feeling and that technology and On’s patented cloud tech is really associated with On and it would be very difficult for someone else, even the big players to accomplish such a thing to the market.

[00:07:04.19] Ben: So, I wanted to talk a little bit about the company’s history. And so, you joined the company in 2013, right?

Marc: Yes.

[Switzerland] is great to scale from because the access to talent is super good and I think Swiss people and Swiss values and the way we’ve been brought up really help in international relations. — Marc MAURER

Ben: I read, I think it was an interview with David — one of the founders — where he said, “2013 was a difficult year for On. We had a bit of a slump in sales. We had a few ‘teething up’ issues scaling the company.” How difficult has it been — or how challenging has it been — for you since you joined, to scale this company to meet the growing international demand for your footwear?

Marc: ‘Difficult’ is probably the wrong word. I think it’s more like, interestingly challenging, and you experience so many different episodes throughout the years. So, in the beginning, when I joined in early 2013, On was 20 people — so it was very small, and our loss was as big as our revenues. So, we were actually fighting for survival, which is a very different mode to what we’re in right now or were in kind of three years later. And then, you start growing and you experience lots of growing pains in production, obviously, in marketing, in scaling up customer service, in finding the right people. But we never experienced it — or I never experienced it — as difficult because it was always associated with positive emotions. We had so much and we still do have so much fun doing it. We’re so fortunate to be able to work with an amazing team, great people. But it’s full of challenges. I’m a person who tends to get bored pretty quickly, and in seven or eight years, I never got bored — not a single day — because the amount of challenges is just so vast, and I think that’s lots of fun.

The problem with Switzerland is it’s a very small home market. So, if you’re the number one player in Switzerland, you’re still subscale from a production perspective. So, that’s why On decided already back in 2012 that we had to go international super quickly and we had to make the US our biggest market as fast as we can. — Marc MAURER

[00:08:47.19] Ben: Is Switzerland a good country from which to scale an international business?

Marc: Yes and no. For us, the advantages clearly outweighed the disadvantages. So, it’s great to scale because the access to talent is super good and I think Swiss people and Swiss values and the way we’ve been brought up really help in international relations. So, Swiss people tend to be quite well-traveled internationally, they’re adapting to different cultures because we essentially have four cultures or three cultures in one country, and three languages/ four languages in one country. So, that has helped. The problem with Switzerland is it’s a very small home market. So, if you’re the number one player in Switzerland, you’re still subscale from a production perspective. So, that’s why On decided already back in 2012 that we had to go international super quickly and we had to make the US our biggest market as fast as we can. And then, Switzerland serving as a basis for international expansion has proven very successful and very helpful.

I think Swissness stands for quality. It stands for design. It stands for innovation. It stands for reliability. And these are values that are very core to On and that we are carrying out. — Marc MAURER

[00:09:58.09] Ben: Yeah, I suppose it’s sort of a double-edged sword, isn’t it? Which is, having a small domestic market means that you need to look outside from the beginning. And so, it’s like, internationalization is higher up the agenda for a Swiss company than compared to a US company, for example?

Marc: Yeah. I mean, in the US, if you’re basically looking at Under Armour, they did $2 billion in revenues before they left the US. It would be completely impossible for us to do that. But, on the other hand, that means that you’re actually building an international company from scratch. So, already now we’re having several offices across the globe, in all regions: On is present in Brazil, in Japan, in the US, and so on. And it’s actually much easier to do that when you’re young versus when you’re already a $2 billion company, and then you’re building your first office abroad. So, I think looking at it from a 20–30-year perspective, hopefully, we’ll look back and say we were very fortunate that we scaled and went international so early on.

[00:10:55.13] Ben: Every single pair has a Swiss flag, right? So it’s almost like Swissness is at the very heart of On.

Marc: Yes. I think Swissness stands for a few things that are absolutely core to On — to On’s products, but also to On’s values and culture. So, it stands for quality, which is super important to us. It also stands for design. It stands for innovation. It stands for reliability. And these are values that are very core to On and that we are carrying out. And all our design work and all our development are happening in Switzerland. So, the product that you see is truly engineered in Switzerland. It’s not manufactured in Switzerland, but it’s engineered here. Swiss designers, lots of developers based in Zurich. So, it’s really at the heart of what we’re doing.

The way we started apparel is because we wanted to have apparel for ourselves. We never did an apparel business plan to eventually go to so many customers; we just said, “We need our own apparel.” — Marc MAURER

[00:11:46.24] Ben: It seems to be that you’re sort of riding a secular trend, which it’s almost like we’ve seen the death of the mass consumer, and we now live in a world where producers can produce things that are much more tailored to our individual needs. At the same time, we’ve become more affluent and we’re demanding better quality stuff; at the same time, we’ve become more conscious about the environmental impact of production. And it seems like you’re riding this big wave towards more locally-produced, more sustainable, better quality products?

