State of the Watchmaking Industry - Morgan Stanley report with Luxconsult

The Morgan Stanley yearly report on the state of the watchmaking industry has become a reference tool which is either loathed or appreciated by those figuring in it, but nonetheless it gives a good snapshot of the main trends witnessed during the previous year. 

And we did get slightly carried away for about four hours with Olivier Müller from Luxconsult talking about the report's main findings. 

We cover the methodology used by the teams of Morgan Stanley, as there has been some controversy on some of the published numbers, but then we follow on general market dynamics, such as why privately held companies perform better than publicly listed ones and the notion of premiumisation and consolidation. 

We also discuss the performance of groups and the big names of the industry, as well as the independent scene and as non Swiss brands and the evolution of events and marketing strategies. 

Enjoy!

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Transcript

SPEAKER_00 0:00

Hello and welcome on Watches TV. And it's this time of the year for our kind of yearly summary of what happened in 2025 with Oliver Miller of Lux Consult. And because we're going to talk about the Morgan Stanley Report, the ninth edition of this report. And it's a report that is widely looked after by the industry as a whole, but also from other people because it's intended for financial and in uh financial institutions and investors. And there's been a little bit of a few controversy about some of the numbers within this report. Let's put it that way. So I think it's important that we come back on the mythology because I mean numbers are quite scarce in this industry. Not that many people like to appreciate to talk about them. Some we have listed companies, we have private-owned companies, but nonetheless, one of the key denominators is that numbers are pretty hard to uh fetch. So tell us a little bit about that.

SPEAKER_02 1:01

Thank you for having me, and thank you for giving me the opportunity to explain a few things uh which we have talked about before, but we lay uh totally uh it's it's an open book. Yeah, we we have the methodology being explained within the report. It's on page uh 23 this year, yeah. And uh basically what we decided to do when we started with the first report, which was 2018 based on the 2017 figures, we decided that we needed to compare very different brands in terms of structure of distribution, retail, etc., that we needed to compare them on a comparable basis, apple with apples, peers with peers, and hence we decided to calculate uh the market shares of each brand on a retail value basis. Uh and we to do that we need uh to do a certain number of estimates. It's we have never said that it's a scientific report and that we have access to all the figures within the Swiss watch industry. That's not the case, and we have never alluded to the to the fact that we would have access to everyone. But on the other hand, we do have access to quite some numbers, interesting figures. Sometimes, of course, those figures are contradicting what people say in the media, etc. etc. And that's why probably it's a little bit disturbing for some people, uh, especially these days, trying to uh take away the legitimacy of uh of our work. So basically, what we do estimate is of course the sales turnover, uh the units sold by the brand, the margin given to the distribution, the uh percentage of integration at the wholesale level and retail level, uh, because that makes a lot of difference. Always give the the uh the same examples if you take Richard Mill. 100% of Richard Mill's turnover is being done direct to consumer, it's 42 point of sales worldwide, selling 100% of Richard Mill's uh watches. Hence, the turnover is not comparable with a brand. Let's take Rolex, the number one dominant. Um Rolex until uh two years ago was 100% almost because they had one boutique in Geneva, but almost 100% was going to third-party retailers, um, and that changed a little bit with the integration of Busherer, uh, which is now retailing owned by Rolex and retailing Rolex and other brands, of course. And we had to integrate that also in the sales of Rolex. And then with all those uh figures, all those estimates, we then converted into retail values, which allow us to uh calculate the overall value of the market and to calculate each brand's uh market share.

SPEAKER_00 4:28

So let's start with the uh the big figure, the one that is let's say undisputed regarding just watch exports coming out of Switzerland. So there's been a slight uh contraction in uh 25 compared to 24, but nonetheless, I mean if you compare it to 2019, we're still above that. Uh so I mean it's people are okay, maybe sometimes playing the doomsday book uh theory, but at the same time, I mean, it's it has still the industry has still had a growth over the last uh let's uh six, seven years. Uh so slight uh decline. Um talk to us about that.

SPEAKER_02 5:04

Yeah, it was a very small decline of minus 1.7 percent in value. In value on average, that's a very important thing. I always emphasize, and sorry for repeating myself year after year, but the thing is if you have uh the four biggest brands in terms of uh of uh market shares, for instance, and you come up with those four, which are uh Rolex, uh Cartier, Audemar Piget, and Omega in terms of market shares. I'm going to explain why Omega is fifth, because they are fifths in terms of sales, but fourth in terms of market shares. And when those four brands already capture 55% of the whole market, you can understand that if most of them or all of them, unfortunately it's not the case for Omega, but if most of them overperform the market, then of course uh the the average is not so much relevant anymore. We could take also the example of the big four, which is Rolex, Odemar Piget, Patek Philippe, and Richard Mill, and those come up to almost now half of the markets, it's 49% by uh captured by the by the big four. So you instantly understand that if those brands perform well, uh then the overall market doesn't look that bad. And then if you dive into the details, you see that there are many brands which were strongly in the high minus single-digit year on year, and then you have even people being in the double-digit minus. Uh, and those are some of those are not happy because we are writing it, some don't have a problem because they stick to the to the truth and they have no problem exchanging information.

SPEAKER_00 7:06

But what's interesting is indeed is that those four uh their market share has grown. I mean, uh, and so we have four players that are really I mean capturing basically not the entire market, but but uh but above 50%. Uh and from year to year they consolidate this.

SPEAKER_02 7:26

Absolutely, it's a virtuous dynamic, uh, as they always call it, because it's very simple. The the the bigger you get, the more the more money you are making, because you can do uh economies of scale, you're becoming more efficient, your uh brand awareness increases over proportionally, etc. Especially on markets like the US, which was the one market post-COVID which grew and partially compensated for the downturn of China. So if you're strong, you make a lot of money, your margin keep increasing because you earn more money, you can reinvest more money, you get more brand awareness, etc. etc. We are not talking about the niche uh uh high-end or not or middle range, etc. But we are talking about the main market. That's why those market uh those uh brands are performing so well. And in the first place, Rolex. Rolex is now up with one-third of the overall uh Swiss-made uh watches, so that's quite an impressive uh uh achievement.

SPEAKER_00 8:39

Absolutely. I saw that indeed in the report you state that uh they were like at 26% uh just a few years back, and now they're indeed at 33%. So just again consolidating, getting more power, uh, and it's as you mentioned, I mean, it's really creating a virtuous circle, basically. Yeah, but uh then uh there can be a kind of a downward spiral uh for other brands, and we'll get back on this uh in a short while. Uh something also that uh uh you highlight uh quite clearly in the report is this notion of premiumization. I hate to say this word, it's a complicated one to uh say, but you see what I mean. Uh and something that I find it quite uh interesting is that uh watches above 50,000 Swiss franc. Yes. Is that retail value? Retail value. Retail value, okay. Uh account for 37% of the total value, yes, but only representing 1.4% of volumes.

SPEAKER_02 9:34

That's absolutely, and that the that that shows how um how dangerous the whole evolution is. And that is about the only point which I would agree with someone I'm not going to name. It's like uh Harry Potter here. We are not going to name him. Um it's about the only point I agree with is the uh extraordinary risk that we're taking as an industry to rely only on the high end because this shows exactly what is happening year after year. The volumes are declining. Last year we lost again 700,000 units. We are down to 14.6 million watches exported from from uh Switzerland, which amounts more or less to the to the sales. I'm not going too much into the detail how we we uh come sorry, how we come up with uh with all the statistics, but um uh basically it shows how thin the fundamentals are becoming. And just another number, uh Swatch Group uh alone with its 16 brands um accounts for about 60% of the whole volume. That's impressive. And if you add up the 1.1, 1.2 million watches sold by Rolex, you are up to 70% almost of the whole cake of Swiss made watches. So it shows how thin the fundamental is and and how uh the volumes are reducing, reducing, reducing because we premize, we are selling more expense, less of more expensive watches, etc. etc. That's dragging away the volumes for the industrial basis, and that's increasingly becoming a problem.

SPEAKER_00 11:35

Uh-huh. But it's uh important to highlight indeed. I mean, the SWAT group is in an industrial group, it was built like that. Uh, and I don't think people realize that indeed they produce 60% of the entire Swiss production. Absolutely. I mean that's that's it's it's massive. Uh it's really uh a huge uh player in regarding the volume and the fact of maintaining those industrial capabilities uh I mean requires those types of volumes. Um regarding still uh volumes, um another interesting uh figure there uh regarding quartz and uh mechanical watches, because indeed volumes are going down. Uh but so since 2011 um volumes have halved, but in 2024 um you have 9.4 million watches, quartz watches that were sold, but 5.2 mechanical watches. And a few years back it was like 5.5 mechanical watches. So the trend regarding mechanical watches is much less uh going downwards compared to quartz uh watches. So is there a future for uh Swiss quartz watches?

SPEAKER_02 12:46

Indeed. I'm very much convinced of that. Uh first of all, because uh we we introduced uh solar quartz technology, which is very interesting uh in terms of uh energy consumption. Uh it's sustainable. Uh there are more and more brands coming to that. Again, Swatch Group, there is uh the one, or no, not one. He's they are the leaders in this technology. Uh they they have used that for quite some time. Uh for instance, uh at Tissot for the T T Touch Solar Connected, which has an extraordinary uh power reserve. Uh on the rest, I'm not going to comment for obvious reasons. Uh but but that's an extremely interesting technology. Cartier uh did a first launch, which was not so successful, but that was not so much because of the product, it was more an issue of the technology itself. Now they're following up uh with a better product, and you can see uh with with Tank at Cartier that you have that solar uh technology, LVMH is coming up with that, uh even at Tiffany. So that's just to say uh that quartz doesn't equal cheap. That's that was the problem of this product, with very few exceptions in the watch industry, with people managing the image of that product, for instance, Grand Psycho, who always remained with uh with either quartz or a mix of quartz and mechanical, uh, which is a very interesting technology as well. Um, so quartz doesn't equal cheap, quartz is interesting, uh, and it's coming more and more at Longin, it's ultra precision quartz, etc. So there is a market there, and not only in the middle range, also uh in the premium line. You you have jewelry watches for women where you use quartz because it's small, it's light, etc. And it's very cheap, and it's very uh it's very easy to exchange because it doesn't cost anything, so that takes away a little bit of the sustainable element, but that's another story. So quartz is not doomed, uh but the people selling quartz need to make their clients understand that it's a different type of watchmaking. I am uh an old guy in love with you know even manual winding, which is even uh of another age. Uh but I I see all the advantages of uh of quartz, even more so if we use the uh solar technology uh uh which is uh abundant. So uh there is a future.

SPEAKER_00 15:43

So the the efforts in research and development within that field of watchmaking is still uh still there, absolutely, and there is still room uh for uh further improvements, and uh but then with the proper communication, then people can understand what uh what's behind it a bit more. Okay, well, that's interesting. So uh let's talk about now some of the performance of uh brands and groups. Um and we see something that is quite unusual compared to other types of uh the branches of the industry, uh the luxury industry, is that privately held brands perform better than the public listed one. Uh and that's kind of an oddity, like I mentioned, compared to other uh luxury sectors. Is there an explanation for this?

SPEAKER_02 16:31

Yes, there is. And before I sh I start explaining why there is a difference, uh there is one exception to this, which is quartier. Uh-huh. And uh I shall make a disclaimer because there are people implying that I have conflicts of interest. Yes, I do. So I love some people, other people I love less. I love some brands, other brands I I dislike a little bit, but I'm not talking about them. So I'm not paid by Richemont, I'm not paid by Cartier, I've never been. Okay, disclaimer. Uh but uh those are really uh extraordinary uh brands, and uh and uh and uh now I forgot your question, sorry, because I was uh saying that uh yeah, uh privately owned brands compared to listed uh companies.

SPEAKER_00 17:24

Yeah, there we are.

