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Why Santa Laura wants Only Watch to demonstrate full transparency

Celine Yap — Mon, 23 Oct 2023 06:00:13 +0000

Why Santa Laura wants Only Watch to demonstrate full transparency

The major collector has raised a number of pertinent questions regarding the organization, how it is run and how its funds are managed.

News

Oct 23, 2023

On 4^th October 2023, the global watch industry was riveted by a social media post shared by one of the most prominent watch collectors in the world. Known for his insane collection of epic timepieces and even crazier collection of supercars, Santa Laura’s Instagram posts and stories are always eye-catching and highly engaging, but this time it wasn’t a sick new watch or car he’d posted about. Rather, it was an open criticism of Only Watch and how the charity organization had fallen short in terms of financial transparency.

This came just a little over a month before the 2023 Only Watch auction was set to put a record 62 unique watches under the hammer. Santa Laura had posted two Instagram Stories relating the exchange he’d had with Only Watch, where a request for the organization’s annual financial report was politely declined. To his disappointment, Only Watch stated that its financial reports are filed with the Monaco government and that it is not required to publish them.

Luc Pettavino addresses the audience at the 2021 Only Watch

Believing that more needs to be done and sensing a deficit of accountability, Santa Laura continued with his inquiry through five Instagram posts raising key questions regarding Only Watch’s state of internal governance and management of charity funds to date. Triggering a series of responses not just from Only Watch but journalists and brand owners as well, Santa Laura has proven to be the watch industry’s most candidly outspoken stakeholder on this matter.

To find out more about the motivations behind his questions, Revolution got in touch with Santa Laura and the following is our conversation with the famed watch collector, published in verbatim and edited only for clarity.

In conversation with Santa Laura

Wei Koh: I would like to know why you felt it was important to push for greater clarity in terms of how the funds are being allocated at only watch.

Firstly Wei, many thanks for reaching out to me for my thoughts on the events of the last couple of weeks. The reason I felt it was important was simple — because it is abundantly clear that nobody in the industry, whether it be the brands donating watches, Christie’s who runs the auctions, or journalists like yourself who have been reporting on Only Watch for many years, could have ever been bothered to ask for that clarity. If they had, we wouldn’t be having this conversation.

Whatever the legal requirements are for AMM (Association Monégasque contre les Myopathies) to operate in Monaco is irrelevant. It is my opinion that they have a moral obligation to all those that support Only Watch to be completely open about how they use those funds, on what basis they are disbursed, how those disbursements are invested, and — particularly given the ownership of the companies receiving the bulk of those funds — what returns are achieved on those investments.

@santa_laura

Celine Yap: What prompted you to contact Only Watch to make the initial inquiry?

Actually, I have been trying to get this information for a while. I tried going to a few watch journalists and asked them for information which they didn’t have. I’ve tried my luck with the retailers who participate in providing venues for Only Watch events. I asked them for financial report with regards to Only Watch, they also couldn’t provide me with any. As a last resort, I left a comment on Only Watch per my Instagram post.

CY: When did you first start trying to search for the information?

About two to three months ago.

CY: What do you think Only Watch or Luc Pettavino should have done?

They should have been more transparent, especially raising over €100 million. In my opinion, Only Watch should not be domiciled in Monaco, where there is a shroud of secrecy. They should aim to domicile themselves in more transparent country like the UK.

WK: I would also like to know what you think the legacy of Only Watch will be if no clarity is provided.

I believe the legacy of Only Watch goes far beyond just that of the charity and the research it has funded to date (It is worth remembering that approximately 50% of the funds raised so far have been held in reserve for future anticipated expenditures. Pharmaceutical R&D and clinical trials are very expensive, so this does make perfect sense from an operational point of view).

Obviously clarity is required not just on the accounts of the charity itself, but arguably even more importantly on those companies and individuals to whom it has been making disbursements over the years.

HRH Prince Albert II of Monaco and Luc Pettavino

The letter to the community that Luc sent out just over a week ago ended up raising even more questions than it addressed. Here’s a couple of obvious ones that nobody has bothered to ask: Why was no mention made in the letter that Dr Luis Garcia — a recipient of around 130,000 Euros in direct individual funding from AMM over the years — is now a board member of Synthena? Why did Dr Luis Garcia neglect to mention this board membership in his list of accreditations at the bottom of the appendix that he himself wrote?

It is of course perfectly possible that there are completely sound reasons behind Dr Garcia’s funding by the charity, and his subsequent appointment to the Synthena board — although it would be very interesting to know whether he holds any equity in the company — but given that the letter was supposedly written in the spirit of openness (and indeed, the funding to Dr Garcia as an individual is mentioned in the second appendix), why was there no mention of this clear conflict of interest in one who has been asked to justify why the funding has been distributed in the way that it has?

Frankly, I was shocked. But perhaps on reflection I shouldn’t have been surprised — by the way that this letter was received and considered by those who reported on it, with seasoned watch journalists taking it at its word and openly chastising those who had dared to ask the questions in the first place; and others simply not considering it worthwhile to even comment on.

The simple fact of the matter is that the symbiotic (some might use the word incestuous) relationship that exists between the watch industry and those who make a living “reporting” on it is fundamentally accountable for the reason why we are here today. With Audemars Piguet apparently feeling that they have no other option other than to withdraw their watch from this year’s Only Watch auction.

How many times every year do we see the same group of people being flown around the world, put up in fancy hotels, and wined and dined in order to “report” on a watch launch, or to get them to write yet another hagiographic puff piece on a brand? This week we even had the ludicrous example of an “Editorial Director” of the self-proclaimed “number-one website for watch lovers and watch professionals” extol the virtues of her job precisely because of the feting they receive from the brands? They just came right out and said it, as if it was something to be proud of, and to aspire to!

And we expect honest, probing, objectivity from these people into what happens to the money paid for the most expensive wristwatch ever sold? So, to answer your question: Regardless of the outcome for Only Watch themselves, the legacy of this debacle should be that those responsible for allowing this situation to escalate to where it has got to today, take a long hard look in the mirror this morning, and reflect on how they may have contributed to the problem staring the community in the face.

At the end of the day, who pays for those flights, fancy hotels, parties, cocktails and canapes that these so-called journalists so enjoy sharing on their social media, and openly promote as primary reasons as to why people should consider a “career” in watch journalism? We do — the people who buy the watches.

CY: The organizer currently has no plans to postpone the event, what are your thoughts on this?

It’s unfortunate, because it goes to show that the star of the show is the watch industry, and not the charity. If they care truly care about the charity, they should pause until a more transparent report is available as to how the Only Watch has spent, or is spending over €100 million.

WK: We are reaching out to Luc as well. Is there something that you would specifically like to ask him?

Recently, a report was published on the DMD (Duchenne Muscular Dystrophy) market stating that the market dynamics are anticipated to change in the coming years “owing to the improvement in the R&D activities for efficient treatment options” expected to come to market.

There would appear to be no mention of either SQY Therapeutics or Synthena AG in the report summary (the full report costs $7,500 and I have not purchased it), but it does say this: “The landscape of the DMD market is poised to undergo significant changes in the near future due to advancements in research and development efforts aimed at providing more effective treatment options. The DMD pipeline is robust, with numerous potential products in the advanced stages of clinical development. Notably, several new therapies for DMD treatment have gained recent approvals, including VILTEPSO’s launch in Japan. Therapies like Capricor’s CAP-1002 and Antisense’s ATL1102 are now poised for broader commercial opportunities. These therapies specifically target the improvement of upper limb functions in DMD patients and cater to a much larger patient population compared to exon-skipping therapies.”

My question is a simple one: Does Luc remain confident that the investment of funds disbursed by the charity are being targeted correctly?

CY: Have you ever bid on or bought an Only Watch lot?

Yes I have bidded [sic], unsuccessfully.

More details from Off Investigation

Along with his comments, Santa Laura shared an article published by a French political website Off Investigation. The article raised a few incisive new points:

Luc Pettavino and his daughter Tess are shareholders in SQY Therapeutics, each owning 4,000 shares; AMM is a 49% shareholder and also managed by Luc and Tess Pettavino

A “well-informed observer of the watchmaking sector” who fears that an Only Watch scandal could spill over into the watchmaking industry comments: “We understand that the Pettavinos have discreetly built up an asset that may one day be worth its weight in gold if the company succeeds in developing a cure for this disease.”

Luc Pettavino, Founder and Organiser of Only Watch

In January 2023, SQY Therapeutics was transformed from a SARL (limited liability company) into a SAS (simplified joint stock company). SAS status is considered more credible for investors and, above all, allows associates to join or leave the company easily. Moreover, as the new articles of association of SQY Therapeutics state, the company “may make offers reserved for qualified investors or a restricted circle of investors.”

