Ukraine war – withdrawal from Russia business

Dusseldorf The Russian invasion of Ukraine overshadows the restart of Sennheiser. The audio specialist has withdrawn from the Russian business. “Corporate responsibility must not be limited to words, but must also include the willingness to accept losses,” says co-boss Andreas Sennheiser in an interview with the Handelsblatt. “Peace is more important than business.”

Employees spontaneously organized the transport of the sales partner’s employees from Dnipro via Hungary to Wedemark. They continue to support the 17 refugee women and children in their everyday lives.

The family business from Wedemark near Hanover split up earlier this month – 77 years after it was founded. The flagging consumer business with headphones and soundbars was sold to the Swiss hearing aid specialist Sonova. Under the umbrella of the financially strong partner, the division has better chances of growing profitably, explains Andreas Sennheiser. The products will continue to be sold under the Sennheiser brand.

The Sennheiser brothers now focus entirely on microphones and audio technology for professionals. “The company is smaller, more agile, has shorter cycles and is more profitable,” says Daniel Sennheiser. The demand for audio technology for live streaming, podcasts and music production in the home studio is growing. In addition, universities and companies equipped lecture halls and conference rooms for hybrid formats. There is a lot of catching up to do with live events.

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Read the entire interview here

Dear Sennheiser, The world is watching Putin’s war in Ukraine with great concern. Will Sennheiser continue to do business in Russia?
Daniel Sennheiser: We have decided to completely stop sales in Russia and no longer deliver there. We can’t do any business there with a clear conscience at the moment. This is primarily an ethical and moral decision. There are other factors that complicate the business. Imported products are becoming more expensive as a result of the collapse of the ruble.

How do you see the role and responsibility of Western companies?
Andrew Sennheiser: With our withdrawal from the Russian business, like many other companies, we are increasing the pressure on the Russian regime to give in. Corporate responsibility must not be limited to words, but must also include the willingness to accept loss. Peace is more important than business.

Vitae Andreas and Daniel Sennheiser

Bolshoi Theater, Church of the Savior and Kremlin Palace in Moscow are equipped with audio technology from Sennheiser. How important is business in Russia for your company?
Daniel Sennheiser: Sennheiser has been active in Russia since Soviet times, especially in the field of cultural equipment. Like many other companies, we had the expectation that the market could become very large with the opening of Russia. However, the business has not grown as hoped.

How many employees are on site?
Andrew Sennheiser: Since 2006 we have had our own branch in Moscow with 45 local employees, 28 of them in the field of professional equipment. We are in daily contact with the local workforce. We’ll continue to pay you for now. You haven’t done anything wrong and have been working loyally for us for many years.

Sennheiser produces microphones and audio equipment – technology that is also fundamentally required by the military.
Daniel Sennheiser: As a German family company, we have a value compass. Our grandfather and father already decided in principle not to produce microphones or audio technology that would be used in military equipment. We regularly have orders in this direction on the table and have always rejected them – for example technology that can triangulate where shots are coming from. If a military orchestra wants our microphones, we supply them.

So far, Sennheiser has made 85 percent of its sales outside of Germany and, like many medium-sized companies, is heavily dependent on foreign business. After the experience with Putin: should companies in autocratically governed countries such as China still do business at all?
Daniel Sennheiser: We cannot speak for others. In the countries where we sell products, we can reconcile business with our conscience. But the world has become too complex. Ultimately, this always has to be decided on a case-by-case basis. Sennheiser stands for exchange, culture, music and community. Our technology is used at the Olympic Games, such as in Beijing, as well as at the “Super Bowl” in the USA or the “Eurovision Song Contest”.

Who are your customers?
Andrew Sennheiser: We focus on artists on the one hand and event and conference technology on the other. It is about the exchange of multinational companies. In this way we promote international cooperation. However, we deliberately do not supply microphones for monitoring and the like.

Putin’s war has far-reaching effects on the globally networked economy. Important components are missing, chips are becoming even scarcer. What consequences do you fear for production at Sennheiser?
Daniel Sennheiser: Many raw materials such as aluminum come from Russia, and energy is sure to become even more expensive. Rare earths from there are needed for our neodymium magnets. The recycling of rare earths has been an important issue for many years and is becoming even more relevant as a result of the war. The lack of chips was already a limiting factor for us in 2021.

What lessons do you draw from the pandemic and Putin’s war? Do suppliers and production have to go back to the EU?
Daniel Sennheiser: Many of our parts used to come from China. That’s why we consciously set up our own factory in Romania years ago. We also produce in Germany and the USA. During the pandemic, we were often better able to deliver than our competitors. Nevertheless, we are all dependent on Asia simply because of the microchips.

