Laulhere became the country's sole maker of traditional berets after it recently bought Blancq-Olibet, its only French competitor, which was almost 200 years old. Cheaper knockoffs from China, India and the Czech Republic made survival hard for local makers of berets, which have been as much a symbol of France as baguettes and Gauloises cigarettes.
Based in the foothills of the French Pyrenees, where the round and flat woolen hat was invented by shepherds to protect themselves from the Basque region's damp, Laulhere has joined the frontlines of the battle for the "Made in France" label as foreign-made berets steal an increasing share of a shrinking market. On its website, Laulhere says: "To us 'Made in France' still means something."
The fight for survival by Laulhere — rescued in a purchase by French military-garment maker Cargo-Promodis with a 500,000 euro ($686,000) injection in late 2012 — tells the tale of President Francois Hollande's competitiveness challenge. French companies struggling to compete and retain market share have contributed to the nation's slumping economy, which barely grew after 2012 and left unemployment at a 16-year high.
Although the government expects the economy to grow 0.9 percent in 2014 and France's trade deficit shrank in 2013 for the second year after a record of 70 billion euros in 2011, the country's performance falls short of neighboring Spain, which is generating record exports thanks to lower labor costs.
On Feb. 16, Prime Minister Jean-Marc Ayrault hosted a dinner for dozens of foreign entrepreneurs and investors to create what he dubbed "The Brand France."
Hollande continued France's new business-friendly efforts by hosting a meeting with the visitors last week at the Elysee Palace in Paris. Part of his plan to make France more competitive includes a pledge to slash state spending and a 30 billion-euro reduction in charges paid by companies — measures that have yet to be put in place.
"We've never been afraid of opening ourselves up to the world," he told executives of companies including Nestle, General Electric and Samsung Electronics.
While Hollande has promoted broader themes, Arnaud Montebourg, his industry minister, has focused on iconic French products and the "Made in France" label to create local jobs.
In October 2012, he posed on the cover of Le Parisien Magazine before the French flag in a sailor's jersey, wearing a Michel Herbelin watch and holding a Moulinex blender — all made in France — to defend the country's industry.
In April, he participated in a ''Made in France'' fair in Paris, touring booths wearing a Laulhere beret.
Laulhere's Saunders, married to a French woman whose family has been in the beret business for generations, says the company is banking on demand from the high end of the market to revive its fortunes after its bankruptcy in 2012.
Laulhere, which had 1.7 million euros in sales last year and didn't make a profit, expects "to break even this year," he said.
The company plans to produce 200,000 hats this year, up from 160,000 in 2013. Half of its beret production goes to armies around the world. The rest goes to the fashion industry and to traditional wearers of the headgear.
Men's berets from Laulhere can cost anywhere from 40 euros to 75 euros, while women's are priced between 20 euros and 95 euros. Imports can cost as little as two euros.
Global competition has come from berets manufacturers in China, Pakistan, India and the Czech Republic, where the company Tonak a.s. produces fashion berets for women.
Until the late 1980s, France produced several million berets each year. Sales slid for decades, with cheaper products made in Asia. The nail in the coffin came in 2001 when the French military ended conscriptions, eliminating hundreds of thousands of army orders.
The number of factories in Oloron Sainte-Marie, the town in the Bearn region where most French berets were made, fell from almost 30 to two: Laulhere and Blancq-Olibet.
The traditional French beret is made with a half mile (800 meters) of merino wool and has a ring of leather inside to help it fit snuggly on the head, Saunders said. It's waterproof and resistant to ultraviolet light. It keeps its shape even after it's been rolled.
While factories started making them industrially in the early 19th century, the "beret Basque" was at first a cottage industry, with the headwear made in the homes of shepherds.
It became fashionable for women in the 1930s and turned into a symbol of the French resistance during the German occupation in World War II. It also started being used by armies in France and the rest of the world in the 20th century.
"Cote d'Ivoire, Kuwait, Saudi Arabia and other countries used to have Chinese, Pakistani or Indian berets, but they switched," Saunders said. "They became aware that it's a technical product and it's useless to get a cheap version."
He expects to increase sales in West Africa and the Mideast in the coming years.
The French army, the United Nations and NATO are among Laulhere's biggest customers. The beret maker is seeking to make greater inroads into the fashion market as armies cut spending. The U.S. army stopped using wool berets in 2011, replacing them with patrol caps.
Saunders says that after the Madrid hat fair, the Paris farm fair and the Moscow fashion fair, where he promotes the hat, he may look into ways to sell the wool-only, waterproof and non-smelly beret to the U.S. army. He's also seeking coveted partnerships with France's luxury houses, including Hermes International SCA.
"We have a crazy plan for our berets," he said. "They're an icon of France but we want to sell them everywhere."