However in his letter to the community, Luc Pettavino asserts that “No dividend has been or will be paid. Once certain stages of development have been reached, and should the biothech ever become profitable, its form will evolve in order to protect its non-profit orientation.”

Meanwhile, the article mentions that an Only Watch spokesperson has stated that “the principle of transferring the shares to the parents’ associations (who were behind the creation of the company) by the end of the year has been confirmed.”

The article also raised questions about the CNRS research director named Dr. Luis Garcia. He is a minority shareholder in Synthena AG and has received funding fees from SQY, Synthena and the WMA (World Medical Association). Research revealed he is based in Noisy-le-Roi, France — sharing the same postal address as SQY Therapeutics and the Duchenne Parent Project France.

The article questions Dr. Luis Garcia’s relationship with a certain Christine Saulnier, president of the Duchenne Parent Project France and managing director of SQY Therapeutics from January 2015 to February 2023. Apparently, in the legal notice on SQY Therapeutics’ website, she appears under the surname “Saulnier Garcia.”

In addition, Off Investigation also uncovered a real estate agency called Madame Christine Garcia also domiciled at the same address.

With less than three weeks to go until the 2023 Only Watch auction, Pettavino and his team are obliged to manage this public inquiry professionally and without delay.

Next, the AMM recently announced the appointment of a well-known Monaco auditor and partner of KPMG Monaco, Bettina Ragazzoni, as its official auditor. Ms Ragazzoni is also General Treasurer of the Monegasque Red Cross and plays a similar role for the Yacht Club de Monaco. Both institutions are chaired by Prince Albert of Monaco and managed by members of his family.

The article included as well a detailed commentary of how Luc Pettavino’s family is connected to French politicians such as former president François Mitterand and current present Emmanuel Macron.

The Off Investigation article can be accessed here.

This remains a developing story and Revolution understands that Only Watch has no plans to postpone the auction. Revolution has reached out to Luc Pettavino for comment.

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Furlan Marri

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FROM THE SHOP

Unimatic

Unimatic x Revolution U1 Milsub "Blue"

$1,220.00

TECH SPECS

Movement	Self-winding caliber SW200-1b; 41-hour power reserve
Functions	Hours, minutes and seconds
Case	41.5mm; 316 steel with Cerulean blue stonewashed Cerakote coating, matte vintage navy aluminium bezel insert; water resistant to 300m
Dial	Matte vintage navy; hour markers outlined in Super-LumiNova
Strap	Vintage navy TPU-coated nylon; additional vintage navy nylon with fabric keepers
Limited Edition	Limited Edition of 200 pieces

The post Why Santa Laura wants Only Watch to demonstrate full transparency appeared first on Revolution Watch.

Louis Vuitton is ready to participate in the big league of high watchmaking

Oliver R Müller — Mon, 23 Oct 2023 01:00:04 +0000

Louis Vuitton is ready to participate in the big league of high watchmaking

The fashion maison has decided that watches are not just accessories anymore

Business

By Oliver R Müller

Oct 23, 2023

If there is just one single case study in luxury management that needs to be taught in any business school, then it would be LVMH. Not so much for the magic of revitalizing wearied brands, but more for consistently aligning powerful marketing decisions with financial engineering. And what the group can’t achieve from scratch, they’d just buy the necessary competencies. The watch business unit — which is, in fact, under one roof with the jewelry — is no exception to the rule.

Even though watches are by far not the main business unit within the LVMH empire, its importance is growing. As of today, LVMH’s main watch brands and the jewelry brands also propositioning watches account for ~6% of the group’s sales and ~4% of its EBIT. Comparatively, Louis Vuitton Horlogerie represents not even 1% of the brand’s sales*, which not only indicates significant latent potential, but also that taking any bold moves — such as repositioning the watch offering at a much higher price point — doesn’t put the brand at risk.

Modest origins in a new category of products

In 1995, LVMH bought Fred Joaillier; this is followed in 1999 by Chaumet, Ebel, TAG Heuer and Zenith. Bulgari’s watches — which account for ~12% of the brand’s total sales — are very successful, though not to the same extent as the jewelry, and are a good example of the group’s long-term vision. Nevertheless, the group hasn’t yet fully achieved what it needs to build up a leading position in the watch business.

As of 2022, the market share of the five brands selling watches accounted for a consolidated ~6.3% of the Swiss watch industry, placing it in fourth position behind Richemont with one-third of the competitor’s sales. In fact, the group even resold EBEL in 1999 after having tried to relaunch a mythical brand of the 1980s and ’90s. The acquisition of Hublot in 2004 then signaled that LVMH did want to muscle up, but the potential growth by acquisition is very limited due to the scarcity of major brands to be potentially acquired.

LVMH will certainly be amongst the first bidders when new opportunities arise for acquisitions, but for the time being it has chosen to build up the fundamentals to become an even more serious player in the watch industry.

The strategic repositioning of Louis Vuitton timepieces

One strong signal coming from the empire of luxury that shows it has ambition in the field of watches is the fact that two of CEO Bernard Arnault’s sons are working in the watch business unit: Frédéric Arnault at TAG Heuer (who is said to be leaving his CEO job there at the end of this year), and Jean Arnault, the youngest of the five siblings. Jean Arnault has already created a lot of goodwill for himself and the group in a watch industry which generally doesn’t appreciate too many new players entering the turf.

Jean Arnault

Very business savvy and genuinely passionate about watches, Jean has learned a lot in a very short timeframe. Rather than entering the playground with arrogance and disdain for the competitors, he has launched quite a few initiatives reflecting positively on the brand’s ambitions in watchmaking.

Creating the Louis Vuitton Watch Prize, for instance, is a very good way of becoming a de facto institution for new independent watchmakers and thus monitoring anything arising on the radar with the potential to become the “next big thing”. The whole concept of this prize is very clever, with the winner not only getting a title and a trophy, but also a mentorship, allowing him/her to learn all the trades that are needed, beyond the product, to become a successful brand.

LVMH Watch Prize

And what shows the cleverness of the young patron is the fact that the quite eclectic composition of the jury — comprising recognized watch experts and other personalities — also includes the director of the Grand Prix d’Horlogerie de Genève, which gives it institutional legitimacy.

The watchmaking know-how of Louis Vuitton

Louis Vuitton bought a small R&D and prototyping atelier in 2011 called La Fabrique du Temps. This was not LV’s first acquisition in the field of watchmaking, but it was certainly a significant one laying the groundstone for the brand’s ambitions in hard luxury. Since then, the small workshop became almost a fully integrated manufacture dedicated to Louis Vuitton and sister brands in need of production capacities for métiers d’art artisanship. La Fabrique du Temps is now capable of manufacturing high-grade enamel or hand-engraved dials, having hired the best artisans to establish the know-how in-house rather than buying finished components.

La Fabrique du Temps Louis Vuitton

It will also integrate the guilloché technique in due course to propose new dial versions and use this hand-turned technique for other components as well.

The manufacture produces fully in-house conceived mechanical calibers and will eventually — in the not-too-distant future — even master the escapement including the hairspring, which is, for the time being, sourced from Atokalpa. The manufacture also produces cases with the ambition to master the whole value chain to produce high-end watches fully in-house.

From a small team of just a dozen people back in 2011, La Fabrique du Temps now employs almost 200 staff — and is still hiring. On top of that, based on its commitment to be part of the watch industry’s eco-system, the company is offering apprenticeships to help absorb the scarcity of qualified people in the Swiss watch industry. This is not only a sustainable and long-term strategy to ensure the planned growth, but also a way to silence the critics saying that Louis Vuitton is behaving in an opportunistic manner to recruit talents from other manufactures.

Enter the new Louis Vuitton Tambour

In 2002 Louis Vuitton launched its first watch collection Tambour with a very daring design referencing the first portable watches of the 16^th century. The name also refers to the shape of a drum, tambour in French. The collection was very coherently combining LV’s DNA with bold colors and a mix of mechanical and quartz-powered watches. Using both standard ETA movements and then enhancing the collection with in-house movements such as the Spin Time, the watches were quite successful given the fact that they were sold exclusively through brand-owned boutiques which number 460 doors worldwide.

Louis Vuitton Tambour Gold

Apart from the Emprise collection designed by Marc Jacobs and launched in 2008, the brand has kept a coherent design language. Thereafter, the Tambour collection has become if not iconic then at least a very recognizable reference in the watch world..

