Matthew Hohner to Andreas Hohner and Will Hohner
Matthew Hohner to Andreas Hohner and Will Hohner, July 16, 1919.
Translation:
16 July 1919
My dear father and Uncle Hans:-
My various recent letters to you, dear Father, I hope you will have received by now, mainly my letter of 19 June.
About a week ago, a letter from Veerk. to Will (Hassle) arrived here, which he showed to me yesterday. This letter is from Geneva and dated the 17 April. – In it, I am particularly criticized for my long silence and lack of a sense of duty, etc. etc. Of course, I can easily think my way into your position and you all can be assured that it was not always very pleasant for me to remain silent the whole time – but when I tell you precisely all about all my experiences later that I had to endure during my long years, then you will see various things in another light and understand that I was pursuing a very particular purpose with this. But this can be explained better later.
In my various letters, I emphasized as much as possible that the first step the company should take here should be thoroughly discussed in all courts–especially orally. For this purpose, it would be best if Uncle H. [Hans] were to come here immediately, if the state of his health allows it – should this not be possible, why can’t Elias go there? He is ready to leave at any time.
If Will [Haussler] has his way here, then he wants to have the agency for your products for the firm “H. & K.” [Haussler & Kienle] that has existed since 1916 – of course, he only means to do this for a while, but why should this firm be announced (it would have to be the same) instead of M.H.? – Among most of the old M.H. clientele, H. & K. is not known and would first have to be introduced, only to be replaced again later by the new firm. — Of course, at the moment the situation is that the old firm, including all patents, furnishings and equipment, is still the property of the American government until the American Senate has accepted the peace treaty. How long this will take (perhaps years), no one knows. — For the future it would perhaps be advantageous for all times to open a purely American company here under the name of HOHNER – let’s say the property of Uncle H. & he can choose his partners or shareholders among American citizens however he sees fit. We should be able to make good profits there too, because we have long paid high taxes of up to 50 and 60% above the normal earnings. This would primarily pertain to the matter of Z.
Then, the matter of pricing is so important that this needs to be thoroughly discussed before we fiddle around for months and keep our clientele uncertain–because of their catalogues, etc. Our matter is too important to just make changes overnight. The pricing matter is also closely tied into the Sconti question. Would it not be a blessing here if we could bring a certain system to this, or if we could altogether clean up with Scontis?
If, for example, Uncle H. is here locally, or if, for example, Elias returns from there with your instructions for a thorough discussion [and with] the authority to act as he sees fit, then the above-mentioned points could be taken care of relatively quickly with the help of a first-class lawyer, but somebody must be here with complete power of attorney for you concerning these matters – besides Will – because his way of dealing with things in the last four years has made it amply clear that he only considers himself and not the well-being of the company – [page break] In my opinion, a great deal depends upon the manner and way our product reappears on this market after many years of absence. Simply to sell some product, regardless of how this is done, only to later suffer from mistakes that have been made, is definitely not in the interest of the firm and certainly not your idea?
While the reorganization of the firm to be created is taking place, the factory could efficiently take up producing mostly all the earlier feasible models and, if necessary, send them under bond to a shipping company until the right company is in a position to proceed with the business again thoroughly and in a solid, real way. In this manner we could then quickly have access to a certain quantity of products without losing too much time. You probably cannot be expected to have your tremendous supplies of staple goods ready for the local market, even if everyone here seems to assume that you cannot wait to get rid of this large stock. When general export is opened up again, you will hopefully be so busy there that we won’t be able to meet the need here. If this is actually the case, then this circumstance would be doubly lucky for us. Your prices for the German market will probably be similar to the prices shared with us previously. If not, it would be interesting to obtain comparisons.