Marc: Yes, definitely! I mean, what we see a lot and what is really core to On is authenticity. And that’s very important to today’s consumers. And it’s just come very natural to On because this is how it started. We always say On was started in the Swiss Alps or born in the Swiss Alps. So, we’re all runners, we love to run. The way we started apparel is because we wanted to have apparel for ourselves. We never did an apparel business plan to eventually go to so many customers; we just said, “We need our own apparel.” And we’re very, very fortunate that On has grown to such scale and that so many people are fans of our brand, but it’s all very authentic. Because it was never the goal, there was never a business plan to go where we are today. It basically just happened naturally by doing what we enjoyed doing, and by being true to our values, and true to what we believe in.

we’re holding ourselves accountable to be authentic — Marc MAURER

[00:13:17.16] Ben: How do you keep or stay authentic, the bigger you get? Because if your success so far has been built on this idea of you being really high-quality and a bit niche, what happens when you’re mainstream? I think I read that you already have a 10% market share in Germany. So, how do you keep authentic at scale?

Marc: I think we’re holding ourselves accountable to be authentic. So, On doesn’t have a CEO for example. We’re kind of like the Swiss government, but that means there’s lots of checks and balances and we know each other so well, because we’ve been working together for so many years, we’ve built a team together. So, everyone has an understanding of who we are. So, it’s very important to us that we’re staying true to ourselves. And we believe you can be a mass-market brand that is still authentic by doing the same thing. On hasn’t really changed in the last seven years in the sense of the products that we bring to the market. we’re still doing more or less the same thing and we’re still very price stable, we’re still very premium, we’re still super high-quality, we’re still very innovative. And then, basically, becoming mass market is almost like the consumer appreciating just the work that we’re doing, so why should we change? Because what we’re currently doing right now is appreciated by our customers.

[00:14:37.26] Ben: When I asked that question earlier about big consumer trends, I mean, one is the high-quality products — tick; and then I think the other big one is to more sustainably source products. And I know you guys have done a lot of work here to try to make your footwork greener, but I suppose the uncomfortable or the inconvenient truth is, shoes are largely made of petroleum. So, how do you make a green shoe? How do you make a green trainer?

Marc: Actually, building on what I said before in the last question, if we do it, we want to do it right. So, we see a lot of companies almost using it as a little bit as a marketing play and what we’re working on is kind of truly solving the problem — and you make it greener with the product. So, a lot it’s just what you said — kind of, if you look at CO2 or carbon emissions, or whatever, a lot of it is in the product and the material itself, and part of it is in the production process, but that’s the vast majority. So, what we’re working on is we’re working on materials that are basically, ideally, at least recyclable; even better if we can have a 360-reuse cycle, so to say, so we can reuse the residuals of the product in other products. And there’s lots of research happening in that space. There are solutions out there. What we don’t want to do is we don’t want to compromise on the product. So, basically, the shoe that has no oil component has to feel as good as the shoe that has an oil component. And this is what takes a little bit of time, but this is where a lot of people at On are invested in, and we’re putting a lot of money to come up, eventually, with a circular product, which is the ultimate goal.

[00:16:27.03] Ben: When we talk about authenticity, one of the things I read, when I was researching this podcast, is that you, guys, regularly have meetings out running. Is that true?

Marc: It’s absolutely true! So, for example, Caspar — one of the founders — and I, we do all our meetings biking, not even running. And it’s actually scientifically proven that when you walk or when you move your body, it stimulates your brain. So, you come up with better ideas rather than just sitting in a meeting room. And so, we do a lot of meetings running, biking, walking and just outside.

[00:16:57.25] Ben: Including client meetings, I heard, as well, right?

Marc: Including tons of client meetings. We had a t-shirt saying, “At the beginning, we don’t talk about our shoes.” Basically, what we meant is, “Just try it on, and then you’ll eventually experience it.” And this is how all the meetings started. We said, “We’re not going to talk about it. We’re going to go on a walk together or on a run together.” And that still holds true till today. A lot of our meetings and discussions are happening on the bike or on the run.

[00:17:27.20] Ben: I have six pairs of On shoes. And the reason I got into On is because a friend of mine just raved about them. He said, “You’ve got to try them! They’re amazing!” And since then, obviously, I’ve made many repeat purchases, I bought shoes for my friends and I can really see how this is a business that has grown organically, based on just having a wonderful product. And I think, when I read about your marketing strategy, you use terms like ‘grassroots’, ‘word of mouth’ — and I suppose, the question is, how big can you get on the back of grassroots, on the back of word of mouth? At some point, do you have to use other marketing strategies? Do you have to use above-the-line type advertising to get to a big-enough audience to really gain massive market share? Or, are you comfortable just to grow, I suppose, in a very Swiss manner, right? Which is, you just grow slowly, sustainably.

Marc: So, one of the Swiss values is also something that’s very important to understand: we’re building a sustainable business, in a sense of, obviously, sustainability, but also financial sustainability. So we always want to be able to kind of finance — or On should be able to finance itself — to a large extent. So, we had to come up with ways to make our product known, that doesn’t cost too much. So, that’s also why On it’s built around or on the basis of lots of retailers. So, when you walk into a store, you have your seven running brands and, eventually, the retailer will also pull the On — and once you’re in the On, the chance that you purchase it is pretty high. And then, hopefully, will remain a loyal customer. And we did a lot of grassroots activities and we still do, because this is really who we are. Then, at some point, to kind of take the next jump in brand awareness you need to start doing above the line. And this is what we already do. We do tons of digital. So, most of our advertising spend will go into digital. We are very lucky to have great ambassadors and athletes of the brand, we’re very lucky to have very loyal customers that are actually, as you said, promoting the brand to friends, and I think the more mature you get, eventually, the more you will start investing in above the line, but in a very different way than we would have done it 10 years ago. Today’s advertising environment is completely different. It has to be much faster. All our videos, all our creative is shot in-house, we’re not working with an agency. So, we have to be very fast in what we come up with.