Ascending the upper league

It is understandable that Louis Vuitton has carefully studied the successful strategy applied by La Montres Hermès in recent years. Hermès has been in the watch business a lot longer than Louis Vuitton, having started selling watches in 1928, but at the time it was considered an accessory rather than a product category per se. About a decade ago, Hermès was still selling watches below the €1,000 price point with quartz movements and producing way too many pieces that could be found also on the gray market, which is very detrimental to its brand equity.

Change came with the acquisition of a 25% stake in the Vaucher Manufacture in 2006 and the launch of a new collection of mechanical timepieces. The first attempt to climb the price ladder was — to put it mildly — not very successful. But then product director Philippe Delhotal totally revamped the product lineup through a more coherent strategy that includes developing the métiers d’art dials and incorporating design details coming from the brand’s DNA.

Hermès has since then very successfully changed gears for its watches by eliminating most of its quartz watches, keeping only a few references in its Cape Cod and Arceau product families. The consolidation of the collection has been done very extensively by ousting all entry-level watches that were not in line with the brand’s overall core positioning — a key decision for any luxury brand that wants to move up the luxury ladder. Reducing the number of SKU’s and product families and focusing on high-end watchmaking brought tremendous success to the brand, with sales being tripled in the last five years. The key success factor? A realignment of watches with all other product categories.

The transformation of Louis Vuitton

Why would anyone want to reinvent the wheel at LV? Probably intrigued by the competitor’s major success, Louis Vuitton managed by a watch aficionado — Jean Arnault — has decided to go the same route by taking an academic approach, applying this strategy of aligning the product category with the core price positioning of the brand. The new Tambour that was unveiled in July this year is jumping on the trend of sports chic watches with an integrated stainless-steel bracelet. For the time being, it is offered only in two dial variations at quite a hefty price — although this is understandable due to its intrinsic horological value — of €19,500.

Louis Vuitton Tambour

For the product review itself please read this story by Revolution founder Wei Koh.

I partially agree with Revolution founder Wei Koh’s enthusiastic review of this new watch, because of the great finishing and architecture of the movement, and the strong product identity. However, I’m left wanting more. La Fabrique du Temps is a manufacture with talented watchmakers and an enormous amount of expertise accumulated by the two master watchmakers Michel Navas and Enrico Barbasini, and yet LV decided to go to Le Cercle des Horlogers, owned by Speake-Marin, to develop a new movement? I know I’m setting the bar high, but it’s justified when the brand’s ambition is to become a serious player in a league where there is Audemars Piguet boasting an R&D heavyweight such as APRP (ex-Renaud & Papi and also serving the needs for Richard Mille in which AP holds 10% equity) or Vacheron Constantin with the extraordinary grand complications made by its “Les Cabinotiers” ateliers.

Louis Vuitton Tambour Gold

When I met Jean Arnault in Paris before the presentation to the LV staff, he was very humble by saying that he was hoping that the clients would adhere to this substantial price repositioning compared with the previous product offering. My only question is about the market’s sustainability of continued demand for substitution products compensating for the scarce offering of the grail watches of sports chic, such as the Nautilus and the Royal Oak.

Louis Vuitton Tambour Gold

We have seen the prices on the secondary market come down substantially since March 2022, indicating that the demand is now reflecting the “real” watch buyers and not only the “flippers”. The demand, for instance, for the Girard-Perregaux Laureato has decreased significantly in recent months and will probably continue to do so.

Michel Navas and Enrico Barbasini

But the strong points that could help the new Tambour become a huge success are its very distinctive design, and the beautifully designed and decorated caliber, which is a certified chronometer by the Observatoire Chronométrique de Genève (Timelab). Again, here I would have expected the brand to be more ambitious by applying for the Observatoire Chronométrique OC+ certification, which not only includes precision testing of the watch head (rather than the movement before casing), but also resistance to magnetism, waterproofness and power reserve, in conditions representative of modern life.

And, in an ideal world, to top it all off with the Poinçon de Genève hallmark, which is the knighthood for any high-end movement, and for which today very few brands apply. The technicality here is that, as mentioned above, the movement is not being manufactured at La Fabrique du Temps in the canton of Geneva and can’t be therefore certified with the Poinçon de Genève.

A bold and coherent move to tick all the boxes

Louis Vuitton is following the successful path initiated by La Montre Hermès, but with a slightly different approach — at least for the time being — by capitalizing on the high-end, massively phasing out existing SKU’s (80%), and most importantly, not using anymore third-party movements. The brand has all the credibility to play in the champion’s league of high-end watchmaking, having launched such extraordinary timepieces as the Tambour Opera Automata, which is a feast of micromechanics and artisanship by using engraving and enameling techniques.

Tambour Opera Automata

Collaborations have become very popular between luxury brands, and the watch industry is no exception to this. Collabs are especially interesting when brands with polarized DNA’s associate on a specific project in which each one imparts its own values. One of the best recent examples of such collabs is the MoonSwatch, where Omega and Swatch partnered on a watch paying tribute to a watch icon — the Speedmaster Professional — associating it with specific characteristics of the partnering brands.

Independents to foster the horological content

For its first collaboration — because Louis Vuitton will undoubtedly revisit the exercise — Akrivia is certainly the best choice, because the man behind the brand, Rexhep Rexhepi, is considered to be the leader of a new generation of independent watchmakers. The spectacular Louis Vuitton x Akrivia LVRR-01 Chronographe à Sonnerie is quite a statement in every aspect.

Rexhep Rexhepi

One, for the first time Louis Vuitton is merging its iconic logo with the one from Akrivia. Two, the movement was developed by Akrivia and the dial was enameled at La Fabrique du Temps. Three, Rexhepi deserves a lot of credit for having developed a very sophisticated mechanism with two barrels — one dedicated to the timekeeping functions and the chronograph, the other one for the chiming function. Four, the movement includes a five-minute tourbillon.

Rexhep Rexhepi Chronomètre Antimagnétique

All said, I’m not a huge fan of the dichotomous design with one side using the Louis Vuitton codes and on the other side the Akrivia design codes. The case seems also a little bit bulky in trying to keep it below the 40mm mark, which is a deal-breaker for some watch collectors. I think it would have made the watch a lot more elegant with an additional 1–2mm in diameter to cope with the thickness of the movement.

Lastly even though there is a competing watch which came out recently — the Omega Chrono Chime which set the bar very high in terms of movement architecture, finishing and beauty of the dial (the Speedmaster version) — the first Louis Vuitton collaboration is most probably already sold out. Proceeds of the sales will fund the LV Watch Prize, which is one more argument for the watch on top of being ultra-rare with only 10 pieces being produced.

Louis Vuitton x Akrivia LVRR-01 Chronographe à Sonnerie

Please read here for the full review of the Louis Vuitton x Akrivia LVRR-01 Chronographe à Sonnerie.

LVMH’s choice to use its flagship brand to venture into high-end watchmaking is clever because it’s not putting the brand at risk, yet it enables the group to build up a real legitimacy in the horological field, even though Bulgari can already boast a legitimacy acquired over the last three decades. The core strategy of Louis Vuitton is not only targeting the product or industrial competencies, but building up a 360-degree project with know-how, manufacturing capacities and a long-term vision — just as the group has done before in soft luxury.

This is a very clever way of associating Louis Vuitton with genuine craftsmanship content made in collaboration with an artisan watchmaker. Such drops will help to foster the value perception by the collectors who might be questioning the legitimacy of a brand lacking the horological heritage of competing brands.

Louis Vuitton is the base of LVMH’s push into the watch industry

Even if in terms of sales, LV’s watch business is marginal for the brand’s revenues — an estimated 0.75% — the repositioning into the haute horlogerie market segment is significant because it will allow LVMH to push its other brands, foremost TAG Heuer and Zenith. It also lays the ground for the relaunch of Gérald Genta and Daniel Roth — two brands that had been absorbed by Bulgari, which were subsequently acquired by LVMH in 2011.

*LVMH does not publish figures at brand level and all figures indicated in this article are based on estimates by Morgan Stanley’s research.

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Louis Vuitton

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The Epic New Louis Vuitton Tambour

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Apr 24, 2023

FEATURED FROM THE SHOP

Laurent Ferrier

Laurent Ferrier × Revolution Classic Micro-Rotor “Amazonia (Private Link)

$57,500.00

TECH SPECS

Movement	Self-winding caliber FBN 229.01 with natural escapement; 72-hour power reserve
Functions	Hours, minutes and small seconds
Case	40mm; stainless steel; water resistant to 30m
Dial	Verdant green, with sector track; applied, white rhodium treated gold Arabic numerals and hour markers
Strap	Brown calf leather with Alcantara lining, stainless steel pin buckle; additional Milanese bracelet in stainless steel
Limited Edition	Limited edition of 15 pieces

The post Louis Vuitton is ready to participate in the big league of high watchmaking appeared first on Revolution Watch.

