Made in Switzerland
After years of debate, the new "Swissness" law is set to take effect in 2017. However, major objections are being raised at the last minute. We explain the point of the new law and who will benefit from it.
Majestic mountains, sparkling blue lakes, lush green meadows, happy cows, Swiss flags flying above Alpine hamlets, gleaming milk trucks, chocolate factories, and watchmakers – in spite of the cliché, these are the images associated with Switzerland at home and abroad, according to the "Swissness Worldwide 2013" study. This follow-up study by htp St. Gallen and the University of St. Gallen is based on two previous surveys. Since 2008, the answers of nearly 17,000 people in 14 countries, including Switzerland, have been analyzed.
Swiss Quality Is Worth the Price
"Switzerland's idyllic image stands for a value proposition. The country has built up this image for centuries," explains Stephan Feige, brand specialist and managing partner of htp St. Gallen. The study's participants, Feige says, see Switzerland as trustworthy, reliable, safe, and steady; as a country that delivers top-notch products and services and, to top it all off, is likable. In Switzerland and around the world, many people are willing to pay more for a Swiss product. A dissertation from the Swiss Federal Institute of Technology (Bolliger Maiolino, 2012) analyzed Swiss consumers' willingness to pay for Swiss agricultural products: The study revealed that 90 percent of those surveyed would pay up to an additional 35 percent for Swiss poultry when shopping. They would even pay 40 percent to 60 percent more for domestic strawberries. People in other countries are also happy to pay more for a product of Swiss origin: Just as in Switzerland itself, the acceptable price range depends on the product and the country. According to the htp study, the Japanese are willing to spend 112 percent more on a Swiss watch, while the Spaniards are at the other end of the spectrum, willing to pay an extra 22 percent. Conversely, the Spaniards would pay 41 percent more for chocolate, while the Japanese would pay "only" 29 percent more for this luxury. There is considerable value added by the Swiss cross, the Matterhorn, mountain backdrops, "Made in Switzerland," "Swiss made," and "of Switzerland." The chocolate, watch, jewelry, and machinery industries alone are generating proceeds of CHF 5.8 billion. No wonder, then, that indicators of "Swissness" have skyrocketed in recent years. Walk through a Swiss supermarket and you'll see that co-branding of this type doesn't apply just to chocolate or milk and farm products, but also natural cosmetics, pacifiers, and toilet paper. Even Coca-Cola, certainly not a product one would identify as Swiss, boasts "Made in Switzerland" on its packaging. "Fifteen years ago, we counted about 1500 active brands in Switzerland that had some sort of 'Swiss' co-branding. Now there are well over 5000," says Feige.
Misuse and Protection of the "Switzerland Brand"
"The success of Switzerland as a brand generates great interest, but also attracts a lot of copycats," says Felix Addor, acting director of the Swiss Federal Institute of Intellectual Property (IIP), citing the case of BelSwissBank, which IIP spent years dealing with. The catchy name doesn't mean "beautiful Swiss bank," although this financial institution even used the Swiss coat of arms in its logo. It stands for "Belarusian Swiss Bank." However, the Belarusian bank has nothing to do with Switzerland, except that it has two attorneys from Ticino on its Board of Directors. A solution is imminent only because BelSwissBank belongs to Belarus, and Switzerland has been able to conduct international negotiations with it. The bank now calls itself BSB Bank and no longer uses the Swiss coat of arms, says Addor and notes: "This misuse of 'Swissness' here and abroad is on the rise; this damages the credibility of the ‘Swiss brand’.” For this reason, in 2006 several postulates were submitted to the Federal Council, which then had a report prepared on the subject before commissioning the IIP to create a draft bill. In 2009 the bill went before Parliament, and in 2013 the new law was passed without even considering a referendum. The new regulations are scheduled to take effect on January 1, 2017; the ordinances are currently under discussion because, as Addor says: "The devil is in the detail." The main question is: How Swiss does a product have to be in order to use the name "Switzerland" on the label?
What Exactly Does "Swiss" Mean?
In future, the products will be assigned to one of three categories:
- Natural products, such as potatoes
- Processed natural products, such as pre-packaged rösti
- Other industrial products
Natural products must be 100 percent Swiss in origin. This is simple in the case of potatoes, but can be trickier for livestock – for instance when all of the major breeding farms are in foreign countries, as an analysis has recently shown. "The Swiss chicken that ends up on a skewer may be allowed as 'second generation (...)'." According to the new Swissness law, however, this animal is definitely Swiss because it spent most of its life here. Now, at least 80 percent of the commodity weight in processed natural products must comprise Swiss ingredients, while for industrially manufactured products, 60 percent of the manufacturing costs must originate in Switzerland. A diverse range of separate hurdles was tackled for the current version of the ordinances. For instance, Swiss beer would no longer have been Swiss under the draft ordinance if the Federal Council had not come to an agreement with brewers, because hops and malt are imported from other countries. Now, the origin of the water is relevant for beer. There will also be exceptions for commodities such as coffee, cocoa, and cotton, which must be imported, and a "trifle clause" stipulates that minor ingredients do not have to be accounted for. This will keep the red tape to a minimum in the documentation process. However, above all it is the food industry that is so ambivalent about the new law. Given the sharp increase in the administrative work involved, the Federation of Swiss Food Industries (Fial) fears that its members will forgo the Swiss cross, which would eliminate the need for production in Switzerland and mean job cuts. Knorr (Unilever) and Toblerone (Mondelez) in particular are critical of the law and may decide to do without the Swiss cross. On the other side are the Swiss Farmers' Union, Migros, and Nestlé, who support the national law and are proposing a compromise for points of contention. The watch industry is divided on the topic of the Swissness law as well: Some smaller and medium-sized producers are struggling with the 60 percent rule, which they feel is a huge leap from the prior 50 percent. There are fears of competitive drawbacks as components become more expensive. However, R&D costs are now considered production costs, and raw materials that are not present in sufficient quantities in Switzerland will not be counted. Estima, a manufacturer of watch hands, recently declared that it was wrong that Swiss suppliers were not able to cover higher demands. Meanwhile, luxury watchmakers and even Swatch are welcoming the new Swissness legislation with open arms. Companies such as Rolex and IWC do not use the Swiss cross for marketing anyway. Brand specialist Feige explains: "These manufacturers don't need the Swiss cross. Everyone knows them and where they're from, even without the coat of arms. Plus, co-branding is always a risk that you can't personally control." The use of the Swiss cross was also newly defined with the partial revision of the "Protection of the Coat of Arms Act." Now the Swiss cross can be used for products that meet the "Swissness" requirements – this was previously prohibited, although rarely prosecuted. Going forward, the use of the Swiss coat of arms (the Swiss cross on an escutcheon) will not be permitted – it will be reserved for the Swiss Confederation. The law provides an exception for companies like Victorinox, who have been using it for many years. "The fact that use of the Swiss Cross is voluntary sometimes appears to have been almost forgotten in the debate regarding Swissness and the associated difficulties," says Addor. However, SMEs and smaller, lesser-known brands in particular could really benefit from co-branding, especially abroad. If they meet the legal conditions, many are likely to take the opportunity and use the Swiss cross for marketing purposes in future. Feige notes: "We don't anticipate a disappearance of the Swiss cross, even if in Switzerland itself we may feel that the market is saturated. There is a good chance that the 'Switzerland' brand will be strengthened further by many low-profile players as a result of the new legislation."