SPEAKER_02 17:26

I'm getting old, you know. Um yes, that there is there is a very very basic explanation for that is the uh the uh time frame that you are taking in account when you are the owner of Patek Philip, when you are the owner of Odemar PG, etc., you are not thinking in terms of quarters because you are not a listed company. You don't have people like us with Morgan Stanley asking why you underperformed last quarter or last year, etc., because you don't have to give accounts to anyone. And I would strongly advise people who are frustrated with the financial community to take, if they're listed, to take their companies uh private. That would be uh a good first step to regain uh their autonomy and uh their freedom uh to do whatever they deem to be good for uh for their company. So basically it's the time frame, they look they look long term, they reinvest in their company. Um the uh the level of debt is very low, if at all. Most of them let's take a company like uh Patek Philippe or Odemar Piget, zero debts, at least to my best knowledge. Uh everything is paid for, uh, every single machine, every building, etc. That gives you uh how shall I say that let's take a very specific example. You launch the Cubitus at Patek Philippe. Some people dislike it, others love it, some speculate on it. But at the end of the day, uh Patek Philippe uh does what it deems to be the best for the for the brand, for the for the company. When they took when they discontinued the 5711 uh in in stainless steel of the Nautilus line, they just did it and then it was gone. Imagine uh someone at LVMH or Richmond or Swatch Group telling his boss that he's going to discontinue the problem the best seller of the brand. I don't think you survive the next minute uh as the CEO of that brand. So that explains a lot. That explains why uh they are so overperforming because they plan long term. I'm not saying none of the listed companies have a little bit of that thinking, uh, but but it's long term. Hermes uh I mean Hermes took almost now two decades to reshuffle the product offering uh at watches, they have re-centered, refocused on more mechanical, more traditional watches, etc. etc. Hermes has uh has done a tremendous job. It they took, yeah, as I said, two decades. They are listed, that's the difference, but there is a very important anchor uh shareholder, which is the family, and the family, as they always say, they're here for eternity. Yeah, yeah. And and sorry, just one last point, and and one thing which I shall add is that uh in watches the the product cycles are very much longer than in most, or I would say almost any other, maybe comparable with cars. Cars are also a very long product cycles because you need a lot of time to develop new engines, etc. etc. You know, you see now the transition of technology from uh from uh conventional engines to uh electric to EVs. Uh it takes a lot of time in the watch industry. We need a lot of time to develop new products, and that explains why privately held companies also perform better because they take the time, you know. The Cubitus, I'm back at the Cubitus, was the first new uh product launch or new product family since a quarter of a century at Patek Philippe. Think of this, this is quite remarkable, and uh kudos to uh to Patek. Patek is looking for uh for decades, for uh for generations.

SPEAKER_00 22:00

Let's use that word that suits them well. So, yeah, interesting indeed, probably in the other luxury industry, other sectors of I mean Eurowatch industry expert, but indeed, in the other industries, probably, I mean the life cycle is much shorter, and uh the then it's a completely different uh mind game, and then perhaps uh having higher yields and performance uh is something that can be managed a little bit differently than in the watchmaking industry.

SPEAKER_02 22:31

Uh and coming back to Hermes, I mean they've accepted to reduce significantly the volumes that they were uh the way they were selling 20 years ago, they were selling more or less between 260,000, 280,000 watches. They are down to not even uh uh 70,000, even a little bit below. Um, so it's a total refocusing on what the this product category is about. That's the important thing to understand. That 20 years ago you would sell a watch at Hermes as an accessory to create traffic in the boutiques for the uh core business. And uh today uh Hermes is selling a watch as its own product category, and they want to be seen as serious people doing serious uh watches, etc. Another interesting thing, but um, we're not going to drive too much. But another interesting thing is how they do smart watches. Instead of doing the mistake that other brands have done, other groups have done, trying to compete with people they will never be able to compete with, they have done a collab with Apple, and those uh Apple by Hermes watches sell very well and at a substantial premium compared with the normal Apple uh watches.

SPEAKER_00 23:56

Interesting indeed. Um before again diving a little bit uh uh deeper with uh the the again performance of brands and groups, let's say on the macro level a little bit, and let's talk market dynamics uh in terms of geographies and uh what can we say about 2025 regarding these uh the different dynamics? Yep.

SPEAKER_02 24:17

Um, first of all, post-COVID we have seen a strong shift towards the US. The US has been a very fast-growing market. One reason, of course, is the overall economic situation with all the wealth that has been created during COVID. There were many liquidities injected into the economy, uh, which uh by uh collateral uh creates uh buying power. Um the category, the product category of watches within the luxury industry in the US was substantially lower at about 11% of the whole spending uh of uh of uh luxury goods spending in the US, which is substantially lower than the worldwide average, which is estimated uh by Bain to be at about 15% of the personal luxury goods where you have uh uh leather goods, etc. So that gave already an idea of the potential that this market has. But it is a very demanding market. Why? Because uh it's huge, you need to create brand awareness that costs money. Um and and some brands were very weak until uh COVID, because COVID was really a game changer for anything. So uh post-COVID, many brands understood that they need they needed to diversify away from China. Uh and China, unlike what some people see, which I don't see anywhere, uh, and I'm going to explain why, because that there is a good reason that the luxury consumption is down in uh China. Um it didn't restart post-COVID where it left uh 2019. And the bad news is I dare to forecast that it's not going to be the case anytime soon. It doesn't mean that the Chinese market disappeared and now it seems that finally it bottomed and that finally we're seeing a little bit an improving situation. The not so positive news is when I see the number one in the world of luxury goods called LVMH selling its duty-free business in China. This for me is a very strong signal that that market is not seen, and I mean as being potentially growing again, and and I mean it's LVMH. You like or dislike them, you like the brands, you dislike the brands, but overall it's still a very well uh performing uh group, etc. So when they go out of China, it's probably because they think that it's done in terms of growth. Again, I'm not saying it's disappearing. I think that the recent uh improving numbers, uh at least in the export figures, um in China were mostly due to the recapturing of offshore spending by the Chinese, because as you may know, uh they had quite some issues between the Japanese and the Chinese. Uh, and the Chinese government now is not so much anymore in favor that the Chinese tourists go over there and spend their money because the yen was low, etc. etc. So that was more of a reassuring. And last but not least, 70% that's an estimate by Morgan Stanley, uh, which most of the financial institutions agree with. 70% of the wealth of the private Chinese are is being invested in real estate. And real estate, the prices are still plummeting. Uh my colleagues at Morion Stanley just issued a report showing that the prices are still going down. So if you lose value on your main investment, maybe might be an apartment, it might be two apartments, whatever. I don't think you're going to spend the same amount of your uh discretionary uh budget on luxury goods if your main investment is losing value. That's a very simple, basic reason.

SPEAKER_00 28:55

Yeah, and regarding China, I mean it's really the entire luxury industry that has been hit. Probably the watchmaking, maybe the the the hardest, uh, but I mean it's overall uh uh luxury spendings have gone down uh in uh all different uh sectors. Uh regarding uh Europe and uh other oh let's remain maybe in Asia. Uh is there anything that can be said about the rest of Asia? Sure.

SPEAKER_02 29:21

The the the markets there there are some good news uh with uh South Korea. Uh there are some mixed news about Japan. Japan took a lot of advantage of their low uh currency. Uh the yen uh took a hit, especially uh compared uh to the Swiss franc. Uh a lot of tourism. Uh Japan became the destination to go to uh because it's an extraordinary country with a very, very unique uh culture. Um and and uh yes, you have here and there you have positive news, but I'm always a little bit you know inclined to say that you can't just say because one market is doing well that everyone is doing well there. It's you have to look at each brand, uh how they perform on the different markets. Asia overall is okay. Uh, China won't be the growth market anymore what it used to be, at least for the I would say at least midterm, uh, the next uh probably few years. Maybe um proven wrong in a decade, but uh at least it looks like there is no other China coming behind uh China. India is growing, uh and there are very positive news in terms of uh uh luxury retail infrastructure, all the money that's being invested in luxury shopping malls, in uh in mono-brand boutiques, etc. Um, the um uh the import duties are being reduced uh gradually uh due to a bilateral agreement with Switzerland. This is all good news, but the the you know, in in terms of absolute size, it's still far, far, far away uh from what China has been, and the growth numbers are not the ones we had seen in China for two decades. Yeah, yeah.

SPEAKER_00 31:23

But it still represents an opportunity.

SPEAKER_02 31:25

It's still an opportunity. It would be silly not to take advantage of it. Now I'm going to say something nice about the group in Bien, uh, but that was when Mr. Hayek Senior, who was a visionary, uh, and the people around him decided to invest massively in India. Uh, they were the first group to go there, invest money. Uh, and still, as of today, Rado is the number one brand in uh in India, and uh and they are doing well there. It's still a it's a very complicated market because the the you know all everything is different, which makes business probably interesting. Um then we have the Middle East, um which uh currently undergoes uh a very, very difficult uh situation. But uh if we look at the recent development of the economy, very interesting. Uh Saudi Arabia is really growing, uh modernizing. Um I'm quite putting some uh I would bet on Saudi Arabia, Kuwait in to a lesser extent, of course, much smaller, etc. Yeah for obvious reasons, but Saudi Arabia is probably one of the growth markets, and then of course you have the uh United Arab Emirates with uh Dubai in the first place because it's an international melting pot where you have the whole world uh meeting from all the places, a lot of Russians uh which officially can't buy anymore in Russia, so they buy uh wherever they are and mainly in uh in Dubai. So those markets are also very interesting. In Europe, it's very diverse, uh, and of course very much linked to tourism. Uh, don't don't don't we don't have to be fooled by some figures that we see because it's mostly concentrated in France, is it's Paris and a little bit of Côte d'Azur, then Monaco, uh Italy, it's uh Milano, which is booming for obvious reasons because it became a tax haven for rich people, and then you have Rome, etc. So it's mostly linked to um to uh tourism, but not only. COVID had also this positive uh outcome that all of a sudden the brands realized that in front of their door they had a lot of consumers, a lot of potential clients whom they probably didn't look after too much when the Chinese were coming massively to Europe and buying everything. You know, we all have these images of uh of huge uh poor um I was going to say the uh this Italian word, but uh the the you know big uh coaches coming in with a lot of uh of uh Chinese tourists buying, buying, buying. And that's drifted away the attention of the brands, not looking towards the local consumers. And now all the brands have understood that locally there is buying power. Switzerland, of course, it's it's an island of of wellness. So uh I always tell people to be very careful not to draw conclusions because they live in Geneva or Zurich and think that the rest of the world is spending as much money on watches. It's very but uh no, overall uh uh there are markets which had not disappeared again, but which were not very much looked after by some brands, by many brands, and uh that changed. COVID changed that, and uh yeah, then then we have uh the UK, which is a very uh special market because basically you have London and then you have a little bit of Manchester, Manchester only, because there are football players buying very expensive watching of it. It's true, and then yeah, you have London, which is again uh an attraction, many, many international people flying through or living there, partially doing business, so it's an important market. Uh the US, we have uh talked about South America, it's difficult. Um we can talk about Central America, there is Mexico. Uh, Mexico is an extraordinary market because it's very dynamic. Uh, there are friends from uh Tiempo de Lojes who organize every year now twice uh their exhibition called SIAR. Uh that creates a lot of interest. The watch community comes together, it's nice because there is sunshine. That that is maybe also an important point we should talk about quickly. It's all those gatherings uh with Dubai Watch Week, etc.

SPEAKER_00 36:35

That's I mean, last year was by was quite a statement by the Dubai Watch Week. You know, it was just like, okay, we're we're we're the center of the watchmaking universe, almost. I mean, I mean it was kind of the message I wanted that they wanted to have come through. But it was impressive. It was really, really nice indeed, and cozy because it was nice weather and it's easy to go in and out and so forth. True. Um, but I mean we live in a world today with so many geographical, um geopolitical uncertainties is quite uh an adverse environment. But something that we didn't mention, which has a direct impact, is obviously the the strength of the Swiss franc.

SPEAKER_02 37:10

Yeah, that's a huge issue. Um the in the uh adverse uh the the headwinds that we are facing, we have the gold prices going through the roof. Uh that's that's incredible. I mean, when you have a uh raw material picking up uh 50% in value uh in 12 months, uh that's becoming an issue for uh especially for the for the high-end, of course. And then we have a very strong Swiss franc. Uh and when you produce in Switzerland, or at least mainly in Switzerland, that's another vast topic. Um then, of course, you impact it because you sell in yen, you sell uh in dollars, you sell in uh pounds, etc. etc. Uh the Swiss franc, just to take an example, uh on average 2025 took 12% against the Reminbi, uh the Chinese currency. That is impacting you massively, especially if you're overexposed to that market, as some Swatch Group brands still are, unfortunately. And that they that's why they are overproportionately impacted, and that's why they're always complaining. They are rightfully complaining, but it's impacting anyone, especially a company like Rolex, which is one of the very very few major Swiss watch brands producing everything in Switzerland. I like to enter. To be noted, absolutely. Uh Patek Philippe, Audemar Piget, etc. etc. And there are a few other ones which uh would deserve to be mentioned here. I can't mention all of them, uh, but of course that that's a very strong headwinds. Uh that's that's the cyclical uh negative impacts, then you have the the geopolitics which are bringing uncertainty. One thing which economy doesn't like is uncertainty. If it goes up and down, you can plan to decrease to or reinvest, on the contrary. Um, but if you don't know where the journey goes, and then we had uh someone in the White House uh turning around the buttons, once here, once there, we didn't know where the journey was going. Finally, it seems that we came to more or less at let's put it that way, a little bit of more stable situation. Kudos to the to the to the watch CEOs who went there. Uh I don't have any problem that he received a very nice clock. By the way, it's not Mr. Trump who received it, it's the United States of America. Uh I don't see any problem. It's about business, it's about jobs in Switzerland, it's about companies, it's about the taxes that those companies pay. But then if this is offset by a weak dollar, then it kind of that that the yeah, the problem, yeah, of course. The problem is that uh that we are seeing the Swiss economy is always seen as an anchor uh of being stable. I mean, with what's just happening the last few days, people are uh brutally reminded that places uh who seem to be, you know, uh some places are called the New Switzerland of the Middle East. Yes, maybe, and maybe they are probably even better than we are at many things, but we are in a stable place, at least for the time being. I don't know what the future will be made of. So, yes, that's a challenge. The the currencies being in a strong economy, people speculating on your currency. I think, unlike someone else, I think the Swiss National Bank does an outstanding job. They are not here to spend billions to fight against speculation. Overall, it's working, it's very hard uh for for uh entrepreneurs, especially producing in in Switzerland in any segment of the economy.