Questions about Only Watch, Luc Pettavino, and all the answers provided so far

Celine Yap — Wed, 18 Oct 2023 00:00:35 +0000

Questions about Only Watch, Luc Pettavino, and all the answers provided so far

Facing scrutiny from the public and the threat of withdrawal by brands, the luxury watch charity auction needs to act swiftly in the coming weeks.

News

Oct 18, 2023

With less than three weeks to go before Only Watch 2023 puts a record 62 watches under the hammer for charity, the luxury watch auction event is facing scrutiny from the general public, leading to the possibility of withdrawals by brands. As of 18^th October, Audemars Piguet’s entry Lot 6 has been taken down from the Only Watch website. No official statements were offered. It is the first brand to have done so, and Revolution understands that it may not be the last.

[Updated on 24th October] Only Watch has announced it will postpone the 10th edition of its auction to a later date in 2024.

Questions first arose 4^th October regarding the organization’s distribution of its charity funds and precisely how it has contributed to the research on Duchenne Muscular Dystrophy — the cause for which this auction was created to support.

The inquiry began when the famed watch collector Santa Laura posed a series of comments on his Instagram account outlining the exchange he’d had with Only Watch, where a request for the organization’s annual financial report was politely declined. To his disappointment, Only Watch stated that its financial reports are filed with the Monaco government and that it is not required to publish them.

A screenshot of Santa Laura's Instagram Stories

Next, he called for the need for greater transparency on the part of Only Watch, a sentiment shared openly by Zug_Gal who is also a renowned watch collector.

Nonetheless, Only Watch replied with a series of Instagram Stories providing details about the organization such as “Who launched Only Watch and Why” “What is Duchenne Muscular Dystrophy” “Does Only Watch benefit research for other genetic conditions” “Where is the charity based? What does it do?” and several others. It mentions an organization known as SQY Therapeutics, adding that it has since appointed an auditor from KPMG Monaco named Bettina Ragazzoni.

A screenshot from Only Watch's Instagram Highlights

On 7^th October, Santa Laura shared a post on Instagram and directed additional questions to Only Watch, asking for more clarification. The issues include who sits on the board of the charity, what their voting rights are, and full details about SQY Therapeutics. He also asked specifically about the ownership structure of SQY Therapeutics, and the company’s accounts for 2019, 2020 and 2022.

This prompted Only Watch to look more closely at the matter and the organization released a letter to the watch industry dated 8^th October, sharing a financial overview, its accounting audit and legal obligations, and the corporate structure of SQY Therapeutics.

On 8^th October as well, De Bethune posted a message on Instagram Stories saying it “deeply values the efforts of Only Watch and hopes for further clarity on their accounts as soon as possible.”

A screenshot from De Bethune's Instagram Stories

Then comes more questions from Santa Laura on 9^th October. He posted on Instagram some basic findings about SQY Therapeutics and the fund allocation by Only Watch of 99% to research and 1% on running costs. He began to question the shareholding of Association Monégasque contre les Myopathies (AMM) the parent company behind Only Watch, the relationship between AMM and SQY Therapeutics, sources for financial details about SQY Therapeutics, the appointment of KPMG, and a cost incurred to date on running the charity.

Further, on 10^th October, Santa Laura returned with more questions, this time on Synthena AG, a Swiss pharmaceutical company based in Bern. He requested for clarification on multiple overlapping details between Synthena AG and SQY Therapeutics, and more details on the lead researcher mentioned in Only Watch’s letter to the industry. He also asked for more details about Synthena AG such as the original ownership structure, board of directors, financial reporting, etc.

On 14^th October, he pointed out that the mission of SQY Therapeutics changed in January this year to include also finding cures for other conditions such as infectious diseases, oncology and inflammatory diseases in addition to Duchenne Muscular Dystrophy.

On 19^th October, FP Journe wrote a post on its own Instagram account reiterating total confidence in Luc Pettavino, and stating that he remains steadfast to the cause and the Only Watch auction.

A screenshot of FP Journe's Instagram post

These have been the main developments to this ongoing story. Revolution has reached out to Santa Laura and Luc Pettavino for additional comment, and understands that Only Watch will proceed as planned despite repeated calls from the public to postpone until after the audit reports are out.

Only Watch is currently on tour around the world, beginning in Los Angeles on 6^th September, New York 14^thSeptember, Monaco 27^th September, Hong Kong 5^th October, Bangkok 11^th October and is headed to Singapore on 20^th October at Malmaison by The Hour Glass. Thereafter it will travel to Dubai 27^th October and then Geneva 3^rd November in time for the auction on 5^th November.

[Edited on 22nd October] On 20th October, Luc Pettavino cancelled his trip to Singapore where he was scheduled for a press conference and fireside chat with local retailer, The Hour Glass.

Essential details about Only Watch and its related organizations

Further developments will be added to this article in due course until this matter is finalized. Meanwhile here’s a guide to all the key people, organizations and topics surrounding Only Watch right now.

Luc Pettavino

Founder of Only Watch. He started this initiative in 2005 after losing his son Paul to Duchenne Muscular Dystrophy, a disease for which there is no known cure.

HRH Prince Albert II of Monaco and Luc Pettavino

Association Monegasque contre les Myopathies (AMM)

The organization behind Only Watch founded by patient families. Luc Pettavino is its co-founder and chairman, and his daughter Tess Pettavino is its CEO.

Duchenne Parent Project (DPP)

An organization committed to fighting Duchenne Muscular Dystrophy founded by Pascal Ferré who is also its treasurer.

SQY Therapeutics

A biotech company funded by AMM and jointly owned by AMM (49%) and DPP (51%) where DPP comprises patients and parents of DMD sufferers which includes Luc Pettavino. Co-founder and president is Pascal Ferré, and scientific advisor Dr. Luis Garcia is the lead researcher quoted in Only Watch’s letter to the watch industry.

Synthena AG

A subsidiary of SQY Therapeutics focusing on developing medication for Duchenne Muscular Dystrophy. Its board members include Pascal Ferré and Dr. Luis Garcia.

Further notes about the Only Watch financial inquiry

Since its inception in 2005, Only Watch has grown exponentially particularly over the last two editions. In 2017 it started to heat up with some very cool lots such as the bronze Tudor Black Bay which sold for CHF350,000 and an FP Journe Chronographe Monopoussoir Rattrapante Bleu for CHF1.15 million. In 2019 it made waves in the industry for selling a stainless steel Patek Philippe Grandmaster Chime for CHF31 million, allowing the auction to catapult to a cool CHF38,593,000. Subsequently, the 2021 edition raked in CHF30 million with a total of 53 lots all sold.

Luc Pettavino addresses the audience at the 2021 Only Watch

Throughout this time, the charity auction has achieved something truly remarkable in that it has succeeded in galvanizing an industry which is otherwise quite segmented. Since the 2017 edition, some brands have seen this as a once-every-two-years opportunity to really push its watchmaking creativity and technicity to the limits. Collectors have also become truly excited by the lots on offer, donating generously for their desired watches — after all, it is for a good cause.

Founder of Only Watch Luc Pettavino has consistently been a great spokesperson and ambassador for the organization. He has been promoting the event very actively, getting the endorsement of HRH Prince Albert II of Monaco, and has done much to grow it from a small 35-lot auction to the present edition with over 60 lots including some of the biggest names in haute horlogerie. For comparison, its inaugural edition in 2005 raised USD2,327,000, the top lot being a Richard Mille by Philippe Starck that sold for USD347,000.

A scene from Only Watch 2021

To date, Only Watch has raised nearly 100 million euros over nine editions and approximately half the amount has been disbursed to organizations such as SQY Therapeutics, Synthena AG and others (predominantly universities and research centers) in grants and fellowships.

With less than three weeks to go until the 2023 Only Watch auction, Pettavino and his team are obliged to manage this public inquiry professionally and without delay.

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Unimatic

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Dial	Matte vintage navy; hour markers outlined in Super-LumiNova
Strap	Vintage navy TPU-coated nylon; additional vintage navy nylon with fabric keepers
Limited Edition	Limited Edition of 200 pieces

The post Questions about Only Watch, Luc Pettavino, and all the answers provided so far appeared first on Revolution Watch.

Rolex acquires Bucherer: What does this mean for everyone in the watch industry?

