The sound of Sennheiser

Premium headphone maker Sennheiser has been in the news this year for its Orpheus headphones and its innovative AMBEO system, which promise “3D” sound to go with virtual reality. Co-CEO Andreas Sennheiser, who was recently in Mumbai, spoke to Fortune India about these new products, the rapidly growing market in India, and the 70-year-old family business he runs with his brother. Edited excerpts:

Tell me about Sennheiser’s journey in India.
We came here about 10 years ago as the first headphone brand. We educated people about the beauty of great sound. We invest in educating them because good sound is like good wine—you can talk about it as long as you want, but to understand it, you have to taste it... That’s why we have managed to be on the top in “share of mind”, even if we may not be on the top in sales. We’ve grown more than 35% every year. The biggest change we’ve seen is that India is becoming a premium market, which is where we’re positioned.

Does having an entry-level segment dilute brand image?
We don’t go to the Rs 500 range because at that price point we can’t offer the quality we want. We want to be an aspirational brand, but we also don’t want that you have to wait 10 years to get your first Sennheiser. That’s why we have some models for India in the Rs 2,000-Rs 5,000 range, while in other countries the lowest is Rs 15,000-Rs 20,000. We will focus on the premium segments and eventually phase out some entry-level products, although we won’t do that immediately.

Is the brand positioning in India the same as that in the Americas or Europe?
Absolutely. The Indian market is developing so fast that we’re seeing a compressed version of the development in Germany of the past 30-40 years. Here that’s happening in just 10 years. We will focus more on the higher-end segments and eventually phase out some of our entry-level products.

There’s been a lot of buzz around the AMBEO. What are your plans with it?
We sent 25 of those [virtual reality] microphones to Google, Oculus, Facebook and others. They sought to create [virtual reality] content [for the AMBEO]. Without content, you can’t show the value of listening to immersive audio. We’re going to launch the product in September. With AMBEO, we want to break down the wall between reality and perception [in VR].

Do you see takers for it in India and Asia as well?
We expect it to be a high seller in emerging markets.

What about your plans for the top-of-the-line Orpheus headphones?
In 1992 we launched the Orpheus and no one has come up with anything better. Around 10 years ago we decided to ‘attack’ our own product. It took us all these years to develop a new Orpheus. Such prolonged development may not make commercial sense, but if we want to shape the future of audio, we need such flagship products. Orpheus is the pinnacle of our attention to detail. The Carrara marble is the same that Michelangelo used to make his statues. The platinum coating on the diaphragm is just a couple of atoms thick. We’ve gone to the absolute edge of what is possible. We can make only one Orpheus a day because it’s very complicated. But we’ve sold an entire year’s worth of production capacity without even shipping the first one. We’re planning to launch it in India this year.

Do you now feel you’re moving from an engineering brand to a lifestyle one?

That’s definitely one facet of development. There’s a lot of co-innovation with our customers to make sure we do not end up with an idea that an engineer came up with but no one needs.

How has design grown in importance?
Ten years ago, our products just had to sound good; looks hardly mattered. Now that you wear it around your neck, we pay great attention to detail and looks. One trend we’ve found is that genuine materials—leather, stainless steel— and good build quality are a lot more appreciated than a specific colour or ear [the way the headphones fit in the ear].

You had a record turnover last fiscal [€682.2 million or Rs 4,309 crore]. What’s the breakup between consumer and professional equipment?
In terms of growth rate, India is No. 1. I see no reason why we shouldn’t keep our growth rate in India consistently above 30% for the next couple of years. Although we don’t share individual country numbers, I can say that India is on its way to becoming one of our top 10 countries in the next one or two years. As for consumer vs. pro, it’s a 50-50 split.

Back in 2014, you had plans to open standalone stores here. How did that pan out?
We don’t have standalone stores in India. There are limitations of going into retail as a foreign brand. The shop-in-shop arrangement we have with premium partners such as Croma is very successful. We have 10 of them, and plan to have 15 more by the end of this year.

A couple years ago, you’d commissioned a study to explore manufacturing in India.
We don’t enter manufacturing just to supply to the rest of the world. It’s more important to reach a critical mass in that market. We don’t know if we will achieve that in India. We’ll review the market again in two years.

There were also plans of scaling back in China.
Sooner or later China will become less favourable as a manufacturing destination. We have partnerships and three factories in China and don’t want to stop that. But if we can get back some control with new products, we’ll do that. We want to balance our exposure [to supplying markets] and the supply chain.

Will Brexit affect your plans?
I don’t see any immediate effect. How this is going to develop, time will tell.

India is a country of family businesses. What’s your secret to running one successfully?
There are a few things we adhere to strongly. We don’t go to investors saying we see this opportunity and need money. That’s valid if you develop a brand with the intention of selling it after five years. But our aim is to be with our customers for the next 30 years. We also take a lot of pride in dealing with other family businesses.

How do you divide work with your brother?
Not at all! [laughs] Seriously, that’s one of the secrets. We are interchangeable in our roles. It gives us a [sense of] freedom to know that there’s someone who you can rely on and has the same values. Our family-like company culture matches with the Indian one.