SPEAKER_00 41:37

Yeah, yeah, no, for sure. But uh yeah, we'll see how that will evolve uh uh this year. But there's I mean there's a high probability that uh the Swiss franc will remain quite strong and uh will have an impact on uh on some of these export figures. Um let's talk now about um some of the uh the the brands themselves and uh let's jump in with uh with the crown with Rolex. Uh indeed the market share has uh risen, like we mentioned a little bit before. But something that I want to uh talk to you about uh is about the success basically of their CPO program. Uh and um maybe share uh your thoughts about that.

SPEAKER_02 42:18

It's probably one of the best ideas they ever had. They weren't first, uh we always have to come back to the who launched that first, and those were niche brands like Groble 4C and uh MBNF. Uh, because Max Buser is one of the people uh giving good thoughts to how business is being done. Smart guy. Smart guy, that's for sure. And he understood that uh if you want people to buy you new watches, they need to be reassured that uh the day they buy, the next day it's not minus 30 percent, it's still keeping some value. The value retention is very important for any brand. And um and Rolex doing that CPO, of course, it's a different level, it needed you know a whole uh uh reshuffling of their supply chain because it's not done overnight, uh, to have all those uh watches authenticated, uh etc. So so that's that's very important. But but Rolex, uh sorry to interrupt yes, please.

SPEAKER_00 43:28

I mean, they uh Rolex watches always had this kind of uh high uh retained value of their uh of their products. Uh so why did they need to do go the extra mile with the program?

SPEAKER_02 43:42

It's a good question. Um because they want to eradicate one of their biggest threats, which is the grey market and fake watches, black market. Uh when you're so successful as Rolex is, of course, you are probably not probably, you are the most competent. Watch brand in the world, and that's a very, very bad uh for the brand equity and many many other uh reasons. So the fact that you're certifying on the secondary market uh brings trust. Trust is the basis of any business in the world. You sell candies, you sell watches, you sell oil. If there is no trust, there is no business. And uh and Rolex uh came in and and and brought that trust, and that's why that's very interesting to see um my friends at watcharts.com. Uh they're always uh tracking those numbers, and they are uh still saying that the premium being paid from CPO uh compared with non-CPO Rolex is still between 20 and 30 percent, depending on the reference, on the skew of the watch, and uh depending, of course, uh uh uh on on uh other uh characteristics of the watch, etc. etc. But overall 20 to 30 percent, it's huge. And why is that? Because you pay a premium, you pay an insurance premium. You know that your watch is has been authenticated by Rolex slash the authorized uh uh Rolex uh retailer. So you know your watch has been checked, you know your watch uh bears an additional two years guarantee, which is worth money. Um and you have the papers, you have the box, the full set, as uh they say out there, and uh that brings trust. And that's why it's so important for Alex. And then you start pushing out the people doing the monkey business around watches with more or less real watches. The thing which surprised me is how quickly they integrated even vintage in the CPO. Because in the first place it was meant to be limited to more recent watches and they open up quite fast. And uh it's a substantial business at Watches of Switzerland, one of the biggest retail networks of the world. They said that it became the second source of income, the the Rolex CPO behind Rolex. That's for obvious reasons. When you do 60% of your sales at Watches of Switzerland with Rolex, when you do the CPO, probably it's also a substantial part of the business, but that's that's just logics. Um and uh yes, the I I think this is uh uh the CEO of uh Rolex said that the Dubai Watch Week, he said that was the missing last mile with the customer. And by the way, you keep in touch with that customer, you reassure him that his watch will bear value for the eternity again. Um he can go to a trusted retailer, he knows he buys a real watch, he can resell it, he can measure the the value. The whole digitalization of the market brought a lot of transparency. Um, you can check the numbers. I talked about watch charts, there are other uh uh websites out there which are very good. You can go on Chrono 24. Uh, I would just say, you know, people ask me very often, can I buy a secondhand watch, whatever brand? And I say yes, but buy it only from a trusted dealer, someone you know, someone giving you some guarantees, and obviously the best guarantee is the one given by the brand, in this case, Rolex.

SPEAKER_00 48:02

So the the numbers of uh points of sales for Rolex have uh has uh decreased. Uh apparently they're they're gonna continue decreasing and uh focusing a little bit more on big flagship stores, but then also, I mean, so but you uh you mentioned that 26% of uh Rolex retailers now are uh have also this CPO uh dimension to their business.

SPEAKER_02 48:28

Yes. That's uh that yes, because it's complementary. You know, there was always this fear that selling uh a secondhand watch takes business away from selling new watches, but you just have to understand that if you are communicating on the fact that it's a sustainable product which would last again forever, or at least for a few generations, then you have to make sure that the whole ecosystem makes sense. Now, uh let's be blunt. I mean, a few years ago, uh no watch brand would care about what would happen with the second, third, and fourth life of their watches. That's uh let's let's face it, they would just say, you know, it's not a very business. Moneymade. Okay. We make watches, we advertise, we do this, we do that, but once it's sold, it's sold. And now they have understood that it's a an ecosystem where that watch will be resold, that customer might buy a new watch or a second-hand watch. So it's an important logical step of creating that ecosystem, and the uh Rolex uh authorized retailers have that additional income source, by the way. Because as we all know, there are some, at least I think so. There are quite a few Rolexes which you can resell with a substantial premium. They have just discontinued the Pepsi. Uh and of course the prices are going through the roof. Uh, very good game, by the way, to increase the brand equity because you know people smartly based say it's smartly done.

SPEAKER_00 50:12

Still talking about Rolex. I mean, last year they introduced uh kind of a guy, uh a game changer basically with uh the land dweller. Uh that okay, new collection, the first thing, but also with uh significant uh mechanical improvements uh and uh which requires quite a lot of technology, showcasing again that there's a lot of efforts put in RD there, and you know that I mean once they commercialize something, it's not because it's we think it's gonna be okay. I mean, they they they really test proof it uh significantly, and that Dyna pulse escapement is really quite something. I mean, it's uh I think it's something that is not yet perceived uh precisely where it uh it should be. I mean, it's uh it's a it's it's quite a game changer, I think. This uh this part.

SPEAKER_02 51:01

Totally agree. We are on the same page. I came to Watches and Wonders a few days before they did, you know, that uh teasing and uh and people uh who understand a little bit about something about uh mechanical movements understood that this was going to be a major uh product launch. Uh kudos to them. Uh I was amazed. Uh it was the most important product launch. Uh whatever people think, say, right. Uh they like or dislike the watch. I'm not here to say that the watch is good looking or not. I'm just here to say that it's a new uh uh way of uh of making mechanical watches, very interesting, major improvements. Uh uh it's not out of respect, uh uh guys, you the artisan watchmakers making very nice things, etc. But uh when we talk about Rolex, Omega, Grand Psycho, and a few others, uh, because uh Daudemar Piget they did uh once upon a time the Robin Escapement, which is more or less of the same uh uh line or same thought. Um I mean this is a major achievement, and when you are Rolex, you need to make sure that you are precise, antimagnetic, that uh that you can produce hundreds of thousands of that caliber. And I mean this is a major industrial achievement besides being an extraordinary watch. The Dynapulse movement is just when when you understand a little bit about mechanics and that you're a little bit passionate like I am, you must say, wow, kudos to those guys. Uh, the last time I was bluffed like this was probably in '99, uh, when uh Omega launched the coaction. Um I have a funny fun fact about about the Dynapals because I said to the Rolex people, oh, it's also inspired by the natural escapement of Broguet, and they looked at me and said, No, not at all, uh nothing to do. They are right, technically speaking, of course, they are right in terms of uh of mechanical philosophy of the concept of that escapement. It's uh thing I think we should pay tribute to a guy called Abraham Louis Broguet uh and his natural escapement. But, anyways, that doesn't change a single thing. It's it's so extraordinary in terms of precision, of resistance to magnetic fields. Um it's a totally anti-magnetic uh escapement oscillator. I mean, it's it's just perfect, it's it's what Rolex is about perfection, manufacturing excellence. I mean, this is uh and again I'm going to make a disclaimer. I don't work for Rolex, I'm not being paid by Rolex, never been, unfortunately, would like to, but the product just uh deserves kudos. Um what what else can we say?

SPEAKER_00 54:30

It's an incredible demonstration of uh high-tech manufacturing capabilities. I mean, we're talking hardcore science basically behind this.

SPEAKER_02 54:37

Absolutely, and the the smart thing that that's where you understand the product philosophy of Rolex is, for instance, instead of reinventing another gear train, they took out the gear train that they were using uh for the Cron Energy uh caliber family because it's it's working so well, and and and they took that for the new and they put it together with the Dynapulse escapement because they just work out perfectly together. It was a game changer. There were people at Watches and Wonders who really questioned me about do you think that this is making a difference? I said yes, a major difference. It's very reassuring to see that the over-dominant player in the Swiss watch industry still invests so much money in the RD. You know, there are always people telling me it's low tech, no investment, no research, etc. I say, ooh, you have to be careful, because there is a lot of money being invested in this.

SPEAKER_00 55:43

Well, I mean, the profile of guys working on such products has maybe evolved a little bit from the traditional watchmaker to kind of some crazy scientists and engineers, that's for sure. But nonetheless, it shows that indeed by pushing limits, continuing to invest in RD is a way of maintaining yourself a little bit different from the other and being always one step ahead. And I think this is overall within the Swiss watchmaking industry. I mean, this is something that needs to be taken care of uh naturally because I mean things we can't just rely on something that has been working for the last uh 50 or 100 years or whatsoever. I mean, this uh we still have to create it value, whether it's within the fact that watches are more precise, uh more uh uh the longevity of uh of uh the the watches, less durability. Durability. And you see that in a certain way by the fact that most brands have increased the number of years of warranty because basically they trust more their their products. Sometimes they do this as a communication scheme and thing like that, and then they're faced with a difficult situation where they have to take care of the watches for longer years than what they expected, but nonetheless, I think it's something that needs to be uh put forward.

SPEAKER_02 57:01

One very quick historical backlash. Um in the mid of the 18th century with uh Breguet, Leroy, Lepine, uh Robin, and a few others, uh you had the most prolific uh time period in uh mechanical watchmaking. Uh it took a long, long time until we got back. It's not that nothing happens. I'm all also always strongly against you know those opinion makers, especially on YouTube and TikTok, telling that nothing happened for 250 years. That's bullshit. There has been a constant evolution. There has been a constant evolution. There have been many interesting things uh done uh in the Swiss watch, and and overall, not only with the Swiss, uh many people have innovated. Uh, there was the auto quartz invented in the 1990s, etc. etc. So the evolution goes, but uh the most prolific time was in that 18th century when uh when the Bruges and uh again uh Leroy Lepine, etc. Mostly French, not only sorry, uh the English guys. I forget to talk about all those extraordinary achievements by English watchmakers uh and a Dutch guy in the first place. Yeah, he was also a little bit uh in the 16th century. So no, it's uh it's uh it's important that it's part of the DNA. Uh it's very important. I have that that's another takeaway from our work of the recent years, and that I'm more and more emphasizing on that. Uh I think we are in a very prolific in terms of a very positive era of watchmaking, very creative, a lot of colors, a lot of mechanical innovations at small and higher levels. Not everyone is Rolex and can spend hundreds of millions you know in manufacturing capacities. But overall, I think we are in a very good, very interesting period with many new product launches, etc. That's uh interesting.

SPEAKER_00 59:22

Yeah, one last thing regarding Rolex is that um they've kind of uh well communicated around this uh Rolex Quantum initiative, also, uh which is kind of definitely uh showcasing their will of pursuing this uh RD uh dimension of their uh business. Can you tell us a little bit what are the goals with this?