Oliver R Müller — Tue, 29 Aug 2023 16:18:31 +0000

Rolex acquires Bucherer: What does this mean for everyone in the watch industry?

Revolution’s watch industry analyst Oliver R. Müller tells you everything to know about this earth-shattering announcement.

Business

By Oliver R Müller

Aug 30, 2023

By now everyone in the luxury watch industry is talking about one thing, and one thing only: Rolex acquiring Bucherer for an undisclosed sum on 25^th August 2023. The announcement was released at 6:00pm CET with a press release that says it all: Rolex acquires Bucherer. It was a move intended to preserve the long-standing partnership between the two companies following the decision made by owner of the retailer Jörg G. Bucherer who has no direct descendents to take over the business. Rolex also states that it will allow Bucherer to operate independently and that the integration will be effective as soon as competition authorities have approved the takeover transaction.

What does this all mean? The world’s biggest watch company has just taken over one of the world’s largest watch retailers. Bucherer, together with Tourneau, accounts for more than 100 points of sales worldwide, and it is also the biggest retail brand in the US. Bucherer has also been a trusted Rolex retailer since 1924 — literally during the time of Hans Wilsdorf, making Jörg Bucherer the last person today to have known and worked with the Rolex founder. Jörg Bucherer will also remain as Honorary President of the Bucherer group. More importantly, this announcement impacts not only the companies involved, but the industry at large. Shortly after this news broke, share prices for Watches of Switzerland fell 30%, then up 10% to close at -20%, showing that what Rolex does always has an impact on everybody else.

To shed some light and more clarity on this subject, Revolution’s resident watch industry analyst Oliver R. Müller takes us through the ins and outs of this deal of the decade.

Rolex is capturing additional power by integrating its most important retail partner

Rolex has announced that it is buying Bucherer — the brand’s most important retail partner worldwide with 100 doors, of which half are selling Rolex and/or Tudor. To qualify this as a strong signal is a euphemism, because it’s basically a radical change of a century-old strategy to keep the retail activities separated from the brand’s core business. In fact, until this recent move Rolex and Patek Philippe could be seen as “anomalies” compared with all other major brands moving toward TDC (direct to consumer strategy cutting out all middlemen), and strongly reducing the number of authorized retailers overall.

The last 30 years have seen a complete change of power going from the distributors (wholesalers) and retailers to the brands. The first major change started around the 1990s with the brands taking over their wholesale and creating subsidiaries all over the world. This allowed the brands to capture margin, develop their presence and better monitor the inventories over the different markets. The second move involved a vertical integration of the retail activities, and some brands had already started in the 2000s to open monobrand activities to get access to the end clients.

Is Rolex’s acquisition of Bucherer a defensive move or a well-thought-through long-term strategy?

To close a deal when buying or merging two companies, you need the perfect timing, and in this case, the Bucherer deal definitely ticks the box. The company had to solve the succession problem of the owner — representing the third generation — being 87 years old and with no children, to ensure the long-term perspective of a very successful business. Mr. Bucherer himself had communicated many times on that matter, saying that the business would be owned by a trust after his death. Even though the company is well managed, Rolex probably sensed that at some point it could do it more efficiently, or that the trust could sell the business and reinvest the proceeds of the sale. It is easily understandable that Rolex didn’t want to bear the risk seeing its number one retailer — generating roughly 8% of the brand’s sales — being bought by a competing company. At the same time, one could question the upside for, say, Richemont to buy a retailer whose business is ~60% based on selling Rolex watches, which represents a cluster risk. Nevertheless, Bucherer represents a fantastic network of points of sales; for instance, in the US — Rolex’s most important market — it acquired the number one retail network with Tourneau.

Jörg G. Bucherer took over as the company’s head in 1977.

Buying a CHF 2B* sales company — even for a cash-laden company such as Rolex — is not a defensive move. Rolex had decided a long time ago to move into retail to control the last mile of the value chain, which is in fact the most important. Retail data is the most important driver to manage your business, because it’s the marker of your real success at any time. You don’t have any clear visibility on which products sell and where you need to shift inventories or propose some sales measures. Unlike what some people are saying, Rolex’s business is not in an automatic mode where the salesclerks are just telling potential customers that there is nothing to sell. Rolex’s product offering is composed of 450 SKU’s and around 50 of them are the hotcakes; some of the others are cross sellers when the client has to acquire another watch rather than the one he/she is really coveting. Rolex’s ambition is to gear up and have mostly sell-through references. And what better way of pushing this strategy than by monitoring your own retail?

The second act of a change in Rolex’s long-term strategy

The move into retailing with the acquisition of Bucherer can be seen as logical following Rolex’s announcement of getting involved with CPO (certified pre-owned) through its retail partner Bucherer. Both measures are a strong signal that the brand is willing to bring some order into a market where loyal long-term clients have had a hard time trying to acquire a watch from Rolex. In recent years, the hype around the brand has brought a lot of clients more motivated by the return on investment in a Daytona or GMT-Master II than the pleasure of wearing them. Some argue that this doesn’t change the outcome for Rolex as in both cases the watches are sold, but it does affect the brand’s equity by frustrating “real” clients who are unable to get their hands on their coveted timepieces. Besides that, the brand is getting bombarded by emails, calls and even sometimes letters from lawyers trying to attack the company on the grounds of unfair product allocations. All these speculative behaviors and product scarcity create frustration and shed bad light on Rolex; and ultimately, they are detrimental to its brand equity.

Rolex will continue to act more proactively against gray-market activities by better controlling the secondary market through its CPO and by better monitoring the primary market through wise product allocations to the different markets and retailers.

Rolex now has their own Certified Pre-Owned Program

Is Rolex’s retail integration detrimental for their remaining authorized distributors?

The next moves to be expected are probably that Rolex will continue to further reduce its POS worldwide, which currently numbers around 1,800. The brand had already initiated the movement by closing some doors in the US and elsewhere, but it can be expected that it will accelerate that process. Logically, it will extend the number of doors within the Bucherer/Tourneau network in the USA, which will collaterally make some existing AD’s redundant. Furthermore, the brand will likely increase the inventory available in its own stores and this would mean that there won’t be enough watches available for the other AD’s. Bigger stores with better product availability and tighter product allocations for the “hotcakes” will naturally help to increase the sales of the brand-owned POS. This will be a further argument to close some doors when they’ll be compared with Rolex’s own boutiques.

Of course, Rolex won’t be willing to, or capable of, shifting its retail 100% to a brand-owned business model. Rather, its approach will also be to rely on strong retail partners. Two of these are retail networks comparable with Bucherer in terms of business size and number of doors: The Hour Glass, a family-owned retail network in Southeast Asia; and Watches of Switzerland (WoS), a listed company. It remains to be seen how this new configuration of the Rolex retail network impacts the business of WoS, but the stockmarket already gave the answer on the day after Rolex’s announcement on 24^th August, with a temporarily drop of 30% of its share price to finish 20% below its previous value. The market valuation lost £300M (~CHF 330M) in one day!

The Hour Glass is one of the world's largest retailers after Watches of Switzerland, Bucherer and Seddiqi & Sons

The investors estimated that WoS bears a cluster risk with a single brand generating almost 60% of its overall sales, and this is not because the management hasn’t tried to diversify the sales mix. But replacing Rolex or adding growth to the other brands to make them significant top-line contributors is easier said than done. Their business with Cartier and Omega has been substantially increased to try to reduce WoS’s dependency on Rolex, but this requires time, and in this case, the company is also competing with strong mono-brand boutiques of both brands.

Key drivers of Rolex’s new retail strategy

Even though it’s not Rolex’s main motivation, capturing the margin given to its retail partners (on average 35%, and ranging from 32% to 40% depending on volume, role and historical relationships and calculated from the suggested minimum retail price) nevertheless represents the staggering amount of CHF 4.65B! Rolex’s yearly sales are estimated** at CHF 9.3B ex-works, which translates into almost CHF 14B sales at retail value and a market share of 29% of the luxury watch market (31% adding Tudor’s increasing sales of CHF 570M in 2022). There is no other luxury brand with a comparable market dominance in its product segment. Rolex’s performance is even more impressive taking into account that it’s a mono-product brand as compared to a brand like Gucci, which is a multi-category luxury brand that achieved €10.4B (CHF 9.9B); and the two figures are not comparable as Gucci partially sells through its own retail.

Rolex is achieving a major step forward toward an improved brand distribution that generates not only an increased bottom line, but also helps to increase the brand’s equity by better controlling its sales and market presence.