Concerning the competition, I of course don’t know what Koch & W. intend to do. Other firms that always sold to local importers do not, of course, have to deal with many questions, because the large importers will certainly allow their buyers to travel through all of Germany, etc., at the first opportunity. Moreover, according to rumors that are circulating here, the Klingenthal area seems to be suffering from a shortage of raw materials. Is it to be understood from your letter of 17 April that it will be difficult to continue to procure inexpensive harps [i.e., harmonicas]? The price differences between the various articles in our branch will certainly once again stand in a relation similar to earlier prices. We do not assume that the quality of Hohner suffered during the war and will without doubt get paid better prices for our articles again, on the condition that we remain within the framework of the earlier price difference. If we release the 34B as a 50-center on the market, then this would be comparable to the prices for any article, because everything here is now at least twice as much as before, of course there are many exceptions where the price has increased by 200 to 400%. If 34B should become a 50-center, then it is uncertain what we could offer as a 25-cent article. Is perhaps not possible? Will there still be 10-cent products? Our sales in dollars and cents will, in the case of good deliveries from the factory, of course grow significantly compared to earlier years and we should easily be able, for example, to double our sales from ’13 [1913] in 1–2 years. Our expenses here should not rise significantly compared to before, so that we may be able to be satisfied with a lower use, on the condition that you all are able to swing the entire business there without capital expansion. Here in the competition question, price-setting is of course of primary importance. In my letter of the 19th… I mentioned that when some importer receives a shipment from over there and pays a rate of 5 cents per mark, he is of course significantly cheaper than we are if we base our prices on a currency status of 10 cents or more, etc. etc. If, on the other hand, we were forced in each case to sell at the going currency rate, then we might have to make price increases on a weekly basis, which would be without end; in any case, this would hinder smooth business transactions. [page break] So in this case a middle course should be found. Our prices, however, must also be brought in line with Japanese harmonicas; even the factories there, despite some meaningful progress, have their own problems in relation to quality and general business methods. It is difficult to say what else might arise from the American competition. Various starts have been made, but not much has been heard about them. – Up to now the Bell Brand still costs us $30 gross each, but the price for this already rose some time ago to $38 gross. This company increased its productivity, but I have no numbers to express its productivity. During the war, up to now we have acquired about 60 [?] gross. Bruno receives monthly shipments of perhaps 10-20 gross, likewise other important music companies, also H & K Toronto; Borgfeldt is also supposed to have already received a shipment, but that is all small quantities.
Concerning the marketability of our article, I have the greatest hopes for the future. If our prices can be brought into a proper relation to the entire competition, it will be a pleasure to visit most of our old clientele and the right man will be greeted with open arms and will not have appeared in vain. Some areas may act somewhat stiff in the beginning, likewise certain firms that are neither American nor anything else, yet if, for example, “Smith” doesn’t buy, then his counterpart “Cohn” will, because business is business. Hohmann is ready to travel at any time and I would really enjoy visiting big local customers and Chicago – of course, only once we have firm plans. To sell products by means of salespeople as well as with intensive advertising, an American firm would be an important point.
The popularity of the article has certainly grown stronger here as well. Newspapers have often run stories on how very desirable the harmonicas are among the soldiers on the front. Various high-ranking officers have mentioned this instrument. The Red Cross has often ordered [them] in large quantities. Various women of the N.Y. elite bought large numbers of harmonicas as presents for soldiers, etc., etc. If one can believe all the various anecdotes about the high prices paid for the last Hohners, there is no cause to worry about the popularity of the article. The professional players now seem especially to be learning to appreciate quality because most of them can hardly work with Bell Brand or Swiss instruments and wait longingly for Hohners. –
Now, after the wages in all industrial areas of the German state have been raised so significantly, and probably are still on the rise, is a wage difference between you and Kling. still meaningful? The prices for raw materials will probably continue to be regulated as before through a central purchasing center. If now the difference in wages as well as prices for materials is no longer crucial, would it not be possible to produce cheap types yourselves? No doubt the 10-15 and 25-centers will play a big role and if you all can produce a better article than Kl. with your modern machinery, then we might have a sweeping success. Now that the question of wages has become so important there, & raw materials have become so dependent on foreign countries, the German producer will have to rely in the future more than ever on his ingenuity, {wherever possible trained workers} should be replaced with machine labor. You all launched cheap harps before with ≠ 00. This article, which you all were never particularly interested in [page break] from the perspective of the producer, has become an article of inestimable value for the NY stores. At the end, the price in 1914 was, after all, totally acceptable, and 30-50,000 dozen in 1914–15 and even later would have benefited us. The quantities sold before the war rose considerably every year and perhaps after 5 years, you all would never have given up this article. Now since a 50-cent item will apparently be the cheapest at Hohner’s, we should definitely be in a position, as before, to represent the whole line from 10-cents and up; because this would be worth it in any case, even if the use is low. The moment the purchaser has to divide his order, we prepare a path for the competition, also for their better articles. When I study your prices, it seems premature to speak of (5)-10-15 & 25-cent articles, yet we will have these again and we should in any case come across as pioneering in our line. – We specialize in harmonicas and accordions. – All of the above applies to accordions as well. Hohner accordions have been introduced today and are generally known for their quality, durability, their masterful workmanship, etc., and the higher price compared to the competition is usually gladly accepted. The disadvantage for our accordions always consisted in the fact that every larger music store here pushes its own line and always gives its own line twice as much or more space for advertising in its catalogues. These stores did this primarily because each one believed it would gain an advantage over the other competitors with its own trademarked article because the profit on their own instruments was usually greater than on our line. Lyra, Lester, Arion accordions & whatever they are all called have perhaps attained a certain fame in the local market; to proceed now in the accordion business as well, we could, for example, produce these lines under the respective name for the larger clients, just as cheaply as Kl., now that our better machinery would give us an advantage.