[00:20:12.27] Ben: Yeah. And again, authentic seems to be the word because it doesn’t seem that you pay people to wear On. It seems that you just tell their stories.

Marc: Yes. So, in an ideal case, and in most cases, athletes or ambassadors come to us because they experience the product and they’re asking, “Hey, I wear On because I feel I can run faster, I can run longer runs, I need less time to recover.” So nearly all of our relationships really kind of emerge from, obviously, the product but then also friendship with all the people that are now part of On. I mean, with Roger who has joined a few months ago, it’s the exact same story. It started with the relationship first — the first discussion we had when we first met him was not targeted at whatever outcome. It was just getting to know each other. And we truly believe if interesting people come together, then something amazing might emerge. And this is how it started with Roger, as well.

[00:21:20.02] Ben: We’re going to come back to Roger later. But, how much do you envision doing something like what Nike does, for example, with Nike running and I suppose building the social context around the brand?

Marc: I think this is one of the next steps. I think there’s a very strong On community, and the community basically has a certain stickiness because of the experience this community is sharing. But there’s no orchestrated way from On on how to activate this community and how this community can really come to life. And there’s tons of grassroots activities, again, that we’re doing with that community. So, you might have heard of something called Tug-O-Run, which is like a squad race that we’re doing in different countries where we bring the community together, we’re doing arc runs in many different cities where we’re bringing the community together. But bringing the community together on social and really activating them potentially also with an app is definitely something that is one of the next steps.

[00:22:25.01] Ben: I wanted to ask you a question a little bit about the demographics of your customer base because I imagine you’ve got elite athletes, for sure, and I think they’re in many of the stories that you tell on your social channels. Then, you’ve got a lot of amateur athletes, people like myself who love the feel of the shoes and make repeat purchases. But I also read that the demographic is much, much broader than that. For example, I read that you guys have a really big following amongst nurses. Is that correct?

Marc: Nurses, and amongst chefs as well because basically, for people who are on their feet all day long, our product is really helpful because of the cushioning technology that it uses — so it’s less tiring, often it helps people that also have certain back problems and so on. So, there’s a huge followership amongst doctors, nurses, chefs, and so on. It’s a super broad customer base. It’s over 50% female, tons of elite runners, lots of outdoor athletes, as well. With the big outdoor push we are doing now, we see lots of walkers as well that are in our products. So, it’s a very big customer base. I think what they all share is obviously they’re all active people that love to be outside and they have an appreciation of quality and design.

On and Roger Federer had a dream and a vision on how we could create something that would eventually be there for a very, very long time and would be way longer-lived than Roger’s career. — Marc MAURER

[00:23:40.29] Ben: That brings us out on to the pandemic because you said these are people that love to be outside. How difficult has it been for you to sell footwear during the pandemic? Because I suppose you’ve got multiple challenges. One, I think, most of your sales go through physical retailers. I think you’re now stocked in 6500 stores in 50 countries, I think. So you’ve got the one challenge of, your distribution channels have been disrupted. And then, another one is that people have been asked — I suppose it’s easy now — but for a long period of time people were asked to stay at home and not exercise too much. So, how difficult has the pandemic been for On?

Marc: I think the pandemic actually triggered two big consumer trends. So, one is running or walking despite some people had to stay at home for quite some time. But it’s mutually searched. So, when you look at cycling case and running case or miles and how it has developed, it’s grown like crazy over the last weeks. And so, you have this huge running boom. So that means there’s a need for people to get access to their product. And now, with many stores closed, the second thing that has done, it has basically leapfrogged roughly three to four years in terms of digital adoption. So, what it meant for On is, immediately when the outbreak happened, we shifted a lot to digital because we cut marketing spend on the physical side because we knew stores were eventually going to be closed, we heavily invested in digital channels. And we also allowed retailers to have a digital channel to sell on. So, if you’re a store in the US, let’s say you’re called A Runner’s Mind, then we basically made an URL for you, which is on-running.com/runnersmind that you could share with your customer base and that would allow the customer base of that store to purchase On product and we will do the fulfillment. So, these two elements together have actually allowed us to overachieve our business plan in April and May. And so, we’ve grown stronger than we anticipated, due to the crisis — and that has been a very positive surprise. So, we didn’t think that impact will be so strong.

[00:25:59.28] Ben: What’s the relative split now of online versus physical sales?

Marc: Before the crisis, online being our own channel, we also do work with third-party online, but let’s take our own direct to consumer channel. So, you’re looking at roughly 25% D2C and 75% B2B. And that’s basically switched. So, April — May, is going to be close to 75–25. And so, it’s completely turned around. And, what we see now happening in the countries that have reopened is that actually, the B2B channel comes back to a large extent, so developments in Germany and in Switzerland, the first weeks have been very, very positive. But that e-com channel stays up. So it’s actually almost a market expansion that is happening, which is very positive to see.