And the answer to the cardinal question that everyone has been asking since last Thursday’s announcement? If we take WoS’s market valuation as a comparison before Friday’s correction, and on the assumption that Rolex paid a premium because there was only one owner at Bucherer, we estimate that the transaction was valued at ~CHF 3B taking into account prime real estate. Buying the world’s number one watch and jewelry retailer comes at a price.

*LuxeConsult’s estimate as neither Bucherer nor Rolex publish any figures on their sales.

**The estimates are taken from the Morgan Stanley x LuxeConsult annual report on the Swiss watch market.

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Dial	Verdant green, with sector track; applied, white rhodium treated gold Arabic numerals and hour markers
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The post Rolex acquires Bucherer: What does this mean for everyone in the watch industry? appeared first on Revolution Watch.

TAG Heuer is muscling up with two of its strongest watch icons, Carrera and Monaco

Oliver R Müller — Thu, 24 Aug 2023 11:38:21 +0000

TAG Heuer is muscling up with two of its strongest watch icons, Carrera and Monaco

With strategic changes in the offing, the avant-garde watch company must seize every opportunity.

Business

By Oliver R Müller

Aug 24, 2023

Rumor is that changes will take place at the helm of TAG Heuer with CEO Frédéric Arnault moving to another role within the LVMH Group and Julien Tornare — currently the CEO of sister brand Zenith — replacing him in due course. Which makes this a good opportunity to analyze a brand which has repositioned itself in recent years vis-à-vis its main rivals such as Tudor, Breitling and Omega. Morgan Stanley and LuxeConsult estimated that the brand lost half of its luxury watch market share from 2017 to 2022 from 4% to 2%. In comparison, during this same time, Breitling tripled its own market share from 1% to 3% by increasing its sales by a factor of 2.7x and capturing margin by integrating their own retail.

Nevertheless, the brand has recently regained momentum by getting back on its home turf and reinterpreting its two main icons, the Monaco and the Carrera. And it has done a stringent work of cleaning its collections by eliminating some existing SKUs and being careful when launching new collections.

TAG Heuer: a brand with two faces

TAG Heuer has an incredible brand DNA which is bicephalous with Heuer for the tradition and TAG for the innovation. But at the same time this represents a daunting task to balance the product offering from icons to disruptive timepieces. Heuer also has a strong legacy of sportscar chronometry and has established strong historical bonds thanks to Jack Heuer — a marketing genius ahead of his time — in the 1970’s. Signing Steve McQueen and placing the “Monaco” Heuer watch on the film set of “Le Mans” was probably the foundation for this watch to become an icon. Launched just the year before in 1969, the Monaco was the first square cased automatic wristwatch chronograph ever made. A groundbreaking design with a circle inside the square, the Monaco contained all the ingredients to become a design icon.

TAG Heuer Monaco from 1971, worn by actor Steve McQueen in the movie Le Mans

The extraordinary asset of having a product icon is the potential of rejuvenating it with new colors, lay-outs and functions as TAG Heuer has done with the launch of new models linked to the movie “Gran Turismo”. With its vintage looks and very unique case design, the Monaco is just the perfect timepiece to link up with the Gen Z in search of referential timepieces, both vintage and new.

The new TAG Heuer Monaco Racing Blue

The Carrera is the other iconic watch

TAG Heuer might not have as many iconic watches as some of the other leading brands, but nevertheless it has another classic icon with the Carrera, born in 1963… just like the Rolex Daytona and both watches once shared the same base caliber, the Valjoux 72. The Carrera was in fact the continuation of the brand’s chronograph heritage of the 1940 and 1950’s. And the watch is also related to car racing, just as the sister product Monaco, and the Rolex Daytona… and the Omega Speedmaster which had been launched earlier in 1957 with a tachymetric bezel to measure the speed of a car.

The design of the Heuer Carrera has evolved over more than 60 years

But the brand must stay coherent in its strategy of establishing hero products. One thing which TAG Heuer must handle with more discipline is sticking to certain basic rules. One product family equals one product territory but that’s a rule the recent launch of the Carrera Skipper doesn’t fully comply with. A remake of a 1968 model, the Heuer Carrera Skipper ref. 7754 which was affectionately named Skipperera, it stands out in a family of strong auto-inspired timepieces.

TAG Heuer Carrera Skipper

A long story with the racing car world

Heuer’s links with the racing cars go way back, and was followed by a collaboration with the Ferrari team. Their drivers — Niki Lauda and Clay Regazzoni — became brand ambassadors. The timepiece marking Heuer’s entrance to the world of car racing was the Carrera Automatic in 18k gold which is today one of the most sought-after collectors’ pieces. At the same time the team managing the time keeping at the races developed a new device called the Centigraph which was a very innovative electronic timing system.

Yet, the diversification of Heuer into electronical timing systems was an unfortunate mishap as Jack Heuer recalls in his autobiography The Time of My Life. The quartz crisis of the late 1970’s till the beginning of the 1980’s forced Heuer to pull-out from the sports chronometry business which they sold for a bargain price to… Longines. All these paved the way to the common thread of collaborations which relate to sports cars with for instance Porsche.

Choosing Porsche as a partner is a very smart move, because more than just selling cars, the German brand is the epitome of a company managing to create the magical bond between the brand and its clients. The German carmaker is in my humble opinion also the epitome of manufacturing precision or I should say perfection. The potential of this collaboration has yet to be fully exploited as the special editions linked to Porsche still have much room to grow.

TAG Heuer and Porsche: a partnership made in brand building heaven

The interesting comparison between Porsche and TAG Heuer is also the fact that the German carmaker manufactures the most iconic sports car overall, the 911 (sorry for all the Ferraristi reading this, although I must confess that I’m also a huge fan of Ferrari). The 911 is the best example of an ever-evolving base design where nothing changes, but everything evolves and each new version is more accomplished than the one it replaces. And here’s another lesson to be taken from Porsche — for all watch brands and not only TAG Heuer — don’t be afraid to go your own path of innovation.

The die-hard fans of the brand almost quit their love when for instance the brand moved away from air cooled engines for the 911 or launched the four-wheel drive. However, the brand is stronger than ever today and is announcing its major shift to EV by 2030 (80% of its product offering). Which brings us to the smartwatches made by TAG Heuer…

Why smartwatches at TAG Heuer?

I made that lengthy comparison with Porsche because any watch brand today with a similar market positioning as TAG Heuer should investigate, or at least should have investigated around 2010-12 if smartwatches could be a new product category to conquer. The likeliness of smartwatches to stay for the long term is very questionable due to their limited lifetime and hence lack of sustainability. But one thing for sure is that in 2022, 15.8 million traditional Swiss made watches were exported, while more than 90 million smartwatches have been sold during the same period. Of that number, Apple sold more than 40 million.

At TAG Heuer, the former CEO and head of the watch division, industry legend Mr. Jean-Claude Biver, decided that the brand should venture into this new market to avoid missing out on a new Eldorado. Biver decided to partner with two major players from Silicon Valley, Intel and Google, to make sure that the technology would be provided by market leaders and always up to date, as it is common knowledge that technology product life cycles are short in the world of high tech.

The strategy was on combining high value materials with hybrid technology, meaning that they would look like conventional watches with analog time displays with hands, thus justifying the substantial price premium compared with their Asian and American competitors. The first series was quickly sold out due to the cleverness of Biver’s launch campaign during BaselWorld.

But then the wave of success soon stopped, as the potential market for people using smartwatches targets a price level which is closer to something below CHF 500 retail, which is a segment that harmed massively the entry level brands of Swiss watchmaking such as Swatch and Tissot. Even though TAG Heuer is regarded as an avant-garde brand, such a product category is very opex (operating expenses such as salaries or licenses) intense, with huge teams of IT specialists updating permanently the system and looking out for the next bug or breach.

And even though TAG Heuer chose to outsource most of the technology — unlike the very strange choice of Swatch Group to maintain its own OS for Tissot’s smartwatch — the smartwatch venture in general has a marginal impact on the topline (sales), but a major negative impact on the bottom line (the operating margin or EBIT).

Frédéric Arnault has been involved in TAG Heuer product development and marketing since 2017

Refocusing on the brand’s natural territory

The product offering has been refocused on the brand’s “natural ground” or territory by eliminating very expensive ventures into the world of high-end watchmaking. The V4 or the Mikrograph have been certainly extraordinary communication vectors, but also major cost centers with investments going into the eight figures with no tangible positive long-term outcome.

The Carrera Chronograph Tourbillion has been repositioned on a more sustainable price level — thus becoming profitable — unlike when it was first launched, where it was assumed that once you have written off the R&D for the first series, the cost of goods sold is only the manufacturing cost.