SPEAKER_02 59:42

This is very interesting because, as we all know, uh one of the reasons of the success of Rolex in the last few decades was that it uh quickly shifted away from quartz and restarted on mechanical. Overall, in 20 years of uh duration of uh the oyster quartz, the the quartz watch made by uh by Rolex, they sold only around 115,000 watches. So that's why they they uh carry such a high uh value retention, those uh oyster uh uh quartz watches. Um they switched very quickly, but but no one knows, uh and I don't know, but I heard you know through the gray points and I heard that they always kept that know-how in quartz watches. And the fact that they are doing this atomic time precision watches, they have set up a separate company which uh will be producing clocks which allow for uh GPS uh guidance, etc. It's very important. Uh, we are in in terms of precision at, of course, totally different levels, what we will ever be able to achieve with a mechanical watch, but that is to highlight their uh their knowledge uh with uh with those uh technology with with quartz. Very interesting because it's very much again in the DNA of that brand with which Mr. Wilsdorf always wanted it to be, and they are becoming better and better.

SPEAKER_00 1:01:25

But it's interesting is that I mean I'm convinced also, like you just mentioned, that I mean those initiatives were still ongoing within Rolex, but they didn't talk about it. Yeah, and but now with this uh quantum initiative, at least, I mean it's a way of them saying that you know we're there basically.

SPEAKER_02 1:01:42

We were there and basically we're the best. No, no, but it's uh it's true, it's very interesting. They're working with the with that institute in the Chatel exam. Uh and then it's interesting. It's interesting to see it's also again, it's a private company held by a foundation. Uh, they can decide that they invest millions of Swiss in uh RD which don't have a real impact on their PL, not for short term and not for long term, but they do it to demonstrate their capacities. And uh as Mr. Dufour, again the CEO of Rolex uh rightfully said recently, there are hundreds of people working in the RD at uh Rolex, and there are you know people with PhD in physics, etc. etc. So it's uh not the watchmaker, you know, more or less doing something which more or less gives time. We are in ultra precision.

SPEAKER_00 1:02:49

Yeah, uh impressive indeed. Um so let's talk about some other brands now, okay? Just a little bit, but we'll remain with the big ones for the for the to start up with. Sure. Uh so let's talk about AP. Uh last year celebrated his 150th anniversary, so which was a kind of an important milestone, I guess. I mean, it's one of those dates, important dates, that I understand that you can celebrate. They came with a lot of different uh limited editions celebrating this uh this anniversary, uh, which probably gave them quite a lot of momentum uh benefiting uh the the the turnover. Uh so they they don't disclose numbers either, but I mean apparently they their uh overall turnover um um increased by almost 10%, 9%, if I'm if I'm not mistaken. That's right. Uh volumes have increased a little bit, but still we're still within this 50,000 more or less uh uh production uh range. Uh how do you see the the the business of AP and uh in the coming years, especially?

SPEAKER_02 1:03:47

Challenging. Uh-huh. Yeah. Yeah. Uh it's a very strong brand, still has a lot of potential on the very long term. I agree with the former CEO and the actual CEO. They are both uh saying the same thing that basically the brand still bears a lot of growth potential.

SPEAKER_00 1:04:07

The question will be uh if in terms of growth, sorry to interrupt, but I mean they doubled their uh turnovers since 2019. I mean that's that's huge.

SPEAKER_02 1:04:20

I mean it's huge. It's huge. And potentially I have no problem with the CEO saying she didn't say it this way. I'm a little bit uh you know interpretating that uh the former CEO said it once uh that the potential can be even double what they do uh today. So the five billion uh sales by Odemar Piget is just not is not just a dream, it's achievable long term, but many things need to align. And those many things is to reduce the monoproduct uh image of the brand, which is related to Royal Oak only. Um but it's a sexy watch. It is.

SPEAKER_00 1:05:07

I mean I understand why people uh want to buy one, you know.

SPEAKER_02 1:05:10

I do, I do also, and I I think there are a million of different ways of creating variations of uh of the royal ork in terms of colors, materials, uh uh material treatment, movements in the first place. I mean uh uh in the last decade, uh in the last decade and a half, uh um Odemar Piguet went up for you know uh buying or 20 years ago buying movements at Géger Le Coult. They went to real manufacture, they were they were they were already producing at APF uh ex Renault Papy, and they were producing already extraordinary movements, but on for for the main for the volume volume uh for the bread and butter business, they were still uh relying a lot. On outside parties. So the question will be uh can they manage to diversify? They have launched uh the code 1159. Uh is it that's that successful? To some extent, we estimate that it's uh contributing to about 12% of the overall sales, which is already quite substantial. People say, oh, only 12%. No, it's 12% of last year, 2.6 billion sales. So uh I think there would be quite a few watch brand CEOs out there happy to make only the sales of the Code 1159. Now the people disliking AP are saying that it's more or less cross-selling because you know, if you want to buy that uh Royal Oak Jumbo, you need to first buy this, you know. Anyways, we know all those uh monkey businesses uh out there, um, and there is certainly a bit of truth to it. Certainly, um it needs you know to to become probably a little bit more diversified. They launched just now the NeoFrame. Interesting watch. I would dare, I'm I'm here not here to say I like or dislike the watch. It's an interesting watch, it's totally in line with the brand's DNA and history. Is it going to be commercially successful? I doubt, very much. But again, I would love to be proven wrong once more with all those uh very intelligent uh uh experts out there. Uh but but that's where the the journey should go for Oudemar Pigue. And one thing, let's not forget about one thing. The uh the outgoing CEO, François-Henri Benamias, we say now his name, uh, he has done a very interesting thing. He made a luxury brand out of Oudemar Pigue rather than just a watch brand. It's a holistic experience uh with uh the AP house, the house, etc., the whole image and the uh current CEO, Mrs. Resta. She's continuing uh that way. Uh for the time being, she has lived on the product pipeline, left from uh predecessor for obvious reasons. That's not criticism. Takes time. We'll see what she comes up with. She seems to be very confident about the future. She just gave an interview where she's saying that uh the brand is aiming at grow again another 10% uh this year. Uh, is it achievable? Uh in terms of uh of math, yes. Through uh price increases, uh the volume will remain more or less stable. The only thing where I think they should be a little bit careful is with their verticalization, they have just inaugurated a new manufacturer, huge thing, more than 23,000 square meters in Le Brassus. They are already building the next one. Um, you know, uh and and the obvious goal, of course, is to go, they are now a little bit above the uh 50,000. We estimated 53, uh, it's somewhere around there. Uh the goal is obviously to go uh to the 70,000, where there is by coincidence a brand called Patek Philippe. Yes, and uh and they think there is a market there, and I would strongly agree with them that there is a market there for them.

SPEAKER_00 1:09:55

Uh-huh. But interestingly uh enough, I mean they they do, they're one of the main brands that is there to defend, for instance, this world of the suppliers of the industry, and that uh you know you need to be uh supportive of your suppliers and so forth. But at the same time, as you mentioned, I mean they've uh integrated quite a lot of capacity. So we'll see, and that I guess I mean the only solution is by increasing the the volumes of production. But coming probably indeed uh with the new collections and this uh neo-frame uh is probably probably just the beginning. I mean, within because you know they they they had done uh reissues of uh former models and things like that, but there was always kind of limited edition, whereas this one is a new collection by itself, and they'll see if they'll be able to grow it and probably make it evolve a little bit. But then that could be that there could be other collections coming in uh in the in the near future also.

SPEAKER_02 1:10:49

The the fun fact about this is if you look at uh Oldemar Piggy's history, which is now 151 this year, uh years, um is that it was a brand which was which didn't have a clear uh design language for very, very long. Absolutely until 1972 and the birth of the Royal Oak, and that became the hero product, and the brand became a mono product uh brand. That's very interesting now that they try to get out of this and trying to re-diversify because if you take the history of that brand, it was uh it was you know, once this, once that, uh, a series of chronographs round, then square watches, etc. All nice watches per se, but no clear design language.

SPEAKER_00 1:11:45

So this is a perfect transition to talk about the next brand and talk about Patek. You mentioned indeed a bit um a bit more than 70,000 watches produced, but something interesting about Patek that which I've already said uh quite a few times is that they indeed have various product lines. You know, it's they there's not this one uh king product and uh that uh and then that which takes over the the entire uh turnover of the company. It's one of the rare brands where they have multiple uh collections uh that are very different from one another, and uh it's quite remarkable that they're able to balance out more or less these collections. I mean, some are more successful than others for sure, but nonetheless they manage to keep it kind of, like I said, yeah, balanced. And it shows that it's uh kind of working.

SPEAKER_02 1:12:34

The one thing about Patek Philippe, which amazes me the most, is that it's contradicting all the theories about brand endorsement. They have zero brand testimonial, they are doing zero sponsoring in terms of culture, sports, or whatever, or I missed something, but I don't think so. So zero. Unlike any other brand out there, they don't have brand ambassadors wearing their watches. The very the many very famous people in uh show business, in sports, etc. Uh wearing those uh uh Nautiluses, aquanautes, etc. They all pay for their for their watches, that's very unique. Keeping uh that generalistic approach of having more than one product family, uh with the Calatrava, the Aquanaut, uh Nautilus, etc. etc. now the Cubitus, etc. That's uh very interesting, it's very clever. Um they are also they have been always very reluctant to spread too much out, meaning uh the integration, the the integration of their retail is is marginal. They have three uh Patek Philippe salons worldwide, Geneva, Paris, and London. Uh they will probably open up a few more uh down the road. They will probably integrate to some extent their retail, just like Rolex began with Boucherer. Uh sorry to come back with that. I was the only one predicting that it would happen one day, and I was proven for once right. Um and you will see there will be changes at Boucherer in the near future in due course. And um and Patek Philippe is is keeping, you know, people forget that the brand isn't what it is today for like 200 years until the 1980s, 90s, it was quite a confidential brand. Uh I worked with a guy called Laurent Ferrier who spent 37 years at Patek Philippe, who always told me the same story. He said, you know, Oliver, in the 1980s, uh we were selling a lot of uh quartz watches even for men, even for the Nautilus line, uh, the average price was blah blah blah, that much, etc. etc. And then came all that renewed interest for watches in the 90s, etc. And then the brand again. But I think the the most differentiating factor there, again, we had that question at the beginning: what makes the difference between a privately held brand and the listed brand? Is that uh uh Mr. Stern, the the owner, uh co-owner with his sister, uh and the CEO of the brand, he he looks for decades. So uh that makes a good part of the success. And uh hopefully they will remain independent forever. Yes, we hope so too. No, I think there is no reason they would sell, even though it would make Mr. Stern a lot richer than he already is.

SPEAKER_00 1:16:17

I think he's already doing quite okay. Yeah, but uh I mean, good. Uh so another success, successful brand, much younger one, Richard Mill celebrating 25th anniversary this year. What an incredible success. And each year, you know, comes this point where you say, oh, okay, they've reached kind of the limit of the uh of the system, and thing like that. But they all always prove us wrong.

SPEAKER_02 1:16:45

No, it's uh it's the most amazing success story of watchmaking overall. Uh it's building up a quintessentially the perfect luxury brand in any aspect, uh, selling only through your mono brand boutiques, uh, being at a very high price, very low quantities, a lot of limited editions, almost only limited editions, at prices which are out of this world.

SPEAKER_00 1:17:20

Um the volumes of production and uh turnover.

SPEAKER_02 1:17:26

Pardon me?

SPEAKER_00 1:17:26

Remind us again the volumes of production.

SPEAKER_02 1:17:29

The last year they achieved 1.75 billion Swiss sales, and they were just below the 6,000 watches, 5,950. So you see, I have access to some figures uh unlike what some people are alluding to. Um so no, it's uh it's it's nothing. 6,000 watches a year is nothing, but the average price at 295,000 or even a little bit more Swiss, it's just amazing. The cheapest uh Richard Mill watch 122,000 Swiss, excluding taxes. I mean, it's out of this world. It's it's it's but basically it's about being coherent and consistent over time, sticking to your values, to your uh strategy, etc. Not you know going once back, once forth. It's everything has been set up to make it a success story, and it's uh it's a success story. The only I always have to say something, uh the only limitation to their business model was uh when they launched the first limited edition with Ferrari, the SP01, they did 150 pieces, it was sold 1.88888 million dollars. Crazy price. And then on the secondary market, as of today, you see that there is a discount of about 30% against retail, which is very seldom with Richard Mill uh watches, and now they came up with a new limited edition, again 150 pieces, and the price was is substantially lower, it's still over one million dollars, but still serious money. But you see that there is, I think they understood that you can push very, very far, but there are some natural uh limitations. I would have personally I would have taken down uh the numbers for the limited edition, maybe 50 pieces, and kept the price, but you know, they are right. I'm I'm no one, they are Richard Mill. Kudos to them. Fantastic.