[00:26:53.01] Ben: Let’s talk again about Roger Federer. So, I think he joined — if that’s the right term — On, I think it was November last year, was it?

Marc: Yes. Yes, exactly.

Ben: That garnered quite a few headlines, including, I saw there was a piece in The New York Times. And so, I suppose the first thing achieved was elevating the brand, which I guess you’d anticipated. But I think you alluded to this earlier on, it’s like, not just about Roger wearing the shoes. I think he’s actually becoming much more involved in helping design the shoes. So, what is Roger’s role at On and how significant is it beyond just the marketing impact?

growth has never been the ultimate goal. The ultimate goal has always been to give you, as a customer, an amazing experience — Marc MAURER

Marc: Yeah, I mean, it’s very significant. So, both, I think, On and Roger had a dream and a vision on how we could create something that would eventually be there for a very, very long time and would be way longer-lived than Roger’s career. And because the product is at the core of what we’re doing, it had to come through a product. So that’s why, at the beginning, we really started to work on a product, brainstorm on a product, and eventually coming up with ideas and first sketches and a first product. And that’s a big part of Roger’s role: helping us thinking through what that product range could look like going forward, and he’s very actively involved in that. At the same time, obviously, Roger is an extremely authentic person and he shares the exact same Swiss values that we do. And together, that allows us to also reach a broader community, kind of take a step in sports marketing. And it has been a very, very inspiring partnership so far.

[00:28:41.06] Ben: How long before there’s a tennis shoe? And how long after that before there’s a squash shoe?

Marc: Probably there’s never going to be a squash shoe. And I’m not sure if there’s going to be a tennis shoe. But I think everyone who is listening, should look forward to eventually something come out that is very authentic to Roger and to On.

[00:29:04.08] Ben: So, up until now you’ve built a business and you’ve grown market share on the back of product innovation. So you’ve had the Cloudrac, Cloudflyer, Cloudedge. Are you now starting to move beyond just product innovation to product development? So, I think one of the things I read — I don’t have a pair yet I’ll get a pair — is that you’ve now started to move into fashion sneakers or fashion trainers, beyond just performance shoes. So, is that now the shift you’re making? Or is it more just that all these different lines are getting blurred? So, what was a running shoe is now doubling up as a fashion shoe. How much is the category changing versus your strategy’s starting to change?

Marc: It’s more the second one. I mean, the thought behind this is basically, what if I could wear my running shoe every day, everywhere, anytime? In the past, you either had a running shoe, a comfortable, performance shoe, or you had a fashion shoe. But you would never have a comfortable or performant fashion shoe. So what we’re trying to do is we’re trying to take our tech and bring it to the lifestyle industry so you actually can wear a very innovative product that is extremely versatile but that is made for a 24/7 active use, rather than just running. At the same time, the second thing is we’ve moved strongly into outdoor because, again, as I said, we were born in the Swiss Alps and trail running is something that we love doing, hiking is something that we love doing, so we invest a lot in outdoor as well. And outdoor, at the same time, has become a huge fashion trend. So, actually, if you go to the big cities now, if you go to some of the key tastemakers that we see in the retail landscape, then a lot of the silhouettes are now influenced by outdoor. So, we’re, again, taking that, and also bringing that trend to what we call, ‘performance all-day’.

[00:31:06.10] Ben: You’ve been, as you said, a couple of times, you were growing in a very Swiss way, which is very sustainable, very organic. How big do you think On could eventually be? I’m not asking for your projections, but much more your long-term ambition for the company.

Marc: We never dared to dream to be where we are today. We would never have imagined being where we are today. So, I don’t think we could give you a number or whatever. I think, in the end, we’re trying to have a great product, work with great distribution partners, have a great team. And if we do that right, and if we continue to execute on the highest level, eventually, our customers will appreciate that and that will allow On to grow much bigger than it is now. But growth has never been the ultimate goal. The ultimate goal has always been to give you, as a customer, an amazing experience — and the more customers we can target and reach to have that amazing experience, the better it is.

For me, an industrial guy is someone who is basically making a commodity. You can swap around industrial lagers and basically see no difference to them. They spend millions in marketing but it doesn’t necessarily mean a difference. Sometimes they don’t even have their own brewery, they contract brew all over. It’s not about the story. — Arthur VIAUD

[00:32:12.26] Ben: Arthur, before you started La Nebuleuse, you were a private banker. How does one go from private banking to craft beer?

Arthur: Well, I was working on the trading floor at the private bank in Geneva. So, of course, they’re very unrelated topics. I was brewing on the side, as a hobby — something I’ve been doing since I was a student.

Ben: Like in your bathtub?