I wrote very little about the Br. [Bruno] matter on principle because Will always reported to Uncle H. on this. The matter there currently appears as though if you, dear uncle, can immediately come over here, your share as well as dividends will be reimbursed in time & then as the rightful owner of your shares you can manage your portion however you like. In your absence H.S. was elected president of the company. As far as I was told, the two Brunos & H.S. are working very hard to see that the company is auctioned as quickly as possible so that these gentlemen can purchase the whole thing for themselves, that is, without you & Starks, as cheaply as possible. Whether this is actually the intention of the respective gentlemen, I, of course, cannot say, but caution is advised. Loewy has so far managed to hold off the matter of the sale & will continue to do this until you return, yet it is very urgent because these days we hardly know what the next day will bring. The business there is always outstanding & the future has never looked brighter.
A table on a separate sheet shows the base prices of the 34B at the different exchange rates. 34B in real brass design & with brass-plated zinc plates. Likewise the production cost of the various batch numbers. For freight and packing I put especially high numbers in because, of course, here we have not yet been able to get freight rates through domestic freight companies there. About 1 month ago there was a quote of $1.00 per cubic foot for ocean freight. – Now, in order to really proceed with setting the price, I can only repeat that, first and foremost, in my opinion a thorough discussion is necessary. [page break] Although we do have your prices, I still don’t know at all what the productivity of the factory will be for 1920. We can probably assume that you will be able to deliver up to 70% or 80% of 1913 levels (normal) in a relatively short period of time. If this is so (or perhaps even better), then it would be logical for us to resume our sales in dozens to almost the same level of 1913. With this point in mind, it is, in any case, in our interest to sell at the lowest possible price. – [The] 34B previously cost us $1.09 to produce (including the basis). We sold the same deducting the maximum discount at the cost price for $1.27 1/2 for the sales price of $1.29 a dozen (B.B. 18 1/2%) & achieved a gross profit of 10 1/2 or 20 cents per dozen or 17 and 18% of the actual cost value of the product. – Let us assume, according to the attached table, the new cost price of 34B (brass) at the exchange rate of 15 cents per mark at $3.51 a dozen; then, according to the old scheme, we would have to calculate adding 17% to this price in order to get the new lowest sales prices of $4.11 per dozen. Now we would gain a gross profit of 60 cents per dozen. In 1913 we sold about 118,000 dozen of the various 25-cent types for a gross profit at that time of between 15 1/2-20 cents per dozen or a total of $22,000. – If we are now able to sell 118,000, (if we receive the products we will do everything we can), then the immediate total profit now would be $71,000. – Of course, if we can only sell a third of the previous quantity then we would need the profit of 60 cents. It now depends on your plans. With the profit of the wholesalers & finally of the smaller customers this case is, to a certain extent, similar, although here we would first have to get a feel for what the individual stores, the most important ones, want. – I am, of course, entirely aware that it is not always a good business principle to increase sales and reduce profits, yet in this case it would certainly be appropriate if at all possible to take a middle road. With the high taxes that have to be paid there a large portion of this profit [that] would go to the government, even though the government must surely be interested in industry getting back on its feet as quickly as possible. The success of the rapid rise of the N.Y. branches could then benefit the firm even more in later years.
For the time being, the customs will probably still be 35%, but when the next elections begin in 1920 the Republicans will mostly talk about protective tariffs again. Then it could easily be possible that the customs will be raised even higher.
Tor. [unknown] keeps me apprised of Elias’s frequent visits here. These gentlemen have endured difficult times and their future there still depends on a number of conditions. At the first opportunity you will receive a detailed report directly from there. These men have lost none of their energy in the meantime, & they are waiting eagerly to once again represent H. [Hohner] products. Originally Elias had high hopes for “Helvetia” products & he would have liked to carry both lines alongside each other so that the buyer would have his choice. As things stand here, whether D. [unknown] still exists, we are still rather in the dark. After all, Elias has not been there since 1900 & it would surely be mutually beneficial if he could visit you there once. [page break]
In conclusion, I want to repeat that when you have made your decision on the various important points & when we have your definitive instructions for the manner and way we should proceed in the future in hand, then nothing at all stands in the way of taking up the business in earnest, – for all in all, the organization established by Uncle H. is still completely intact.
In the hope that you, dear Father, my dear Mother and siblings, Uncle Hans, Jakob, Matthias & Will, as well as Ernst & Karl & all our relatives, are in good health, I send you all my hearty greetings.
Yours faithfully,
Matthias
From now on the postal service is open once again, once a week to begin with, & I will keep you all up to date on everything. Your private reports would be most welcome to me for much must have changed.