A new CEO for new impulses

Meanwhile, Julien Tornare — current CEO of sister brand Zenith — is set to take over the helm of TAG Heuer and based on his track record, we can probably expect a hand-over with minor changes. His 6 years as CEO of Zenith have allowed the brand to stabilize and strengthen its product offering. His predecessors had all tried to kick start the brand, meant to bear a tremendous, unexploited potential, although Zenith has yet to establish itself as a brand that a vast majority of watch aficionados dream of.

The question for Tornare, thus, will be to decide if smartwatches deserve to remain in the collection and if so, how should he navigate the challenges of this ever-changing segment.

What we will probably see at TAG Heuer is an accelerated transition back to the icons such as Carrera and Monaco which are the brand’s “bread and butter” business. To regain lost ground from its main competitors, it will need to show consistency around a clear product offering. The recent product initiatives were very well received and are showing a clear path back to growth. And even in areas where TAG Heuer can’t compete in terms of horological legacy, it still has potential to revive its strong roots in sports chronometry, especially in the field of racing cars.

Julian Tornare is set to take over the helm at TAG Heuer this fall

On the journey to success

Are the recent changes in the product strategy sufficient for the brand to regain the momentum it had definitely lost in recent years? The recent product launches suggest that owners of the brand and its management have understood that stability is a key value to survive in a very competitive market with strong competitors. Pushing icons like Monaco and Carrera, clarifying the product offering and connecting with Gen Z through more contemporary messages are certainly some of the ingredients needed. Re-evaluating its strategy for smartwatches will probably be the next important step to regain the positive momentum the brand had until mid 2010.

And being owned by the luxury industry’s no. 1 – LVMH – which is starting to flex its muscles in the field of watchmaking will certainly help to restart a virtuous circle. As a whole, the group did lose some ground in terms of consolidated watch market share (LVMH watch division plus Bulgari watch division) of 7,9% in 2017 to 6,3% in 2022. But the chairman of LVMH Mr. Bernard Arnault is always known to play on the podium rather than stay in fourth place — just ahead of mono-brand company Patek Philippe with 5% market share. So all things considered, TAG Heuer is definitely an exciting brand to watch in the years ahead.

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Movement	Self-winding caliber FBN 229.01 with natural escapement; 72-hour power reserve
Functions	Hours, minutes and small seconds
Case	40mm; stainless steel; water resistant to 30m
Dial	Verdant green, with sector track; applied, white rhodium treated gold Arabic numerals and hour markers
Strap	Brown calf leather with Alcantara lining, stainless steel pin buckle; additional Milanese bracelet in stainless steel
Limited Edition	Limited edition of 15 pieces

The post TAG Heuer is muscling up with two of its strongest watch icons, Carrera and Monaco appeared first on Revolution Watch.

As Rolex ascends the luxury pyramid, Tudor reprises its role as protector and creative lab of the group

Oliver R Müller — Wed, 05 Jul 2023 12:00:13 +0000

As Rolex ascends the luxury pyramid, Tudor reprises its role as protector and creative lab of the group

Castling The King: Rolex is not just about sports watches.

Business

By Oliver R Müller

Jul 5, 2023

Rolex’s tendency to keep its distance from the rest of the watch industry is sometimes perceived as arrogance by other brands, but it’s certainly part of the brand’s DNA. The brand is an institution and when its leadership is needed to foster an industry-wide project, such as Watches and Wonders in Geneva, Rolex takes a stance.

By far the number one in the Swiss watch industry with estimated sales* of CHF 9.3B in 2022, which translates to CHF 13.95B in retail value, Rolex is the reference for any other watch brand. Despite being the untouched — and maybe untouchable — market leader, Rolex is investing a lot of money and energy to ensure its supremacy by establishing standards of quality and precision. Product excellence was one of the founding values of the Rolex brand by its founder Hans Wilsdorf who was targeting the front stage of technical innovation and precision in the Swiss watch industry.

Two brands with two distinct missions to fulfil

Most of today’s buyers are too young to remember, but Rolex was not a luxury brand from its inception. I, on the other hand, am actually old enough to remember that when I was 5, my parents decided to move to Bienne — the small Swiss town where Rolex is still manufacturing its movements, and where its big rival, Omega, has its headquarters. We moved into an apartment where we could see a huge factory with a sign that says “Rolex”. Guess what? My parents didn’t know what Rolex was. At the beginning of the 1970s, the brand had a positioning like Longines today — mid-range or accessible luxury, however you want to look at it.

The Bienne manufacture is one of four Rolex manufacturing sites

With the Quartz Crisis (1970-1983) and the pressure put on most Swiss watch brands, a unique opportunity arose for Rolex to climb the ladder of the brand pyramid of the Swiss watch industry. Even though Rolex also tried the quartz path, that experiment was short-lived with an estimated 100,000 Oysterquartz sold over the course of 25 years (1977-2003), which is nothing compared with the brand’s overall sales (est. 1.2 million units in 2022 alone).

Yet Rolex was one of the very few Swiss watch brands that never lost faith in mechanical movements. Even though they did decide to experiment with quartz watches, they never quit the path of “real watchmaking”. That said, Rolex continues to keep its manufacturing capacities of ultra-precise quartz movements and, hypothetically, could at any time launch a high-precision quartz Rolex, a Tudor or… a dedicated third brand. If this happens, it could be another strike from the empire on archrival Swatch Group and Longines, which has a growing fanbase for its V.H.P. (Very High Precision) quartz watches.

Tudor is here to protect Rolex from below

In 1946, Mr. Wilsdorf, who was a marketing wizard far ahead of his time, decided to launch a sister brand with the purpose of offering watches at a more affordable price than Rolex, thus keeping its stringent quality standards. The second purpose — and later the main mission of Tudor — was to protect Rolex from rivals keen to challenge the champion. Notably, Mr. Hayek — the legendary chairman of Swatch Group — adopted the same strategy when he decided to reconquer the watch market starting from the bottom with Swatch, explaining in a Harvard Business Review interview in 1993 that retreating from lower price segments would allow competitors to move up “to the next layer of the cake”.

And that is exactly what Rolex is doing with Tudor and increasingly so. A very smart move was achieving the METAS Master Chronometer certification for the Black Bay Ceramic in 2021, which was intended as a strong signal for Rolex’s main rival Omega, that even its “B” brand can compete at a level beyond the entry range. Rolex is keeping its current double chronometer certification (the movements being COSC certified and the watch head is then internally certified), which lacks an official hallmark comparable with the Master Chronometer — but as we said at the beginning: Rolex plays in a league of its own.

On the other hand, Tudor has been driven by changing strategies since its inception. For a time, it has gone away from its useful purpose of offering an attractive entry into the Rolex world, to being relegated to a sleeping beauty during the decades after Mr. Wilsdorf’s death in 1960. For a time, the people at Rolex were — to put it mildly — not very keen to see Tudor next to their brand. This changed completely with the arrival in 2009 of a new CEO Philippe Peverelli at Tudor with the mission to revive and rejuvenate the brand. Supported by Davide Cerrato as the product director, the pair managed to quickly bring back a positive momentum by launching vintage-inspired models such as the Black Bay collection in 2012.

Tudor's boutiques express a younger, sportier vibe

A lab for new materials and new ways of communication

Rolex’s brand equity is probably one of the strongest in the luxury world and therefore needs to be kept safe. That is where Tudor’s mission starts. Apart from shielding Rolex from competitors trying to move up the cake (this was one of the reasons why it has a logo in the form of a shield), it plays an important role as the de facto testing lab for the group to try new things out. For instance, the use of new materials such as ceramic. Even though Rolex had used it before for its bezel, branded as Cerachrom as far back as 2005, Tudor was the one that made a full-ceramic timepiece.

Tudor Black Bay Ceramic

Tudor is positioned as the more daring younger sibling talking to a younger audience, and launched in 2021 the Black Bay Ceramic, which can be seen both as an experiment with new materials to be potentially used later on by the “A” brand, and an answer to rival Omega’s Dark Side of the Moon.

Tudor Big Block Chronograph Yellow Gold

It is the same with titanium. In 2012, Tudor launched its Pelagos dive watch made of titanium, a material that was only used for the first time in 2022 with the Rolex Oyster Perpetual Deepsea challenge. More recently, the Yacht-Master in RLX titanium brought a fresher look into this product family.

Yacht-Master RLX Titanium

Tudor is also building a younger and fresher image of the brand with light and snazzy campaign videos that are informative but also entertaining — a good way to appeal to Gen Z’s who might hesitate to wear a Rolex because of its institutional image.