Arthur: Kind of in my bathtub. Not literally in my bathtub, but in the bathroom, for sure! At some point, I felt like I wanted to find a really meaningful working life, and the entrepreneurial spirit always has been in me and then, I’m not going to say it was a very natural jump, because you need to consider a lot of things before jumping ahead, and of course, you go into a lot of uncertainty. But it was just about taking the jump. The passion was there, the interest was there, and it was about doing something with my brain but with my hands and with passion and moving ahead with a different set of values, etc. The previous professional experience was useful and proved to be useful in a lot of different aspects in the journey, so I never regretted having done what I’ve done, but of course, I would not go back to it now. I’m very, very happy, and proud that I’ve made this move. So I would say it came up naturally and the deep motivation was so early on in my career. I’m young, I don’t have any family to feed, it’s easier to take risks, as well. So, that’s how it came.

[00:34:00.21] Ben: And when you were weighing up that decision, did you literally weigh up the pros and cons? I mean, did you make a list of, a private banking offers me a steady career, it offers me a fixed wage, it offers me a bonus each year. On the negative side, I don’t want to wear a suit anymore, I want to do something I’m passionate about. Like, how did you make that decision?

if you share that passion and that interest and you’re passionate about your product and you want to get the best thing out, then I think that it’s not really volume question. It’s about your interests and how you’re aligned. We take decisions that are sometimes not efficient on an industrial basis, but we won’t compromise on them because we just think it’s the right thing to do. — Arthur VIAUD

Arthur: Well, first, it was not a single decision because I went into the game with two very old childhood friends of mine. So, we all took the decision at the same time and both of them also had corporate jobs. So, it made it both easier and harder. It made it easier because all of a sudden, if you’re three people convinced about something, it’s easier to say, “Okay, well, this must be something right about it.” But it may have been also harder because then you have on your shoulder the potential failure of the business but you also have on your shoulder the potential failure for your other partners who are also taking a lot of risk there. And so, of course, we discussed about it. So, in my head, I mentally went through pros and cons and I think I remember writing down a small list about things that I will lose by doing it, and sometimes writing them makes you realize, “Am I really willing to let go of that?” But it was easier because we were still fairly Junior in the positions. So it’s not like we left a huge paycheck on the table. It’s not like we left massive benefits, big stock option plans, whatever. It was way earlier in the curb. And I thought, “Okay, well, I might not miss much of the curb at this point in time.” So it was also easier to go ahead at this point in time.

[00:35:40.16] Ben: So, on the one hand, you had your personal desire to do something you’re passionate about, but presumably you also saw the gap in the market, the opportunity to launch something which would be successful. So, what is the gap that you saw, and how is La Nebuleuse addressing it?

Arthur: We’ve been following the craft beer markets in other countries just out of interest because we were just homebrewers and it was quite fun to do that. When we realized, “Well, actually, maybe we should do that.” Then I thought, “Okay, I had to go ahead and do a few trips abroad to really check what the scene was like, to see how is this different from the current market?” I just went to the US for about three weeks, in California, and just checked the craft beer scene there, and then I discovered that the level of development of the market there was way, way, way ahead of the Swiss market. And, looking at it, I saw no reason why this would not come here. The power of the population, the level of education, the center of interest, the psych — all the stars were aligned to see a real booming of the industry in Switzerland and it was just not there. There were a few players who were still around brewing but there was nothing spectacular. The connection with the customer was pretty low, to be honest, the quality of the products was not outstanding, we would not find the flavors and the kind of brand that we would look up to abroad. So then, it became apparent that something could be done. And then, I got further confirmation looking at what was happening in Scandinavian markets, in the UK. So, I was like, “Okay, it’s happening also in Europe; it’s not only a US thing. There’s absolutely no reason in the world why this would not happen in Switzerland.” And that’s what really triggered the, “Okay, this was just an idea and now we have to make it a business.”

Craft beer is an affordable luxury. It is a luxury because it comes at a premium and it comes at quite a premium if you look in percentage terms, but if you look in absolute terms, it’s actually quite cheap and affordable for most people. — Arthur VIAUD

[00:37:39.06] Ben: Basic question: what is the difference between an industrial and a craft beer?

Arthur: It’s not volume related. A lot of people think it’s volume related. I think it’s spirits related. For me, an industrial guy is someone who is basically making a commodity. You can swap around industrial lagers and basically see no difference to them. They spend millions in marketing but it doesn’t necessarily mean a difference. Sometimes they don’t even have their own brewery, they contract brew all over. It’s not about the story. It’s not about what you offer behind it. And you have small guys who actually have kind of an industrial mindset — will produce something that’s not so interesting, they don’t put much soul into it, and much interest to it. On the other hand, a craft brewer is someone who focuses first and foremost on the quality of what they deliver — and I value that a lot. It’s a bit like an industry with a heart and a smile, I like to say, so you’ve got to be passionate about what you do. You’ve got to be very interested in the people — it’s a people business, we do something that’s basically as old as the world and has been gathering people around beer forever. And so, if you share that passion and that interest and you’re passionate about your product and you want to get the best thing out, then I think that it’s not really volume question. It’s about your interests and how you’re aligned. We take decisions that are sometimes not efficient on an industrial basis, but we won’t compromise on them because we just think it’s the right thing to do. And a big guy would not do that.

