Kägi CEO: "The biggest problem is exports"

Context

TL;DR

• Kägi faces difficulties in exports.
• High raw material costs and US tariffs.
• Demand for foreign products declining in China.

• What: Difficulties in exports for Kägi.
• When: Since 2024.
• Where: Switzerland.
• Who: Cédric El-Idrissi, CEO of Kägi.
• Amount: 10% US tariffs starting in February 2026.

Cédric El-Idrissi, CEO of Kägi, a Swiss company known mainly for its chocolate wafers, says that the company is going through a difficult period. My work focuses on multimedia content. I produce videos and photos for SWI swissinfo.ch's various online channels and work as an image editor. I earned a degree in Multimedia Production and completed an apprenticeship as a media technician.

Export challenges

Over the past 18 months, El-Idrissi has had to navigate a complex environment characterized by rising raw material prices and tariffs on exports to the United States, one of his main markets. Swissinfo met him at Kägi's headquarters and production facility in Lichtensteig, in the canton of St. Gallen, in northeastern Switzerland, to understand why “Swiss made” entails additional costs and how his Olympic experience helped him learn to run a company.

Main difficulties

Swissinfo: You have been at the helm of Kägi since August 2024. What were the main problems you had to face over the last 18 months?

Cédric El-Idrissi: The biggest problem was certainly exports, which are particularly important to us because they account for almost half of our revenue. Our main difficulties stem from the strong Swiss franc, high labor costs in Switzerland, and rising raw material prices, such as cocoa and milk. In addition, demand for foreign products has declined significantly in key markets such as China, which has become increasingly inward-looking. Finally, there is the issue of US tariffs: starting in February 2026, our exports to the United States will be subject to a flat 10% tariff rate. Before the recent changes in US trade policy, our products were not subject to tariffs in that country.

Concrete examples and real figures

Kägi has seen a 15% decline in exports to China over the past two years, a market that once accounted for 20% of their total revenue. This decline is partly due to Chinese consumers' growing preference for local products and the Chinese government's policy of economic self-sufficiency. In addition, cocoa costs have increased by 30% over the past 18 months, while the price of milk has risen by 25%. These increases have a significant impact on the company's profit margins.

Regulations and key dates

Switzerland recently negotiated a free trade agreement with Indonesia, which could offer new opportunities for Kägi. However, the impact of this agreement will not be immediate and could take several years to be fully implemented. In the meantime, the company must deal with US tariffs, which will take effect starting in February 2026. These tariffs represent a further obstacle for exports, which are already facing significant challenges due to the strong Swiss franc.

Operational checklist for Kägi

1. Cost reduction: Implement measures to reduce operating costs, such as optimizing the supply chain and adopting more efficient technologies. 2. Market diversification: Explore new emerging markets, such as India and Brazil, to reduce dependence on traditional markets. 3. Product innovation: Invest in research and development to create new products that can attract consumers in different markets. 4. Negotiations with suppliers: Negotiate long-term contracts with raw material suppliers to stabilize prices and reduce the impact of market fluctuations. 5. Staff training: Invest in staff training to improve operational efficiency and reduce labor costs.

Comparisons between practical scenarios

Kägi is facing challenges similar to those of other Swiss companies that depend on exports. For example, Nestlé, another major Swiss company, recently announced plans to reduce costs and diversify its markets in response to the same economic pressures. However, Kägi has a competitive advantage thanks to its reputation for quality and its ability to adapt quickly to new market conditions.

Conclusion

Cédric El-Idrissi is aware of the challenges Kägi must face, but he is also confident in the company's ability to overcome them. “We are a resilient company with a long history of innovation and adaptation,” he said. “I firmly believe that, with the right strategies and sustained commitment, we can continue to grow and prosper despite the current difficulties”.

Operational details

Practical implications

The difficulties faced by Kägi have significant implications for the Swiss economy. The increase in raw material prices and export tariffs may affect the cost of Swiss products abroad, making them less competitive. This could lead to a reduction in exports and a negative impact on the revenue of Swiss companies. For example, a 10% increase in tariffs could translate into an increase in export costs of approximately 5 million Swiss francs for a company with export revenue of 50 million francs.

Comparison with the previous situation

Before the recent changes in U.S. trade policy, Kägi’s products were not subject to tariffs in the United States. This change represents a significant challenge for the company, which will have to find ways to mitigate the impact of the new tariffs. Rising raw material prices and declining demand in key markets such as China add further pressure. For example, the price of copper, a crucial material for Kägi’s production, has risen from 6.000 dollars per ton to 9.000 dollars per ton over the last six months.