SPEAKER_00 1:19:51

Regarding that uh special uh uh February edition, I mean it was very a very special watch. I mean, so I can understand that they say, okay, well, this is so special that we can you know take it uh through the roof. But something interesting uh regarding Richard Mill also is that I mean, until a couple of years back, indeed on the secondary market, I mean, most watches held or over uh outperformed the the selling price. Uh and we've seen a contraction of that on many different models today. I mean, before you came out of the the Richard Meal shop and you basically made money uh if you uh had this allocation, which is not necessarily the case anymore. Uh you mentioned the Ferrari, but there are other examples like this. How do they handle or how can they improve uh the handling of their secondary markets and what impact uh does it have on the primary market?

SPEAKER_02 1:20:46

A lot, because again it's trust. So if people have to believe in the fact that there is value retention for what they are buying, um they do a very good job since ever. They were one of the first brands, you know, uh uh taking care of the second hand, having uh dedicated, very highly qualified watchmakers to uh service uh the watches to make sure that they work perfectly, etc. That they are authentic uh to the last screw uh in the in the movement. So, yes, it is important. Yes, the prices came down, of course, it was a lot, a lot of over speculation, uh like currently on Francois-Paul Journe. Yeah, I mean another brand. But we are maybe back to a little bit more normal, and and the brand is still growing. You know, when you when you sell 2,000 watches a year, then your secondary market is that big. You sell 6,000 a year and a few percent to more the year after, then of course it's starting to grow the secondary market, and it's less rare, and hence the prices maybe come down a little bit. It's still, I think, a good investment. It's uh it's statutory when you wear a rich mail. Everyone knows, but you have the the message is clear. It's like uh you have the price of a small apartment or a big apartment in some cases on your wrist.

SPEAKER_00 1:22:23

Um yeah. Uh there's quite a message. But uh yeah, interestingly enough, I think for instance in the auction world, uh, until a couple of years before uh ago, you used to see quite a lot of uh watches coming on the market. But today it's uh pretty rare to see uh, I mean, there's that's that's much lesser watches sold uh in auctions uh from Richard Mill, I think.

SPEAKER_02 1:22:46

Ah, from Richard Mill. Uh yes, I wouldn't have any numbers to why I am not the expert of auctions. Uh but yes, that might be an indication that uh that people keep their their watches, which would be good, or they sell it uh elsewhere. Um let's not forget the the volume that is being traded peer-to-peer and uh you know very cloud. Oceans are very important uh overall to create image, to create uh uh storytelling about you know watches being sold at crazy high prices, the 1518 at uh Patek, etc. We know all those stories. Uh those are creating myth, those are creating the trophy watches, the absolute grails, etc. Uh uh the people at Philips in the first place, but also uh uh in other auction houses, they do a good work. Overall, it's a small part of the secondary market, which we estimate at about uh 25 billion uh a year, and out of that the auctions are only between seven and eight hundred million.

SPEAKER_00 1:24:01

But as you mentioned, in terms of image, it's important. It's important, of course. And I think regarding Patek, for instance, I mean it has uh I would imagine, I mean, a very uh important impact also on uh some regular customers saying, Oh, well, you see what's happening over there. I mean, because you keep reminded of their uh performance in this uh auction world, yeah. I think it's reassuring.

SPEAKER_02 1:24:24

Like you know, I I don't think Patek has anything to rebound or there, but but of course, yes, it is important. Uh brands have to be careful not to, you know, to play silly games trying to make uh the market believe into extraordinary prices which are out of this world. And I'm not going to you can mention it if you want to, but there was a very, very bad example of where a brand wanted to make uh people believe that all of a sudden that same exact watch, or at least the same model, was all of a sudden 10 times the already very high price of the uh of the watch sold before at an auction. That's not smart.

SPEAKER_00 1:25:13

Yeah, yeah, yeah. No, it's um, but I mean we see that that kind of generally backfires, uh, and it's difficult to distort the market.

SPEAKER_02 1:25:23

Uh it's a small world, it's a world of passionate people, very educated, literate people about uh watches. You have uh very good experts around uh Geoffroy there uh at other watches, uh my friend Alex Godby at Philips, etc. You have very, very good people, and uh you know when when your customer asks you, is that uh really the price that I should pay for that, we'll tell you, well, you know, I wouldn't. Very politely, very politely, and so you have to be careful. I always tell people buy vintage only if you have a trusted watchmaker telling you that it's 100% uh uh true genius, that there is no monkey business. Uh and and yes, a watch which has a uh 50-year on uh on its back, probably not all the parts are uh coming from where they should come. That's less of an issue, but be very careful, you know, of not having those Franken watches being, you know.

SPEAKER_00 1:26:40

I mean, there's been some stories, of course, and ultimately going back to what you were saying before, I mean, that unfortunately breaks the trust. Absolutely. And it can completely, I mean, stop the dynamic, and then it's uh complicated to rebound from this.

SPEAKER_02 1:26:56

There is one guy making uh and tremendous work to highlight uh the that monkey business is uh Jose Perez Periscope. He doesn't have only friends. No, just like me. That's why we get along well together because just like me, he's saying things he's uh not supposed to say. Um he's a lot wealthier than I am, so he can uh afford that he's not friend with uh with everyone, but I think the the work he does is very useful. Um, and you see to what extent of detail you have to dive into when you buy a very expensive uh vintage watch, and you can't just you know trust someone who says, you know, this is the uh whatever, blah blah blah. Trust me. When the guy tells you trust me, then you should be worried.

SPEAKER_00 1:27:54

So I mean this we had a little discretion, discretion uh regarding the the secondary market. And uh the world of auction, let's go back to the state of the industry 2025 and talk about some of the other big players. And one of, I mean, one of the big ones obviously is Omega. Uh, from what you state uh in your report, basically it's it's it's just staying where it is uh since a few years. I mean, it's uh despite the fact of having like big uh uh marketing opportunities like the Olympic Games, uh well, that was already two years ago. But they're there are now the Olympic Games, the Winter Olympic Games and so forth. I mean, there's so what's going on uh with Omega?

SPEAKER_02 1:28:36

Um it's my love brand. I know first disclaimer I work there. Yeah, everyone knows by the time I think I said it so many times. No, it's an extraordinary brand. It's it means it it's so unique, the DNA of the brand with NASA first watch on the moon, whatever other tell. Cut the bullshit, it was Omega, we all know. Okay, there was never went to the moon. Yeah, that's another problem. I was going to say there are also people don't believe in that they went up there. I met I met two people who went up there, so obviously there is some truth to it. No, extraordinary brand, um limited in its ambitions, and I'm going to take one example where where you understand that as good as the work as the brand itself delivers, it still has limitations due to the fact that it's part of the swatch group. For instance, diver watches. They have this extraordinary product line, they have four product lines, generalistic approach, which they always kept. Uh Seamaster, Speedmaster, Constellation, and Deville, uh, the dress watch. Uh and and you know, with diver's watches, Seamaster, which is by the way uh James Bond's watch since '95, if I'm uh right. Um, and they are not allowed to talk specifically on the diving part because in the group there is another brand called Blancin. And does that make sense? Maybe it made it made sense once upon a time to have very differentiated brand territories within a group. That makes absolutely sense. Uh, Mr. Hayek Sr. again, because he was a visionary, he built up the 16 brands so that each brand would have its own brand territory, which was totally logical. But as of today, does it make sense that you are you communicate diving only with the 50 fathoms at Blanc, which is a very nice attractive watch, which uh in recent years they have done uh new product launches, very, very, very nice, really. And then uh you have the uh Seamaster at Omega, and I mean the potential of Omega is substantially higher to say the least. So, you know, I would cut off those dogmas which are not making any sense anymore. And they have a strong competitor of, of course, in front of them called Rolex that makes life hard for them. Uh they are quite successful in at their level, but as you rightfully said, our estimates are indicating that the journey doesn't go up and they are not gaining market shares, not even in uh in their core range. Okay, they are maybe getting gaining market shares. They are strong, for instance, with ladies' watches. Their main competitor is called Cartier. Omega is a very strong competitor against Cartier, and they do very nice uh dress watches, sports watches uh for ladies, and uh and the proportion of ladies' watches at Omega is uh is quite high. Um but the the part missing there is that positive uh momentum that uh that has been missing since now uh years. I'm I'm sorry to say that. And then just as a side remark, there is a uh very good report issued by a Swiss bank called Fontaubel, and interestingly, Fontaubel estimated Omega at 1.67 billion, substantially lower than what we estimated uh with Morgan Stanley. We are still at 2.2 billion. Who is right, who is wrong, I don't know, but it it's a clear indication that the the analysts at Fontoble share our opinion that the dynamic at Omega has has gone, uh the growth dynamic, and and that's uh they're keeping a good level. I still see a lot of potential, they do many good things in terms of products. I mean, we talked about the quality, I mean, nothing to be said. I mean the quality in the last 20 years at Omega went up tremendously. There is one guy, sorry Reynolds, the CEO, you do an outstanding job. But the one guy who brought uh the product up at Omega is the guy now in charge of the show at Breguet, and hopefully, and he already showed that he understands what his trade is about, Gregory Kisling. He hopefully he does uh that magic trick again at Breguet and brings that unique, that unique name, legacy inside.

SPEAKER_00 1:34:09

One of the most prestigious, um significant name out there for sure. But uh indeed, I was glad to see last year concrete examples of things new, uh but sticking to the Breguet uh language, and uh no, it was uh that uh made me happy. And I see talking, and you mentioned about uh Breguet, uh Blancin, sorry, but um it seems that also there's a little bit of a uh kind of a revival in a certain way with some new products that are coming, also um on top of the what you were mentioned about the uh 50 fathoms. But regarding the 50 fathoms and the CMAS, I think I mean they're they are different products, they're not positioned at the same price and things like that. So I mean I don't think one shadows the other necessarily.

SPEAKER_02 1:35:01

Yes and no. As I always say, uh every watch is a potential competitor for another watch. Uh-huh. Um, but yeah, they have uh each their I I don't see it as an issue. I I would, yeah, you're right. I would open up and say, listen, Omega, if you want to talk about diving, talk about diving uh with uh with the Seamaster. It absolutely makes sense. The Speed Master, not even we don't even have to debate about it. It's unique, it's uh it's one of the icons of the Swiss watch industry. Um yeah, but the brand overall, yes, not performing like it should. Uh not a catastrophe, don't don't get me wrong. Uh like other people got me wrong. Uh, but overall the group is certainly not overperforming the market. Uh, that is uh for a certain unless someone comes up with figures contradicting what I'm just saying, and that uh is Oliver Muller slash Lux Consult.

SPEAKER_00 1:36:14

All right, so let's talk about one brand that is definitely performing very well and from year to year, Cartier. Uh, we mentioned uh about them just a little while back. Why is it uh working so well for them?

SPEAKER_02 1:36:29

Because they went back to their roots. Uh, the former CEO, Mr. Vigneron, when he took over the brand, he stopped many things which were not making any sense for a brand like Cartier. Cartier is a very, very unique Parisian uh luxury maison uh with a unique history, and they always I'm I'm so full of praise because they always manage to retell the same story in a new way. That that's extraordinary. The Panther, you know, the all their communication campaigns, they don't come over as you know, dusty or already seen, etc. It's always new and refreshing. That that's that's the the kind of strengths that a real luxury brand has. And to regenerate all times and to reconnect with Gen Z because now Gen Z has discovered that Cartier existed before the years 2000. You know, it's always very funny for me that the young guys discovered that the brand was making watches already in the 70s and even before. Uh so the prices of vintage Cartier are going up also. It's not through the roof, but they are picking up values. And the the strength, the core strength of Cartier as a brand is having so many iconic products, both on the jewelry and the watches side. Uh, Tonk, Santos, Pasha.

SPEAKER_00 1:38:04

And you're talking about more than 100-year-old watches. Absolutely. Those are people keep forgetting about that, indeed. I mean, Cartier has been around for a very, very long time, and with the design signature that is unique.

SPEAKER_02 1:38:17

They stick to that.

SPEAKER_00 1:38:18

Yeah, absolutely.

SPEAKER_02 1:38:19

Yeah, that that that that's the extraordinary thing is that they always manage to redo that same watch in a new way.

SPEAKER_00 1:38:28

What you mentioned about the appeal to uh younger generation is indeed quite unique, I think. I mean, I have a few examples around me. Uh, I'll just give you one. Is that like uh my goddaughter that is not necessarily completely attracted to the to the luxury world and things like that, but for her 18th birthday, she wanted a cartier. That's interesting. That's uh that's and I never expected that she would want a watch just to start with, but then on top of it, wanted a cartier.