[00:39:11.21] Ben: And the rise in craft, as a general term — which encompasses beer, but also chocolate and all sorts of different items — this is really riding, I guess, two waves, right? One is the growth in disposable income. And the other one is the death of mass marketing. Would you say that’s fair to say? Because it’s harder to get people to buy an undifferentiated product at scale — on the one hand; on the other hand, as people get wealthier, they’re demanding better quality products, and they’re more interested in where these products come from, and how they’re sourced and if they’re sustainable, and so on. Do you think these are the two trends you’re riding with craft beer?

Arthur: Yeah, totally! Over the last maybe 50–60 years, there’s been such a rise in consumer choices, and people got a bit obsessed with choice. And then also the price was a big trigger, because all of a sudden it became accessible to the majority, to have access to a wide range of goods, which if you go back in the early 20th century was not at all like that. And then, at the end of the 20th century it was already a very different game with goods coming from all over the world, and products that were once never available, were available to the masses. I think that’s the first part of the equation. Now, the second part of the equation is that people got used to diversity, they start to also look a bit deeper than just, “Okay, what do I have available?” They start to look for the story behind, they start to associate with the brands, they want to support maybe more values that they like, and I think the rise of the Internet in the way that it increased the speed of information and then people got just much more information about things. So, it’s much harder to fool consumers today than what it was 30 years ago. So, you can’t just go around and say something that’s completely wrong or that’s completely not in line with your values and expect to take people for fools and think they will just take it. So, I think that this is a big change. Of course, there’s wealth involved, but also, it’s just that people are more sensitive to what they consume. They think more. And I think if you’re just doing a good job, and you’re being honest about it, and you show it and you’re caring and professional, then eventually you’ll find a market as well — as long as you do something that’s quality-driven and that you actually mean it, then there’s a market out there for you.

We target people who are conscious about what they want to drink, who like to taste, who like to feel, who like the branding, and who feel like they can have some tie with us one way or another. So, naturally, we tend to go a bit local. But, of course, this can resonate with people abroad, it can resonate in a lot of different places. — Arthur VIAUD

[00:41:30.01] Ben: How big could that market be? Is there a tension between this constant fragmentation, this constant search for better quality? And then, on the other hand, producing a really good product at scale? Because, some of these “craft brewers” like, BrewDog, for example — I mean, these guys have gotten really, really quite big and they’re distributing internationally. So, does it come to a point at which you grow so big that you almost look like a mass-market brand?

Arthur: I think it’s a fair question. It’s the big question of, “Is it better to be a big fish in a small pond or a small fish in a big pond?” And I think BrewDog, for example, has had a very aggressive growth. They’re fueling a lot of that. So, for those who don’t know, they’re a Scottish-based brewery, they brought a lot to the equation in terms of craft beer throughout Europe. They’ve been very disruptive. And they’ve been expanding internationally. This is a bit against the base idea of craft, which has some sort of local grounding to it. So, we’re not talking about historical beers and say you want a special beer from a Belgian Bay and you won’t find it anywhere else in the world, and that’s shipping all over the world. Craft beer is an industrial process and someone in Iceland can do an excellent beer, and someone in Vietnam could do an excellent beer, given that they have access to the raw materials that they of course have to source internationally, but they can produce and brew something really qualitative. So, I would say that the craft beer market tends to be a bit more local than the international beer market. And hence, some guys like BrewDog, have tried to associate a lot with local brewers when they go abroad, not to get too much of this image of an international global brand. Whether this is successful or not, it’s hard for me to say. But what’s for sure is that I think that our market, for example, is still very Swiss at the moment. Could evolve over time. But I think it’s hard to be a really global brand and have a really close relationship with the consumer. Or you can have a close relationship, but in a product that’s physical, I think there’s some limitation to that one way or another.

we go and have drinks in the same places that our consumers go have drinks and we just see people there, we know everyone from bartenders to waiters, to bar owners, restaurant owners, shop owners. And so, there’s a very special relationship — Arthur VIAUD

[00:43:39.18] Ben: But isn’t it about finding the right demographic for La Nebuleuse?

There’s a certain type of drinker and you identify with that drinker and maybe it’s about their lifestyle, maybe it’s about their age, and then you’ll find that same demographic in all the places where you have “hipsters”. So, do you know what I mean? Like, you have an audience in Lausanne, you have an audience in Geneva, you have an audience in Zurich, and then maybe the next natural audience is in Lyon, or it’s in Milan.

Arthur: I mean, it could be, of course. I think beer is an affordable luxury. Craft beer is an affordable luxury. It is a luxury because it comes at a premium and it comes at quite a premium if you look in percentage terms, but if you look in absolute terms, it’s actually quite cheap and affordable for most people. So, we do not see ourselves as a very exclusive good. We just target people who are conscious about what they want to drink, who like the taste, who like to feel, who like the branding, and who feel like they can have some tie with us one way or another. So, naturally, we tend to go a bit local. But, of course, this can resonate with people abroad, it can resonate in a lot of different places. But I think, then, in these places, it will tend to be a smaller size market than in our home market. It doesn’t mean that there’s no market, it just means that it will be a bit more niche. But again, a niche market in Shanghai might be as big as our local market here. But demographics are obviously very important. Because it is such a widespread good, because it is consumed by so many people, in terms of demographics, it might touch a lot of people anyways. But, of course, we have a core range of consumers who are much more likely to take the product than others, that’s for sure.