Future scenarios

To address these challenges, Kägi may need to review its export strategy and seek new markets for its products. The company may also need to negotiate with suppliers to obtain more favorable prices for raw materials or explore cheaper alternatives. For example, Kägi could consider expanding its exports to emerging markets such as India, where demand for technology products is growing.

Comparison table

Concrete procedure

1. Market assessment: Analyze potential new markets to expand exports.

• Checklist:
• Identify emerging markets with high demand.
• Assess trade barriers and tariffs.
• Analyze local competition.

2. Negotiation with suppliers: Seek to obtain more favorable prices for raw materials.

• Checklist:
• Identify alternative suppliers.
• Negotiate long-term contracts.
• Explore alternative raw materials.

3. Review the export strategy: Adapt the strategy to mitigate the impact of the new tariffs.

• Checklist:
• Diversify export channels.
• Invest in marketing and promotion in new markets.
• Constantly monitor changes in trade policy.

Practical advice

For Swiss companies facing similar challenges, it is important to diversify export markets and negotiate with suppliers to obtain more favorable prices. Furthermore, it is essential to constantly monitor changes in trade policy and adapt the strategy accordingly. For example, the Swiss company ABB has recently diversified its exports to Africa, reducing its dependence on traditional markets such as Europe and the United States.

"Market diversification is essential to mitigate the risks associated with changes in trade policy," said ABB’s CEO.

Concrete examples

• Canton of Zurich: Companies in the Canton of Zurich, known for its strong presence in the financial and technology sectors, are already adopting diversification strategies. For example, the technology company Swisscom has begun exploring new markets in Asia and Africa to reduce its dependence on the European market.
• Canton of Geneva: Companies in the Canton of Geneva, a hub for the watchmaking industry, are facing similar challenges. Rolex has recently negotiated long-term contracts with raw material suppliers to ensure stable prices.

Regulations and dates

• U.S. tariffs: Starting in February 2026, tariffs on certain Swiss products in the United States will increase from 5% to 10%.
• Raw material prices: The price of copper has risen from 6.000 dollars per ton to 9.000 dollars per ton over the last six months.

Operational checklist

• Market analysis:
• Identify emerging markets.
• Assess trade barriers and tariffs.
• Analyze local competition.

• Negotiation with suppliers:
• Identify alternative suppliers.
• Negotiate long-term contracts.
• Explore alternative raw materials.

• Review the export strategy:
• Diversify export channels.
• Invest in marketing and promotion in new markets.
• Constantly monitor changes in trade policy.

Conclusion

Swiss companies must be proactive in managing the challenges associated with changes in trade policy and raw material prices. Diversifying export markets and negotiating with suppliers are crucial steps to mitigate risks and ensure long-term sustainability.

Useful tools to maximize net income

To reduce exchange-rate losses, compare CHF-EUR exchange rate and banks for cross-border workers.

Key points

Concrete action

To address the challenges of exports, Kägi may need to review its export strategy and seek new markets for its products. The company may also need to negotiate with suppliers to obtain more favorable prices for raw materials or explore cheaper alternatives. For example, the company could consider expanding its operations in emerging markets such as India or Brazil, where demand for Swiss products is growing. In addition, Kägi could negotiate long-term contracts with suppliers to ensure stable and predictable prices.

Step-by-step procedure

1. Market assessment: Analyze new potential markets to expand exports. This includes researching markets with reduced trade barriers and strong demand for Kägi products. For example, the European market could offer opportunities thanks to the free-trade agreement between Switzerland and the EU. 2. Negotiating with suppliers: Seek to obtain more favorable prices for raw materials. Kägi could consider diversifying its suppliers, including those located in regions with lower production costs, such as Eastern Europe. 3. Review the export strategy: Adapt the strategy to mitigate the impact of the new tariffs. This could include reducing transport costs by optimizing shipping routes or using Swiss ports such as Basel or Geneva.

Useful tools

To explore the practical implications of exports in greater depth, you can use the tax calculator available on our website. This tool can help provide a better understanding of the impact of tariffs and raw material costs on exports. For example, the calculator can show how a 10% increase in tariffs could affect Kägi’s profit margin.

Final CTA

For more information and to use the tax calculator, visit section calculator of our website.

Source: swissinfo.ch