SPEAKER_02 1:38:56

That's quite a compliment for the brand. Absolutely. Uh my son is wearing my my father passed away last year, and uh and one of his watches was a quartier, and my my son is now wearing that watch very proudly because it's his grandfather's watch. That's very also important. All people always talking about emotions, it's the memories, etc. etc. But uh but but also he finds the watch very cool because it's very thin, it's small. Uh you know, that's uh that's a compliment for the brand. And that quartier is just you know, in the continuity, it's uh it's the same path, but you know, always bringing new elements to the to the journey, uh like Hermès does, like Chanel does. Uh, those luxury brands really manage to reinvent themselves at all times, and Cartier is really, really unique, absolutely. And uh yeah, and still accessible.

SPEAKER_00 1:40:02

That's the thing. I think it's it's a combination between, I mean, you do have this notion of luxury and prestige, uh, obviously design, uh, and at the same time it remains more or less accessible. I mean, we're still talking a few thousand uh francs per watch, but nonetheless, I mean they didn't go too crazy. Uh they could have probably had the temptation of increasing further their prices, but they stick to something that is quite uh reasonable, if I can say so. And at the same time, regarding the retained value, it stays there also. Yeah. So if you combine all of this, sure, sure.

SPEAKER_02 1:40:42

That's the then you have the magic combo of success. It's not one thing, it's an alignment of important key success factors, and uh, and one of them is uh being able to regenerate, of staying relevant with uh new customers coming into the market, etc. Uh, quartier, and the results are there. I mean, there are almost 3.5 billion Swiss sales for the watch business only, most important brand at Richemont. They had uh one or two quarters. I don't uh don't remember uh last year where the watch business grew faster even than jewelry. Normally, jewelry, of course, is dominant. Um what else can you say? It's it's if you make a book about uh luxury branding, then you would have uh uh Cartier, you would have Rolex, you would have uh Richard Mill, uh, and those are really you know uh best in class uh studies, and of course Hermès, uh Chanel and others.

SPEAKER_00 1:41:51

Yeah, and um so that enables me to rebound a little bit about uh the the Richemont group, but just to finish off with Cartier, I think what's interesting is despite being a powerhouse of the luxury world since decades, uh, when they indeed tried to uh appeal to the very you know high collectible collector type of uh uh type of uh customers, invested probably tens and tens of millions in there, came up with interesting products, but despite being quartier, despite having that power, it doesn't work.

SPEAKER_02 1:42:26

No, so you have to stick back. You have to stick to your roots. Um, their roots are much more into uh craftsmanship, uh metida. They have their own atelier where they do engraving, uh gem setting, uh miniature, uh high fire enameling, etc. etc. So they do a million different things which fit into their DNA. I don't think highly uh mechanical complications are uh they still do, they still do a little bit uh quartier privé. They come up every year or every other year with interesting new products, but it's certainly not the brand's DNA. No, and it's not me saying this, it's uh a gentleman called Franco Coloni who uh used to be an important man at Richmond, and he once uh told me a long time ago, I was a little bit younger, and he told me that basically he thought that Cartier could have some potential in the authorlogerie, and that he was proven wrong because people were seeing Cartier as what it is, it's an elegant, dressy watch uh which uh bears good value, it's a reasonable price, you have the prestige, the status, etc. So uh why would you go somewhere else? But it was the trend, you know, yeah, once upon a time. The luck of Cartier was that they didn't go too much into the wrong direction.

SPEAKER_00 1:43:58

Yeah, yeah, yeah. And uh if we compare the swatch group with what you mentioned before, the fact of brands had their own territory and they stick with their territory, with whereas with the Richemont group, brands were allowed to compete against one another. And so, meaning that basically they all came up with the same type of products within those different brands, instead of you know cultivating where you're you're kind of the best, and the example of Cartier going back to where it was known and where it was perceived as being okay, the most interesting brands for the reason that we mentioned before. Well, it's proven them right. Whereas some with other brands, I mean they you know, we take one example with Beaumont Mercier, which has been uh taken out of uh the the Richemont family of brands. Uh a brand like Beaumont Mercier could have competed against Longines, could have competed with some kind of mid-level if it stayed there. But at one point, because being part of the Richemont family, I mean, if prices came up, then you had then the uh complications that were probably very nice, but I mean that didn't have any really purpose within uh a brand like uh Baumet Mercier. And on top of it, I think it's you know it takes a lot of time and resources and um you know thinking uh uh hours to develop these type of product, and then you defocus from who you really are with the consequences that it has.

SPEAKER_02 1:45:29

That is we are perfectly on the same page. Jean-Claude Bivert, the industry legend, my boss once upon a time at Omega. Um I uh I interviewed him for an academic article a few years ago. He was very, very, very reluctant to accept. But anyways, I convinced him, and he was saying something which is uh it was uh published on uh Rutger's Business Review in the US. And uh he said something which is uh very uh uh relevant. He said a brand should never change its DNA, but that doesn't mean that you can't adapt the way you you live that DNA, how you create new products, etc. The thing is don't stick to dogmas. Uh the world changes, uh the weather changes, the technology changes, you have to adapt to that. And if you stick with things which are from the past, then all of a sudden you're uh not relevant anymore. I'm not going to bring you all the bad examples by the people uh I don't I'm not supposed to talk about, uh, but uh there you have a lot of those examples, and as you rightfully said, now all of a sudden you have those 16 brands, and you look at all those new products and you don't see any different from one brand to the other at different price levels, etc. You I mean, you know, I get confusing, yeah. It's gets very confusing, absolutely. And okay, overall in the watch industry there is this tendency, you know, of this um uh going back to neo vintage, and uh and everyone tries to redo the 1950s to the 1980s, trying to redo kind of a Nautilus or a whatever uh chronograph, and and then you start looking at the market and you say, but okay, what's the difference? I exchange the name, I can't say who is behind uh the watch. That's not the case at Richard Mill, uh, and so on and so on. You know, when you have a differentiating factor, a strong one, a design language, stick to it.

SPEAKER_00 1:47:59

Yeah, yeah, cultivate it. So regarding uh Richemont, um Vachon is still performing quite well. I mean it went a little bit down apparently, but it's still uh I mean, still one of the strong brands of the of the group. Uh can you walk us through a few of these brands of the Richemont uh what they're currently uh going through?

SPEAKER_02 1:48:21

Yeah, uh Cartier we did extensively Van Cleef uh success story a la quartier, both jewelry and and watches. Of course, it's a lot smaller than Cartier. Uh it's more quiet. Uh you see it less because it's a different price region, uh, etc. And then you have uh what they call the specialist watchmakers division, which were eight brands, one less from uh don't know where they will close the deal with uh with Damiani. Uh they are uh selling the brand to Damiani. I think it's a good decision, it's a very, very fine brand, it's an excellent brand, which was a little bit, you know, left aside uh dirichemont for whatever reasons, but as you say, probably it's more because of a cultural clash between a luxury group and something, let's put it that way, Beaumet Mercier should maybe uh belong to a swatch group, but they have already enough with their 16 brands, but it would be more in their logical uh DNA. And then you have a brand, Paneray. Paneray, difficult situation, not performing like it should be. Is it overall a brand which will regain its strength it had once upon a time? I doubt very much. Uh it's a fine brand, it has it has a strong and weak aspect to it, the strong aspect. It as that is a very clear and recognizable design. We all know, at least some people interested in watches, we all know what Panorai stands for. Paneraye took a little bit strange passes, you know, all of a sudden talking about innovative uh products and experience and this and that. I think they should just stick to what they are. Uh it's a tool watch, a very nice one. Uh, they have their aficionados around the world, and that limits also the potential growth of that brand. So currently a little bit in a difficult situation. Positive news from IWC, they finally rebounded. We estimated that they had a small, but compared to the average uh substantial growth of 5% year on year, of course, they are coming back from low levels, so the plus five need to be a little bit interpreted. But um no, they they they might have more potential.

SPEAKER_00 1:51:10

How do you explain this uh rebound?

SPEAKER_02 1:51:13

I think they uh they went back to you know reshuffling a little bit the collection. They are currently probably also uh getting back to where they were strong, maybe they should even more. Uh, when I look at IWC, I'm always missing the strengths of of what was once upon a time their main asset, which was you know bold and definitely, yeah. German inspired, even though it's Switzerland, but anyways, with communication border with communication campaigns that you can't do anymore. No. Uh 2026, you would run the same, you would probably end up in prison uh for decades. Uh but it was strong. You maybe you they needed or they need to adapt that, but still they rebounded. I'm happy for them. It's a fine brand, fine products. The challenge for IWC is always that in terms of prices, they're a little bit high, and that makes life difficult for them when they are being compared to one of their competitors, Omega, even though at Omega on some product lines you could also come up with the uh same remark of the price uh which went up too much. Um then we have Géger Le Coult just regarding IWC uh and still talking about communication.

SPEAKER_00 1:52:41

To what extent do you think that the success of the Formula One movie has had on their business?

SPEAKER_02 1:52:51

I don't know. Maybe, maybe that's a good point. Uh I I doubt always I said uh Patek Philippe, uh the Rolls Royce of uh Swiss made uh watchmaking, they have zero brand ambassadors, zero sponsoring, etc. Has it done good to IWC? Probably.

SPEAKER_00 1:53:12

I mean it's probably one of the smartest uh product placements uh because I mean as you could see it throughout the movie, basically.

SPEAKER_02 1:53:19

Yeah, sure. Probably it brought back attention. Formula one is really becoming relevant again uh since a few years since the Netflix uh series, etc. So yeah, probably it has done good. I always come up with the example of uh the Seamaster at Omega first uh movie. The sales of the whole Seamaster line at Omega went up by I think two or three times, and long term five times when we had done the second movie, uh etc. So it pushes the whole brand, it makes the whole brand uh more relevant, and it's not only uh I'm going to be a little bit cocky because I pretend to know the references by heart, the 2531 AD, which is the uh the James Bond watch, just you know went through the roof, and maybe that uh that positive effect at IWC played uh in their favor, uh maybe. An assumption.

SPEAKER_00 1:54:23

So you were you were starting to talk about Géger le Coult.

SPEAKER_02 1:54:29

Also, positive momentum coming in. Uh, we can see that the latest product launches are are on more sustainable or more acceptable prices because that was also a main issue. There are two issues at Géger le Coult, my opinion. The masterline, it's a little bit dusty, very nice watch. I love those watches. Uh, I love the brand, by the way. Uh, again, I don't work for Géger le Coult, I don't advise them. I love this brand since ever, but those watches are too old-fashioned. They would, in fact, it's it's a little bit contradictory with what I said before that neo vintage coming in, but that neo vintage at Géger le Coult should be cooler to connect with Gen Z. And apparently they have a hard time uh uh uh still. I hope Jerome Lambert, he knows the brand inside out, uh, that he will manage to turn that around. Then on the other side, they have one of the most iconic products uh in watches, which are the reversal. We'll see. It's uh and then there are those rumors coming up. Uh I don't I don't give much credit to those rumors. I think there will be other brands at Richemont which are going to be uh divested, sold uh in due course.

SPEAKER_00 1:56:01

Uh, but let's at the core of the Richemont group.

SPEAKER_02 1:56:05

I mean, that's it's such a fine brand, and I wish it uh it turns back to the glory it once had. It's not again, it's not uh sadly.

SPEAKER_00 1:56:15

I feel like I'm saying this every year regarding them. So I really hope that this time there's something happening.

SPEAKER_02 1:56:20

Let's give Jérôme Lambert, the CEO, a little bit more time. It takes time to develop products. Uh, it's an extraordinary integrated verticalized manufacturer, so they have all the means it takes. Oh, for sure. Um that's Géger. Uh, whom else are we missing? Uh Piaget, a little bit, yeah, not so successful in uh in watches, even though they have all legitimacy to do watches things ever. Um, I don't know what it needs there. There it's again, it's not a catastrophe, but not as successful as it uh could be. And which one are we missing?

SPEAKER_00 1:57:01

Which is pretty stable.