The only motto that we have, internally, is that we do not produce something that we don’t like ourselves. So, any single product that goes out is something that we would happily consume ourselves. And if not, it’s not making it. — Arthur VIAUD

[00:45:21.04] Ben: That just seems that’s the mistake of mass-market brands, which is, in order to appeal to every single demographic everywhere, they stand for nothing. Whereas I think you authentically stand for something and it would almost be better to target a small demographic across Europe than to try to get too deep in Switzerland.

Arthur: Well, I think that you can’t touch everything and you can’t touch everyone, that’s for sure. I think that we can also stand for something that can be seen as local pride because we think it’s how we want to be perceived, eventually, and it’s what we want to work towards. So we want to do things differently and we want to brew the best beers we can with an independent spirit and all of that. And I think you can reach the point where you’re seeing not just as an outstanding product but also as a symbol that can be seen and put forward. So in Lausanne already, in a lot of places, we’re seen as really THE beer of the place and there’s a sense of pride from people living there, just because they have a cool brand that’s the cool beer that’s being brewed very close by and it’s part of it. And of course, if they can see that brand elsewhere in Europe, they would also advocate it. So, it’s really, I think it’s two things. And at the same time, we also appeal to people who are very in line with the brand. So, as I said, our real core target group of people who will really fit with us, they will also be all over Europe, maybe, and they will associate with our products, our design, our spirit, all of that — and regardless of where they are, they might be a perfect match and if they can have their hands on our product, they will do that.

[00:46:58.13] Ben: Tell us, what’s so special about La Nebuleuse, in your opinion?

Arthur: I think we’ve seen the whole thing as not only brewing the best beer but as being part of something. So, we haven’t followed the typical, “Let’s try to make the best beer.” We talked about how are we going to activate with our customers, do events things like this? How are we going to do the best packaging we can? How can we be very, very active to support the local community? How can we interact with all the industries as well? So, we try to be part of an ecosystem instead of just being a player somewhere. And I think it makes quite a big difference between a lot of the players around. It’s us, the three founders being very, very involved and the team that grew around is very involved, and where it all takes place is Romandy, in general, and I would say mostly focused on Lac Leman in general. And there’s a story behind it and there’s the relationship we’ve got with the people and we go down to meet customers but not on the purpose of meeting customers. It’s just because we go have drinks in the same places that our consumers go have drinks and we just see people there, we know everyone from bartenders to waiters, to bar owners, restaurant owners, shop owners. And so, there’s a very special relationship in that perspective, which is very different from a lot of different brands.

[00:48:20.17] Ben: What is the best-selling beer that you have?

Arthur: Now, there’s a bit of a competition, but we have three brands that are really doing great. And that’s Stirling, Embuscade, and Zepp. Zepp, obviously, is taking a big hit because it’s a beer for bars and restaurants, and over the last two months plus it’s been closed pretty much. So, it took a hit but Stirling is getting stronger as well. Embuscade is still growing. So, I would say these three are really the three brands that are all the way at the top.

[00:48:54.02] Ben: You have an IPA, you have a Pilsner, you have a session IPA. So you have all these different types of beers. And is the idea to appeal to everybody’s different tastes? Or is the idea that you can not just take market share from traditional beers, but you can start to take market share from spirits and wine. What’s the idea behind having such a broad range of beers?

Arthur: Well, first of all, it would be very boring to have only one or two beers and that’s not in the spirit of what we do. I think it’s very hard to have a favorite among your children — you should not — so the thing is it’s part of our culture to have a range and to have diversity. And, of course, we try not to overlap too many styles together. We have a lager that can compete against bigger industrial breweries, but most of the time, it’s still priced at a premium. And so, it’s not necessarily really scavenging on the big guys market. And we’re not necessarily trying to scavenge on craft beer themselves. It’s just that the craft beer segment is growing. So by growing, we have more space for products. We try to have a portfolio of products that’s balanced that we like and we’ve built it with that in mind. Of course, we wanted a Pale Ale, we wanted an IPA, we added a Session because it’s something that was really missing in our range — we wanted something that was highly drinkable with lower alcohol. The only motto that we have, internally, is that we do not produce something that we don’t like ourselves. So, any single product that goes out is something that we would happily consume ourselves. And if not, it’s not making it.

[00:50:34.16] Ben: And I think you have very passionate customers, like me, right? Real brand advocates. What’s the plan to get your passionate customers and use that passion and channel it to make the product better, and I guess, more importantly, use that passion to help you to sell more?

Arthur: I think the best thing is to embark them on the journey one way or another. I think we are a great brewery, we’re going to pull back visits on the schedule, ideally from July going forward. We want to get as many people to come and visit, as possible. And you rarely speak about the beer that you had yesterday except if it was something truly outstanding, but you’re not going to pick up a discussion with that. But you might pick up a discussion on the visit that you’ve done and how great it was and how you discovered this and that about the process and all of this, and then you might get these other people to come and visit. You came, you tasted beer, you liked the place, you liked the atmosphere, you liked all that. The likeliness of you consuming more of that product next time you hit the bar or telling the bar manager, “Hey, why don’t you have this product in stock?” Or picking up that product the next time you go to the supermarket just shoots through the roof once you’ve seen that.