Realignment of strategies for both Rolex and Tudor

Despite what certain analysts think, Rolex is not resting on its laurels and the pace of new product launches has tremendously increased since the arrival of Jean-Frédéric Dufour as the new CEO in 2014. Having worked for three decades in various tenures at different watch brands, he immediately identified the growth potential of both brands. In the last decade, Rolex has probably launched more product novelties than it has in the previous three. I remember a time when Rolex aficionados were getting excited by the new version of a Submariner with 1mm increase in case diameter. And, until recently, Rolex hardly communicated about product innovations, considering it part of its mission to continue elevating the brand.

CEO of Rolex, Jean-Frédéric-Dufour

This has totally changed today with the brand introducing whimsical, colorful dials with the “Celebration Dial” Oyster Perpetual and the Day-Date Emoji Puzzle. Both models were launched at Watches and Wonders in March 2023 and certainly prove Rolex’s ambitions to connect to a younger clientele who venerates its product icons such as the Daytona or the Submariner, but also want to see cooler, trendier watches.

Oyster Perpetual Celebration and Day-date Jigsaw

Apart from those “disruptive” designs, Rolex continues improving on small details that make the whole difference. Here are my observations so far.

Focused product management

We are seeing at Rolex a very focused product strategy with a very disciplined way of managing a product collection. The total number of SKU’s is kept at a constant 450 references, which is comparable with Omega, but Rolex’s sales are almost four-fold those of its rival. For every new product launched, there is at least one existing reference being discontinued. This keeps — and even improves — the legibility of the overall product collection.

Increased value proposition

In the last few years, the Rolex product collection has been enhanced with more Rolesium, precious-metal and gem-set watches, which translates to an ever-increasing average retail price which grew by 15% in 5 years* to CHF 11,600. This trend will accelerate in the coming years because the sales mix will be shifting toward higher-priced watches, as indicated by the recent product launches, for example, a new Daytona with a sapphire exhibition caseback — a first for the Oyster Perpetual product line — and a platinum case to highlight that product innovation is coming from the top. The introduction of new Rolesor variations of the GMT-Master II is also a clear sign that the product offering is going up the ladder.

Rolex Oyster Perpetual Deepsea Challange

Luxury rather than sports chic

Far from leaving sports watches behind, Rolex is elevating the game by refining its base designs and offering high-end versions of its bestselling watches. By trying to keep a sound balance between the “bread-and-butter” steel-on-steel watches and more refined variations, the brand avoids getting caught in the dilemma of having to constantly increase the volumes. Having sold an estimated 1.2 million watches last year — which makes it by far the biggest luxury watch brand and the number four Swiss watch exporter by volume, behind entry- and mid-level brands such as Swatch, Tissot and Longines — Rolex is still having a hard time coping with demand.

The long waiting lists on the primary market (six years for a Rolex Daytona) or hefty premiums — up to more than 100% vs. MSRP — for the fast track on the secondary market, are the best indicators of this strong demand. Even though the secondary market has cooled down substantially since March 2022 (e.g. the price of a Daytona came down from CHF 50,000 to CHF 28,000), the overdemand is still tremendous (the Daytona retails for CHF 14,300).

The whole dynamic of moving the brand upward doesn’t take the grip from Rolex and its sound business principles, so you can sense that shifting the two brands up the brand pyramid is done very cautiously. The space left by Rolex when climbing the brand pyramid is immediately covered by Tudor. This synchronization represents certainly a permanent challenge and a threat for the challengers in the first place. Omega, naturally, but also Breitling and TAG Heuer. These brands must constantly adapt their own strategy by launching counter product offensives.

Rolex the sleeping giant has regained a strong momentum and taken back its role of product innovator — but not the loud and disruptive ones — that stems from its DNA.

Tudor reviving icons with vintage-inspired designs

Tudor has experienced a strong revival through vintage-inspired timepieces such as the Black Bay, which made a big splash with each new variation presented in the last few years. It is very interesting to see that the recipes used by Rolex are also applied to Tudor with a compelling logic, such as having a product territory for each family. Diving for the Pelagos, the Black Bay in cross sports, etc. Its structure is, however, questionable with a rather mixed bag within the collection apart from the aforementioned classics which rely strongly on vintage design.

Why the Clair de Rose, which could go unnoticed rebranded under another name? The same goes for the Glamour product family. Apart from probably selling in high quantities to Chinese consumers who have for a long time represented its major market, they rather dilute the collection’s legibility. The Black Bay 31, 36, 39 and 41mm variations, too, look like intruders in its product family.

Rolex Pelagos Titanium

Once it had been decided to reboot Tudor, the brand’s distribution was diversified and could still be viewed in some markets as a new brand. In the US, the brand was relaunched in 2013 after having quit that market in 1996.

The distribution strategy has now shifted to move as a team — not twins, but siblings — and this requires that when a new Rolex boutique opens, a Tudor boutique is also being installed next to it (Rolex doesn’t operate any retail activity, apart from one boutique in Geneva). This is a major shift from its previous attitude of having the two brands clearly separated through distinctive sales channels.

Still room for improvement

On the whole, Tudor’s branding feels a little bit less inspired than Rolex’s, with its conventional approach of using brand ambassadors and a tagline “Born To Dare” which fulfills its purpose of a cool hashtag on any social media, but lacks coherence with the rest of the branding. One could make the argument that a tagline like that doesn’t immediately gel with products such as the vintage-inspired Black Bay. From a brand consistency point of view, if we were to make a comparison with Breitling’s brand pillars comprising purpose-dedicated squads and their respective territories, Tudor’s storytelling needs more coherence, which shouldn’t be a big challenge. After all, the epitome of branding coherence is Rolex! There, everything is perfectly aligned and anyone looking at the brand doesn’t need a PhD in marketing to immediately understand what the brand is about: excellence in manufacturing, and hence precision.

Last but not least, when comparing the number of SKU’s between the two, Tudor’s is around 500, while its sister brand is making 16 times more sales with 450…. There is still room to focus Tudor’s product offering on its strengths.

A unique market positioning and a bright future

Meanwhile, Rolex has a unique competitive positioning with almost one-third market share (29% for Rolex and 2% for Tudor*) of the whole Swiss watch industry. To appreciate that figure, we could add that 96% of the worldwide luxury watch market** (watches with a retail price tag above CHF 1,200) is controlled by Swiss-made or Swiss-owned brands. Even more compelling is the fact that Rolex owns an estimated 40% market share in the USA, which is the number one market for Swiss watches at the moment.

There is no other luxury brand in any other segments of the luxury industry that is as dominant as Rolex in their respective markets. Another comparison that we can draw is with a multi-product brand such as Gucci achieving €10.4 billion, which is marginally more than Rolex’s CHF 9.3 billion, but less if we take into account the fact that Rolex is retailing only through third parties (with the one exception mentioned above). In fact, Morgan Stanley estimates* that Rolex has created CHF 13.95 billion in retail value in 2022 or put the other way round, it doesn’t yet capture a retail margin of CHF 4,65B. Now let’s imagine that Rolex decides to integrate their retail network entirely or partially. What would it mean in terms of profitability and the consequences on the worldwide retail structure?

At Tudor, the potential margin to capture would be CHF 256 million and that would easily justify going into brand-owned retailing. Even though Rolex has decided — at least for the time being — not to capture the retail margin, it is quite easy to estimate that its profitability as a mono-product brand must be staggering, and even more so when you take into account the fact the production is almost fully integrated.

Rolex still has tremendous potential with a market getting more and more polarized and premiumized. The brand is increasingly applying the same rules as any other luxury brand with regular price increases due to its pricing power, and better brand visibility through a broad range of sponsorships across sports and the arts. Rolex is also very good at becoming the exclusive partner in one domain — for example, Formula 1, tennis or golf — by sponsoring all the main events worldwide.

Once the brand has established its superiority, the sexiness, social status and foremost brand equity will keep growing in a virtuous circle. Rolex is delivering a masterclass in proving that a sports-grounded brand can be luxury. When others struggle to establish a bond between their brand and their sponsorship activities, Rolex has achieved just that since the founding of the brand. Sports-chic and increasingly luxurious Rolex will pursue its journey for glory.

*Estimates published in Morgan Stanley’s annual report on the Swiss watch industry market shares “Sixth Annual Swiss Watcher”, in collaboration with LuxeConsult

** Estimates by LuxeConsult in its exclusive report on “The secondary watch market, pre-owned, pre-loved and gray market timepieces”

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