In a message dated 7/27/2004 11:09:31 AM Eastern Daylight Time, PHALL@bloomberg.net writes:

Subj: Story for today's interview
Date: 7/27/2004 11:09:31 AM Eastern Daylight Time
From: PHALL@bloomberg.net
To: ilaul@aol.com
Sent from the Internet

By Benjamin Ivry

July 27 (Bloomberg) -- Buying a piano from Estonia seems as odd as looking for a good Bordeaux wine in Poland. Yet AS Estonia Piano Factory, with two factories in Tallinn, the Estonian capital, makes and exports about 400 grand pianos annually to the U.S., with 30 dealers across the country selling the instruments. Worldwide sales totaled about $8 million in 2003, the company said. The appeal of its instruments is musical quality combined with reasonable prices. The Estonia piano has drawn praise from classical pianists such as Van Cliburn and Sviatoslav Richter as well as jazz musicians including Dave Brubeck and Oscar Peterson, according to the company's Web site. Mass-murdering Soviet dictator and music lover Josef Stalin is said to have been a fan. The company's owner, since 1995, is a Juilliard School-trained pianist, Indrek Laul, 36, who divides his time between offices in Stony Point, New York, and Tallinn. In Manhattan to visit his exclusive New York dealer, Faust Harrison Pianos on West 58th Street, Laul stopped at a favorite midtown German restaurant to chat with Bloomberg's Benjamin Ivry. Dressed in a striped shirt and suspenders, the 36-year-old pianist and entrepreneur sat back sipping iced tea and munching smoked herring as he explained his passion for his company's instruments.

German Connection

Bloomberg: Why make pianos in Estonia?

Laul: German musicians who emigrated to Tallinn in the 18th century continued to develop the modern piano, as invented by pupils of Johann Sebastian Bach. Estonia has no oil, nothing we can drill for, so music has always been our country's natural resource. Before World War II, when Estonia was independent, there were almost two dozen piano factories in a country of 1.4 million people.

Bloomberg: How old is your company?

Laul: An Estonian-born piano maker, Ernst Hiis, founded Estonia Pianos in 1893, after training at the Steinway piano factory in Hamburg.

Bloomberg: Where in Estonia are your factories?

Laul: One, built in the early 20th century, is near the old city of Tallinn. Eighteen months ago we opened a new facility, also in Tallinn. That makes a total of 104 employees.

Bloomberg: Your parents are among those employees, I understand.

Laul: Yes, my father Veno, a choirmaster, and my mother Reet, chief accompanist at the Estonian National Opera, test every piano before it leaves the factory. They listen for evenness of tone and how the sound is projected. They are very demanding and also check the outer workmanship, right down to the quality of the varnish.

Comparative Pricing

Bloomberg: So you're from a musical family.

Laul: Yes, our family name Laul even means ``song'' in Estonian.

Bloomberg: How much do your pianos cost?

Laul: Prices range from $23,700 to $71,000. By comparison, a Steinway grand piano costs around $120,000.

Bloomberg: How do you keep prices so low?

Laul: In Estonia, salaries are roughly one-quarter of salaries in the U.S., although skilled laborers in Estonian piano factories are paid more than average. Estonia's tax laws also help, as we have no corporate income tax as long as profits are invested back into the company. That's a very powerful incentive.

Bloomberg: How many kinds of pianos do you make?

Laul: We only make grand pianos, unlike most other companies which sell upright pianos that take up less room, so they are popular in modern European apartments. We focus on grand pianos for the American market, since homes generally are more spacious in America than in Europe. We offer a studio grand, which is 5 feet 6 inches; a parlor grand, which is 6 feet 3 inches long; and a concert grand, which is 9 feet long.

Uncle Joe

Bloomberg: The Estonia Piano is often described as ``Stalin's favorite piano.'' Was it?

Laul: Estonia was forced to give gifts for Stalin's birthday, like all the countries under the Soviet yoke. In 1950, the Estonian Parliament presented Stalin with a piano made by Ernst Hiis, and one of Stalin's commissars informed the Estonian delegation that Stalin really liked the piano and asked if more could be manufactured like it. The Estonia piano was adopted as the sole manufacturer of concert grands for the Soviet Union.

Bloomberg: Is the link with Stalin a drawback or a selling point?

Laul: In Estonia we never mention Stalin in our brochures. The U.S. media usually brings it up as a sensational fact, but we don't boast about it. For us it's no joke, since we remember Stalin in other contexts. In 1991, Soviet tanks rolled down the streets of Tallinn, crushing people in the last attempt by the Soviets to keep their regime together. Bloomberg: What made you acquire it?

First Piano

Laul: I grew up in Tallinn playing on Estonia grands. When I was 10, my parents bought an Estonia grand and I heard my mother play Chopin etudes at home. The sound was just amazing and I was inspired to study these works myself. After Mr. Hiis died in 1964, the Estonia company gradually declined from producing 475 pianos annually to 49 pianos annually by 1995. By then, quality was also a problem. Recalling my previous feelings about these pianos, I decided to acquire the company and bought a majority share in 1997-1998, becoming the sole owner in 2001-2002. (Laul said that under the terms of the agreement the purchase price can't be disclosed.)

Bloomberg: Where did you learn how to run a small business?

Laul: From books by Jack Trout and Al Ries. I felt sure that if we could make a better piano, we would succeed.

Bloomberg: Like building a better mousetrap?

Laul: That's right. I also introduced a new model piano, the smallest we sell, the studio grand, which fits most homes. Previously, we only made black pianos and I introduced wood tones like African mahogany and walnut, which people like because it matches their furniture. We changed staff gradually as necessary, and also changed suppliers of internal components, from local producers to the best German companies, since our aim is to be European.

Special Sound

Bloomberg: How does that change the way the pianos sound?

Laul: The sound now has lots more color and a wider range of shades, like giving a painter a wider choice of palette. Between 2000 and 2004 we made 279 changes to the three models, over 80 changes, large and small, in each model.

Bloomberg: Would you recommend that a customer buy an older Estonia piano, if one is on sale?

Laul: No, get one made after 2001. They are better.

Bloomberg: Has your performing career been put on hold for business activities?

Laul: Not really; Estonia Pianos fan clubs have been formed in Detroit and Seattle, where I am invited to play, and other dealers across the U.S. ask me to give concerts as well. Also I record on Estonia pianos for Consonant Records.

Bloomberg: Irving Faust of Faust Harrison pianos in New York calls the Estonia brand ``investment-grade pianos.'' Do pianos appreciate in value?

Laul: Most do not, but the prices of Estonia pianos are still quite low, and will certainly rise in the future. Since May 2004, when Estonia joined the European Union, customs duties of 4.7 percent were added to the price, which the U.S. requires of imports from European Union countries. In Estonia, wages will increase and prices too in the coming years.

Market Share

Bloomberg: How many new Estonia pianos do you sell each year?

Laul: We make from 385 to 420 grands per year, of which from 350 to 400 go to the U.S., with the rest selling in Europe or Asia.

Bloomberg: Is Asia the next new market for these pianos?

Laul: We still have so much potential growth in America that I have to say I'm happy where I am. We're back-ordered in the U.S. until October 2004. We have dealers on a waiting list to sell our pianos.

Bloomberg: According to Music Trades Magazine, 40,000 grand pianos were sold in the U.S. in 2003. Is a 1 percent market share enough?

Laul: Yes, our pianos are connoisseur's instruments, not commodities. That they are offered at the current low prices is an opportunity. Our chief aim is to maintain high quality.