Arthur: And we’ve seen this with some of the bar managers, bartenders — after they came — because our place really sweats of passion. And so, once you really got into this and you saw it, it actually triggers something. You get more interested in the product, about the whole story behind. And it’s much cooler to speak about something that you’ve seen the back scene of it, then to talk about something that you don’t really know about. I think big brands have nothing to say. They have to spend millions to find a storyline that they can share with the consumers. And we have a lot to say. We just need to get the people in to see it. And after, I think, they will do the job themselves and they will advocate for what they like or they didn’t like. And if they don’t like, well, we’re actually small enough so that we take very seriously any comments that we have and we can actually act upon it quite fast or much faster than the big guys. So, that’s also a big differentiating point for us.

[00:52:53.22] Ben: Tell us about C’est ma tournée.

Arthur: Yes, sure. So, you know, of course, there is a multitude of campaigns that were launched by a lot of different actors throughout the pandemic and how to support your consumers, how to support clients, how to support the society as a whole, as well. We thought about a lot of different things. We thought about, of course, it was this huge talk about, should we do some hand disinfectant? But we realized, “Okay, we cannot. We can’t produce pharma-grade disinfectant. It’s not going to work. We’re a brewery, we’re not distilling and we can’t even bottle the product.” So, that was a no-go. But we really wanted to help with something because the whole company is not going to a dead stop. But it was very, very slow because more than 50% of our sales were in bars and restaurants. All of a sudden, you have zero sales with that. And we thought, “Well, we have to help these guys out, as well, because if they go down, we also go down. Oh, it’s terrible. We need to find something to do.”

Arthur: And we didn’t want to do something complicated because we know the guys, and they’re not very big into paperwork. So, we wanted to do something that’s quite easy that requires minimal effort from their side and that can bring what they need most — that is cash — just to survive. And we thought, “Well, we have a bit of a capacity because of course, it’s being unused. And we know how to make great beer because it’s our day-to-day job. And we don’t have a niche shop — because we didn’t then.” So we thought, “Well, what could we do that would be significant?” Well, that would be saying, well, we’re going to deliver ourselves the beers to a limited area — because we can’t deliver throughout Switzerland — and people can buy a pack of 24 and select which bar or restaurant they want to support. And the bar or restaurant needs to be in Lausanne or in Geneva — the two areas that we deliver — and if they don’t want to pick, they just say, “Okay, I split parts” and we give to all the different things. And we decided, “Well, we’ll give half of the sales” because it’s not very profitable, at all, for us, but that’s okay, we get the beer moving. And most importantly, we support bars and restaurants. So, for every franc that we get, we give back 50 cents.

Arthur: So, it’s that simple and people get to select which bar and restaurant they want to support. So, of course, people are stuck at home, they can’t do much so they might as well get a beer in the evening and they might as well help the bar that they used to go to, to have drinks because that bar will be in dire need at this point in time. And “C’est ma tournée” means “it’s my round” and what we thought is that very often when you go to a bar or a restaurant, the bar owner will give you a round at the end of an evening just to thank you for being there. And I thought, “Well, now it’s time for you, the consumer, to give a round to your bar or to your restaurant to help them out.” And you can do that by contributing no more than paying the normal price for your beers and we will go the extra mile and give 50% of that to the bar or restaurant of your choice. So, we made some posters that bars and restaurants could put on their windows and some banners they could put on their social media. So it was a very simple operation, at the end of the day. It was put in May, and it’s been running since then.

[00:56:18.26] Ben: The last question is, will you keep direct distribution to consumers post-pandemic?

Arthur: It was something we didn’t consider before. But we had surprisingly high traction on that — or I don’t know if it’s surprising, actually, but we had excellent traction on that. Now, the website is actually put up, so it is very possible that we keep this as a branch of business for us. Also, because some products that we sell are sometimes a bit more difficult to get out on standard channels because you might have distributors who don’t want to stock up small volumes. If you do some funky beers, then it’s always hard. You can find a lot of people who will be interested. We actually often have consumers who call us up at the brewery and say, “Well, I’ve seen that you’re releasing this beer and I can’t find it anywhere. How do I get it there?” And sometimes there’s only a few places that will actually pick it up, even though there’s demand because they can’t be bothered to buy just a few boxes, they can’t be bothered to change their menu, they can’t be bothered to make some space in the shelves. But still, there’s demand for it. So, I think for that simple reason, as well, it’s a very good channel that we’ve never really used. So, most likely we’ll keep it up and running, yeah.

[00:57:25.19] Ben: And can you ship internationally?

Arthur: It’s complicated today. We ship internationally on occasion for professionals. So, if we have some bars in France or in Belgium, or in Scandinavia, or in England, who want to buy the beer, sometimes some have just contacted the distributors, and it’s going through like that. So, it’s been, I would say, a non-systematic business, but it’s been happening ever since 2015. We’ve been selling beer internationally, but not to private consumers because it’s very difficult and you need to go through a guy, you need to go through a middleman. I don’t see how you’d do it without.

Ben: Perfect! Arthur, thank you so much for coming on the podcast!

Arthur: Thanks, man!