SPEAKER_02 1:57:06

What shall I say? I love the brand. You look at the prices on the secondary market, you instantly understand that the watch collectors don't buy into the long-term perspective of that brand. I mean that that's uh that's in your face. Uh, I always tell watch collectors you want to do a good buy, you can buy an extraordinary chronograph, uh, double, triple split seconds chronograph at um at uh Langyeon Zune. Um it's it's an extraordinary product, but look at how much they are being discounted on the secondary market. It's it's catastrophe, it's not good for the brand equity. Um and and yeah, the brand is is good. The brand no, it's not good, it's extraordinary, but it's not growing. I mean, their main number one competitor is Patek Philippe. Patek Philippe 2.5 or 2.6 billion turnover, and then uh you have uh Langyon Zone with one-tenth of that value, and it's not that they started yesterday, but maybe I did one prediction right in my life because when I saw the first time a Longyan Zone, it was on the wrist of a German uh specialized journalist, and he showed me that, and I looked at the watch, I didn't know what long it was, I didn't know about the history, etc. etc. It was, I think, in 97 or 98, if I remember right, and I said to him, you know, made in Germany, no chance. Maybe I don't know, I don't know. You know, the Germans have a uh a rich tradition, they're very good in engineering. Uh, you have fine brands like Nomos doing interesting.

SPEAKER_00 1:59:04

And the one thing I think we can be thankful is that the it shook up the Swiss watchmaking industry at a time where it needed it, and it kind of helped raise the bar uh in the 90s, and I think we're still benefiting from this uh moment of uh you know being uh woken up uh positively. Um let's maybe switch group now and talk about you. We kind of briefly talked uh about LVMH, which is a huge player of the luxury world. Uh uh and regarding its uh watch division, what can be said?

SPEAKER_02 1:59:44

A lot. Um watch division, basically, it's only three brands. Uh it's uh Zenith, Hublot, uh, and uh and uh Taghoyer. And uh not overly successful for the time being. It again it's the Hublot is in a very complicated situation. They lost a lot of momentum last year. They had the Jubilee of the Big Bang. Um was more or less uh successful. Uh they have uh Julien Tornard as a CEO who is trying very hard to revive the brand. The new strategies about going in a higher price range, but more much more authority. My personal opinion is that Hubleau doesn't belong there, and he has a very, very tough uh challenge, Julien Tornard. Um it's it's one of the brands with the highest uh uh bad will amongst watch brands. It's incredible. All that negative that is being said and written about about Hublot, which the brand definitely doesn't deserve. Um they do uh products which you like or dislike, uh, they do some very limited editions in the high end, which are very interesting. I mean, technically speaking, they do interesting things. And they manufacture, etc. Do they manufacture everything in-house? No, they don't, but they do a lot already in-house, so they would deserve a little bit more consideration, I think. So currently very difficult situation. The brand was negative against uh uh last year, again last year, uh, despite that Jubilee year. Uh Tag Hoyer, um well, uh changing the CEO every other year might not be the magic recipe to bring stability. Um Antoine Pin came and left within 15 months. What can you do in 15 months? Nothing, you can't do miracles. Uh he had two difficult uh challenges. One was that very expensive uh uh sponsoring of Formula One, which is an extraordinary marketing instrument, no doubts about that. Is that not a little bit too much of an investment at the size of Taghoyer? Probably, uh, and then it becomes difficult to improve your PL when you have on 1st of Jan already uh, you know, about let's put it that half or one-third of your marketing budget, boom. Uh, because you know it's the it's what you pay as a sponsoring fee, and it's what you pay additionally on activation. Activation, of course. Okay, yeah, and the the simple, very simple rule that we have is that we say the activation costs are at least an at least as much as the sponsoring cost, or even two times that much. You need to communicate, you need to invite your clients, you need etc, etc. etc. Uh, so it's a lot of money. It's an expensive game, yeah. And then the other thing, I'm sorry, it's I'm not going to make another friend, but he already knows what I think about the connected watches, smartwatches, they should stop that better yesterday than today, or even worse tomorrow. Uh the smartwatches at Tag Hoyer, I mean, it's a distraction from their business. It doesn't make any sense. Did it make sense in the beginning? Maybe. I don't know. I'm not here to prove someone wrong. Uh, but as of today, uh, they have they they are just uh a meaningless, just as the uh at Tisso with the with the T-Touch connected. I mean, a connected watch is about being connected to a cloud, to an ecosystem, because it's about data. The data when you walk, the data when you run, the data, whatever, what your uh uh health is about, or when you go golfing, etc. etc. So why would anyone in the world spend three times the amount of an extraordinary instrument uh measuring my word, which is not a watch, but it's called the Apple Watch. Uh I mean, why would you spend three times that amount?

SPEAKER_00 2:04:32

And which you know will be obsolete within the next couple of years, by definition. I mean, whether it's the battery not working anymore or whatsoever. New IS, no new OS, whatever.

SPEAKER_02 2:04:43

I bought one smartwatch from a Swiss brand called Alpina. Uh-huh. And I was really not happy to say the least. I didn't spend a fortune, but it was a few hundred bucks. And after three years, I was just told that this would stop smartwatches. So you take your watch, and it was a good-looking watch, it was cool, it was working. So solala with uh the pairing with the iPhone, etc. etc. That's the strength of Apple. Anything you buy just works. Uh, you have your watch, uh, you have your computer, you have your headphones, everything works. But what recently? Sorry, no, no, no, no. No, no, no.

SPEAKER_00 2:05:26

What was interesting about the the uh Alpina and uh uh Frederic Constant smartwatches, I don't know if they still continue to do that. Okay, well but Frederick Constant, yes, I think they still have uh but they had this more of a kind of an analogue way of being a smartwatch, and then indeed by uh syncing it with your phone, it would uh give you uh some uh information or whatsoever. But I mean it was not completely going the smartwatch way as Tag did. Yeah, yeah. Uh do we have any idea of the volumes of uh smartwatches that uh tag uh produces or sells?

SPEAKER_02 2:06:05

No idea, must be a few thousands at best, and uh the thing is not tens of thousands, no, definitely not. Oh wow, and and the thing is it's distraction from your brand management, and then the worst part is now to come, because what would many uh watch managers forget is that the end of the day, okay, you can do e-commerce, whatever, but but uh at the end of the day you have a sales counter, okay, with one guy coming in and says, I would like to see you smartwatch. Then your sales clerk who could sell a Carrera with a much much better margin, etc., in half an hour, he starts convincing and explaining that bloody smartwatch for like an hour, and then the client says, Okay, I take it, but can you pair it with my phone? Then you have to pair that bloody watch, etc. So you have lost between one hour, one and a half. Uh so I let you imagine how much you distract your salespeople, even though you have dedicated people for the smartwatch, you distract them away from the from the products where you do the the the margin, so it doesn't make any sense.

SPEAKER_00 2:07:24

Yeah, interesting.

SPEAKER_02 2:07:25

And Louis Vuitton, by the way, the at the Louis Vuitton horlogerie, which is not part of their watch business unit, has already stopped the smartwates. Okay. And they did cool smart watches.

SPEAKER_00 2:07:38

Yeah, yeah, but there was interesting with the notion of you know the joyer journey and there was uh one could explain it uh in a certain way.

SPEAKER_02 2:07:47

Yeah, I I agree, but they stopped for probably the same reasons.

SPEAKER_00 2:07:53

With Tiger is like a okay, I'm a golfer, and uh uh I use Tiger has an app for golfing, which is absolutely great, probably one of the best ones uh uh out there. They actually bought this app from it, was another company before, and it's okay. Well, we have like a huge pool of people using this app, so we'll be able we'll be able to cross-sell our smart watches. Uh so I still use this app, of course. Uh, but I still use my uh Garmin watch once in a while, you know. And uh because yeah, spending that much money on it is uh I mean there's there's a huge gap there, and uh the the app by itself is doing a good thing. I understand the strategy, but I don't think it turned out that no. So we talked about uh uh tag hair. Uh hopefully it can uh rebound. What's impressive about Tager is the the decline of production volume over the years. I mean, it's uh quite impressive.

SPEAKER_02 2:08:46

Uh so I don't know to what extent it'll be able to go back to those uh volumes uh anytime soon, but it's uh when you consider the uh how big the brand was only like 10, 15, 20 years ago, uh compared to what they produce now, it's quite uh that's concerning, and that's the overall uh analysis that we make about the Swisswatch industry that the volumes are going away. Um, yes, they went down substantially, and I don't think they will go back into the volumes because the strategy is quite the opposite. It's to go higher in the prices. They have to be very careful with that because you you lose, you know, your your uh historical client by going way uh too up in into the prices. And I mean doing a split seconds chronograph for more than a hundred thousand Swiss. Okay, probably the marketing VP would explain to me, Mr. Muller, it's about uh creating a talking piece, and I don't know what, but I would say, and you know it's not even it's not even a movement coming from in-house, it's a moving uh coming from uh Voscher. Not saying that Voscher is not good, not at all. Of course not, no. Voscher makes a lot of movements for Richard Millford. For instance, yes, for instance, yeah. So but but yeah, uh Taghoyer, difficult one, uh, and then Zenith.

SPEAKER_00 2:10:17

All right, let's talk about Zenith. Yeah.

SPEAKER_02 2:10:19

Zenith for me is the brand that everyone loves and uh which no one buys the watches. Uh-huh. It's brutal. Yes. Uh, my apologies. I love uh the brand again, rich history. I don't think the brand ever had the history that some aficionados are uh uh crediting the brand with.

SPEAKER_00 2:10:44

Yeah, it's I don't sorry so no no no, it's Zenith definitely benefited from the scarcity of the early uh 20s, I mean uh when uh everybody was looking indeed for their nautilus and blah blah blah and so forth. So they there was a bit of uh uh for for people that really wanted to buy a cool mechanical watch, that was Zenith was the was a perfect option. And then when things, the market uh dynamics changed a little bit, uh I think they got hurt from that. And they're not the only ones. I mean, there's some other brands that also had sporty models that had uh well, some a few good years and then uh went back to normal.

SPEAKER_02 2:11:20

Sadvacheron, Laureato, Girard Pergault, etc. They're all fine watches per se, but of course they don't have that uh iconic appeal that uh the the trophy watches that you just named have. And uh at Zenith it's it's just you know, it's it's if the goal is to keep it at that level, and the goal is uh um also to keep it as a manufacture for sister brands to manufacture high-end uh chronographs or the elite line, which is the more accessible one, okay, fair enough. Uh maybe it can find a living there, but don't expect Zenith to be amongst the whatever top uh whatever of the Morgan Stanley uh annual report. I uh unfortunately I don't think so.

SPEAKER_00 2:12:15

It's uh so if I take Zenith and uh Hubleau, okay. Yes uh kind of a parallel uh uh path between the two, uh despite the fact I mean Hublow was much bigger uh than uh Zenith and so forth. I mean it was so I mean it was present everywhere with football and sponsorship, Formula One, what do you name it, and things like that? Uh do you think brands, and this can be applied to uh well asked for uh other brands also, do you think brands are capable of accepting of producing less, being stuffed for less production, less marketing investment, and things like that, not go crazy with their prices and uh be sustainable. You know, instead of you know going shooting only for growth, growth, growth, but saying, okay, well, maybe the most important is just to be sustainable.

SPEAKER_02 2:13:09

That's what any brand as a company should be about, because the main goal is that you are here for the long term, and uh if you start you know overshooting, then you take the risk that uh that you don't make it in the long term, in the long run. Uh and again, then we are back to the beginning of our discussion, which is what makes the difference between a privately held brand and a a brand held by a listed company. It's exactly that. It's uh it's uh growth, growth, growth, growth. And then uh by coincidence, you have, I'm just saying this is a pure coincidence, you have a private equity coming in and saying, you know, uh, we need uh you need to do that much more uh top line, and more importantly, that much more bottom line, and uh because in seven years we resell or we do the IPO, and then you have pressure, pressure, pressure, and the market is maybe not in line with your objectives, etc. etc. So very difficult. Uh, and um, and uh you know, unlike what some people say, uh LVMH is here for the long term in any of their businesses. They have owned Zenis since 1999. Yes, they have beyond any doubts lost a lot of money every year.

SPEAKER_00 2:14:38

Around the same time, also?

SPEAKER_02 2:14:41

Yeah, yeah, and uh they have lost a lot of money and they stick to it. Uh, and then we come to the to the glorious part of the watchmaking at uh at LVMH, which is uh Louis Vuitton, la manufacture du temps, uh la fabrique du temps, sorry. Uh um that's the interesting part. It's not that Venice is not interesting, but yes, it's the it the question is for me is it good that it stays with LVMH? Yes and no, it's good because at least you have a rich owner who is capable of feeding, you know, uh a brand which is obviously not generating a positive cash flow since a long time. And uh that's that's one way to look. The flip side is you you keep a brand alive and and it's not doing the basic works, and maybe it's what you said what you're saying. It's maybe instead of trying to go over 100 million sales, maybe Zenith would be better off doing 50 million with private owners, uh being uh sustainable, self-financed, you know, making some money, etc. Sorry.