Andrew Sennheiser: What the war means for our global business can only be speculated on. Nobody knows how long it will last and how far the situation will escalate. Sennheiser has set up a crisis management team that discusses measures on a daily basis. This isn’t our first crisis.

Sennheiser focuses again on the professional business

How has Sennheiser survived other crises?
Daniel Sennheiser: Even before the corona and chip crisis, we had to strategically reposition Sennheiser three years ago. Since the beginning of the month, after more than 50 years, we have been concentrating completely on our business for professionals again. The company is smaller, more agile, shorter-cycle and more profitable. In this way, we can grow above average under our own steam and react more quickly to crises.

Walk through the Sennheiser factory

Andreas and Daniel Sennheiser (from left) are now concentrating on audio technology for conference rooms, recording studios and events.

(Photo: Sennheiser)

The company has been split up since this month, a historic turning point. No family business is willingly parting with what has long been its largest division.
Andrew Sennheiser: We concluded that all of our businesses have big and good growth opportunities – if given the right framework. We can bring audio technology for professionals, Neumann studio microphones and business communication such as conference technology to a higher level on our own. But for the volatile consumer business with headphones and soundbars, we need a financially strong partner to grow profitably. Under the umbrella of the Swiss hearing aid specialist Sonova, the division has greater opportunities.

Daniel Sennheiser: This is the best solution for everyone – including the employees. At some point a child moves out of the parental home because it can develop better on its own.

How did the workforce react to the sale?
Daniel Sennheiser: It is normal for there to be uncertainty at first. But as an innovative company, our culture has always been very opportunity-oriented.

Andrew Sennheiser: We sense a spirit of optimism in the entire workforce. However, we had to install separate access systems everywhere on campus and train the employees. Former colleagues are allowed to eat lunch together in the canteen, but are no longer allowed to talk about business.

>> Read also: entrepreneur Jörg Sennheiser: A man for every key

The sound quality of Sennheiser is unquestionable. Nevertheless, the headphones have been losing market share to newcomers like Beats and corporations like Samsung or Sony for years. Have you underestimated the competitors?
Daniel Sennheiser: In terms of brand and design, we have very successfully caught up. But the business model has changed completely. A headphone is now just an interface to a large ecosystem, be it from Apple, Samsung, Google or Amazon. Sonova has a different approach. The provider of hearing solutions wants to rejuvenate its target group and needs a strong consumer brand like Sennheiser to do so.

Apple took over the start-up Beats in 2014 for around three billion dollars – triple the sales at the time. The sales price of your headphone division sounds much more modest: 200 million euros, less than annual sales, plus annual license fees for the Sennheiser brand. Did Apple knock on your door too?
Andrew Sennheiser: We are extremely satisfied with the price achieved. There were many interested parties, including large corporations. We made a conscious decision not to. It was important to us that Sonova, as a European company, shares similar values.

They now only focus on gear for professionals. How do you see the prospects? After all, live events were hardly possible during the pandemic.
Andrew Sennheiser: The past year was nevertheless very successful in all areas. We also expect significant growth in 2022. Since the pandemic, there has been an increase in live streaming, podcasts and home studio music production. More and more influencers are shooting Tiktok or Youtube videos at home. We supply the right audio technology for this.

Sennheiser Ambeo microphone

The microphone is designed to record 3D audio.

(Photo: Sennheiser)

Daniel Sennheiser: In addition, universities and companies are equipping lecture halls and conference rooms for hybrid formats. There is also a lot of catching up to do with live events. With everything, the trend is towards 3D sound. Sennheiser has been a pioneer here for 30 years.

Speaking of sound: at CES 2020, Sennheiser presented Continental, an innovative audio system for cars. This supposedly produces a sound like in a concert hall. Is the new business area ready for series production?
Andrew Sennheiser: We have largely achieved series maturity and are working with various car manufacturers on specific projects. The vehicle can become a concert hall or manager’s office. In the future, the driver will be able to listen to music without headphones while the front passenger has a hands-free conference call.

To what extent are partnerships becoming increasingly important for medium-sized companies?
Daniel Sennheiser: Our products are increasingly part of systems. We also work very closely with Microsoft and Zoom on business communications. That is fertile for everyone. However, partnerships require a rethinking of the employees and of us in the management level.

How can you prevent know-how from being skimmed off?
Andrew Sennheiser: By being better and faster. If you are obsessed with fear and do not engage in an open exchange of knowledge, you cannot fully exploit the possibilities of cooperation.

Gentlemen Sennheiser, thank you very much for the interview.

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