SPEAKER_00 2:16:04

No, no, no. Uh but come coming back to what you're saying about tag, you know, and that Spitsecond chronograph, and indeed when they did it, outsourced that with uh uh well, partnered with uh Voscher. Uh and at the time they were very open about this uh uh collaboration, and but it was at a time where LBMH had this appetite for uh Voscher. Uh that deal didn't go through. But then why? I mean, if they wanted to have a movement manufacturer, they already had one as Zenith. And it's I mean, historically speaking, Zenith is a manufacture, okay, before being a brand. Uh so why did they invest more maybe in the uh Zenith manufacturing capabilities?

SPEAKER_02 2:16:45

That's a very good question, which I'm asking myself all the time. You know, now I talked a little bit uh helicopter view, but if you go down and uh you look at what Zenith really is, it's a very fine manufacturer, but certainly in terms of um industrial capacities and know-how, it's probably not by far comparable with what Swatch Group does. Swatch group is really really excellent. They are the probably amongst the best in class with Rolex at this industrial level.

SPEAKER_00 2:17:26

And one thing, I'm sorry to interrupt, very, very sorry to interrupt, but something I think that needs to be uh pointed out and is important and is is old to the I mean, not the glory of the Swatch group, but nonetheless, I mean in there has been indeed maybe a bit of difficult times and so forth, but nonetheless, it's a group that didn't, I mean, they didn't make redundant uh uh working positions. I mean, uh they they reduced a little bit, of course. I mean, they don't talk too much about it, but compared to other ones that benefited from more uh federal subsidies and so forth, I mean they they stick true to the core of the people there because they know that's those are the guys that are making it possible. Sure. And uh uh so the I think that's something that you know needs to be said and respected for.

SPEAKER_02 2:18:14

Sure, sure, sure, sure. That I'm always saying this that uh if uh if if uh the Hayek family deserves a lot of compliments and and respect is uh that they keep uh working uh places, headcounts uh in Switzerland, which which are far above from what other companies would be able or willing to afford. Uh it's very important. That that's why that's why it's such an important topic, because it's not just a company, it's not just a group or a house of brands. It's much more than that ecosystem by itself. Absolutely. And they are very, very good and efficient on an industrial uh basis, they are very strong, they're sticking to their values. The Hayek family is prepared that they haven't asked for uh the RHT, the uh short uh uh reduction of working hours. Where the uh by the way, this is also this is a remark I want to make. It's not subsidies from the Swiss government, like it has been written all over the time. I just uh uh lectured an English-speaking journalist who asked me about that, and I said, no, it's not the case. It's uh the workers and the company paying equally the same amount, and over a certain cap, the company pays more than the worker in a in a scheme which is like an insurance for those types of cases where you have uh economic downturn cycles to avoid laying off uh people. And uh the SWAT group would have been entitled for this rightfully, they didn't. Is it a good decision or not? I'm not going to comment on that, it's their decision, but they deserve a lot of respect for what they are keeping alive. 158, at least it's what they say, factories in Switzerland and and and elsewhere, a lot of know-how, they still continue to uh train uh apprentices. So the you know that is all important for from for the ecosystem. Uh no, no, kudos. I'm I'm not here. Unlike what some people think, I'm not here to say only bad things about uh this family, this group, and their and their brands. They deserve a lot of respect.

SPEAKER_00 2:20:59

Yes. Yeah. So let's go back to uh LVMH, and you were mentioning La Fabrique du Ton, uh Gérald Jantin, uh Daniel Roth that comes along, and Louis Vuitton itself. Uh obviously, it's probably a little bit more fun to uh play around with these kind of toys. Sure. Uh but is that precisely defocusing then a little bit of the attention on those big power group powerhouses, or at least the the Tag Hurry powerhouse?

SPEAKER_02 2:21:31

It's not trying to get the attention away from uh where it doesn't work, uh where it should work a lot better. It's creating image, it's creating uh legitimacy in watchmaking that's very important. It's image building, yes, that's for for sure. It's coherent with the overall DNA of the LVMH group, which is a lot of unlike what some people think, say, and write again. Uh yes, of course, there are things which you know well has less to do with craftsmanship, but still within the Louis Vuitton group, LVMH group, there is a lot of craftsmanship, and that's what Jean Arnaud, the youngest son of Bernard Arnault, the chairman of the group and main shareholder, uh, wants the group to be. Jean Arnaud does an extraordinary work uh with uh La Fabrique Duton, uh with the Louis Vuitton watches. Uh very bold, uh very increased the price level, they are cutting out all the SKUs which were from before with Eta and Celita movements. Uh they are more into uh complicated, uh more expensive things, very complicated, very complicated, they're going uh and then they revive the uh Roth, uh Daniel Roth and uh Gerald Jantin, also two niche brands, those will remain uh niche, and of course what's interesting with these two is that they were under the umbrella of uh Bulgary for many years, yes, and they kept producing uh a few seldom watches here and there.

SPEAKER_00 2:23:16

Uh but then we you see that by taking it out and giving it them their own existence, it seems that it's uh working again. So that the combination of uh one brand uh overseen by another and thing like that makes it a little bit complicated. And I'm thinking just out loud because we were talking about Richmond before, with uh Mont Blanc and Minerva. Uh I think we have a bit of the same situation there, but that just a little side.

SPEAKER_02 2:23:42

Yeah, yeah, yeah, yeah. The move out of the uh brand portfolio of Bulgarie back to Louis Vuitton, uh La Fabrique du Temps, I probably it's pure speculation, but it's due uh uh to the fact that there are two master watchmakers at La Fabrique du Temps called Michel Nawas and Enrico Barbazzini, as everyone knows. Two friends of mine and two ex-business partners at uh Laurent Ferrier. Um and they worked for those brands and they knew how important in terms of image again those brands could be in terms of building up the legitimacy of Louis Vuitton watches with watch collectors, and it's a very smart move, and probably didn't take them much time and convincing power to gain uh um uh Jean Arnaud's trust to revive uh those two brands and the and the products since they have restarted. Just very, very, very cool, very fine watches. At uh Louis Vuitton, it's a little bit, you know, it's it's buying a watch from someone who is not a watchmaker per se at quite a substantial price. The tambour micro rotter is around I don't know uh 19,000 euros. Uh kudos to them, they sell only in their own uh POS, uh about 450 worldwide, so it limits already. Uh uh, and and anyone coming from a Louis Vuitton watch is, anyways, probably at least it's my uh my my uh uh assumption that uh anyone coming in from a watch is anyways a Louis Vuitton customer, so you don't need to win him over for the brand, you need to convince him maybe of the watch. Um their strategy is to say uh it very politely, probably a lot inspired by what Hermes has done, uh, but very it's very clever. Uh the manufacture, La Fabrique du Ton, is just you know it's a nice place to go. Have you been there? Yes. Uh I have been there many times. Uh it's it's so nice, it's um it's really watchmaking at its best because you see passionate people, uh, you see craftsmen, etc. I'm not saying that you are not seeing this at Borgier or Blanc or Patek Philippe, it is you certainly see that. But it's all new, it's a lot of positive energy. And one thing, and it's not to brush uh the shoes or shoe shine uh Jean Arnaud, but the most important is that you have someone standing in front of something and uh incarnating the values, the passion, etc. And Jean is really so passionate about watches, and uh and uh that it's really inspiring, and it's a very positive signal sent to the to the whole industry. There are you know there are passionate people like you outside of brands. There are passionate people like uh Max Busser, uh Edouard Melon at the Moser, who really incarnate that passion. Sometimes you see watch brand CEOs where you think, well, he could also sell whatever uh uh cars or or bags, etc. You know, he doesn't care too much about watches. With those people, you really feel there that there is passion.

SPEAKER_00 2:27:34

Yeah, and what's interesting with the Arno uh family is that I mean, being I mean, owner of LVMH, I mean those gazillions of brands, prestige and so forth, the glitz, I mean, you name it and so forth, but nonetheless, there were quite a lot of the kids that were involved in the watchmaking uh division. So that watchmaking is indeed something special, you know, there's a special appeal. You know, you could be obviously uh yeah, wanted to go a little bit more under the flashlights of the fashion world or whatsoever, but they were. I mean, okay, they are most of them are engineers, so maybe that explains also a little bit.

SPEAKER_02 2:28:12

Yeah, and yeah, and maybe also a more trivial explanation is that uh don't take it as disrespectful, uh, but you know, Louis Vuitton watches, the whole watches for Louis Vuitton, the brand, uh, is less than one percent of the of the sales of the brand. Uh overall the watch of the Louis Vuitton brand.

SPEAKER_00 2:28:34

Of the Louis Vuitton brand.

SPEAKER_02 2:28:36

Okay, so in the group it's it's nothing. You know, so if it doesn't work out, but it seems that uh it works out very well. If it doesn't work out, it's not too bad, it's not a catastrophe. Overall, the whole watches and jewelry business on the group's total turnover, it's about 12%. So it's not, you know, and it's quite similar uh to overall what Bain is estimating on the personal luxury goods, which watches make out 15% and jewelry another few percent, uh more important percentage, etc. So it's at for LVMH at least, it's not overwhelmingly important today, but as you saw at uh Tiffany, or you're seeing at Tiffany, they are investing substantial amounts of money, so they have ambitions there. They are doing also high jewelry at Louis Vuitton. Uh you know, they they have ambitions. And I think uh Jean will be the man of the future on this side.

SPEAKER_00 2:29:45

But interestingly, to have uh family members that are so implicated in such a small portion of the overall business of a group like MVMH. You mentioned Tiffany, it's interesting to talk about that quickly because it has rebounded quite uh quite a lot over the last uh years, I would say. I mean, the watchmaking part is I mean, with coming with new design and things like that, which seem to appeal because uh uh it was a brand that's uh had ambitions like 10-15 years ago, I remember, and then it kind of uh when they failed, they faded away, and uh it seems that it's gaining again a little bit of momentum.

SPEAKER_02 2:30:24

Yeah, I hope so. It's at least what we understand from the market. It was it's it's quite um it's it's a substantial project because it's a uh total repositioning in different price regions. Uh the whole image of the brand was redone, and you have to be careful not to scratch or or scrap uh the truth, the DNA, uh the historical DNA of the brand. And you have to bring that in a more modern, in a fresher, in a regenerovated uh way, and and and make new products, etc. It will take time. The first results are coming in now. They were all you know, there are always those people uh saying, I see it's LBMH, and they are not achieving it. So it you know takes time. Luxury, as we say in French, le temps long, it's it's long time frames. Uh, you don't turn around a brand or you don't just reposition like this in uh in a few weeks, few months, and then uh you know they bought it just at the wrong time because uh, you know, COVID, tada, and then you need more time. And but the positive momentum is I think building up. Um they have a very clear positioning, very clear competing brands which are they're uh going after.

SPEAKER_00 2:31:58

Yeah, I think we talked about these before, no?

SPEAKER_02 2:32:00

Yes. Um, I think uh it's working out well. They they need they they would need to put that same energy on their business unit. I'm not saying they're not putting energy, don't get me wrong. But I think there it needs really a strong push, and they are capable of it. They are more successful at brands Bulgarie and Louis Vuitton at their level, Keteris Paribus, they are more uh successful with watches than the the pure players of Taghoyer Riblo and Zenis. Yeah, interesting. So it's interesting. It's uh it's maybe their challenge to understand that when you're a taghoyer, your approach, even though you're a luxury brand, might be a little bit different, and that makes the beauty of our watch industry.

SPEAKER_00 2:32:50

Absolutely. So maybe to finish up on LBMH, so let's quickly talk about uh Bulgary, uh which has been chasing records for years and years and years in the ultra-thin uh department, let's put it that way, but uh throughout. Uh but how is the brand performing? The brand is performing very well. The the brand, yeah. I'm talking about the the the watches.

SPEAKER_02 2:33:14

The watches uh are performing well. Uh a little bit, of course, the importance of watches within the whole product portfolio was reduced a lot the the last two decades. Uh about 20 something years ago, uh, watches would make up more than 20% of the total sales of the of the brand. And of course, jewelry grew a lot faster. It's a jewelry brand in the first place. So it's not that the watches are not successful, but they don't have that same positive uh growth momentum that jewelry had. Um so, but overall, the brand is doing very well, it's it's probably very profitable. Brand and the watches are being seen as legitimate, very strong designs, very iconic products, and uh and that quest for the thinner and thinner. Uh, it's a good positioning. It's uh they took a little bit the place from uh brand called Piaget. Yeah, definitely. Used to be world champion in that field, and they came uh and then we had Richard Mill with the SP01.

SPEAKER_00 2:34:28

Yeah, they completely overshadowed uh Piaget, that's for sure. With I mean, and in year after year, I was that's I think it's you know you take one punch and then the next year you take another one, another one, another one. Ultimately it's kind of it probably has a little um impact on your psych. Indeed. And but the interesting, I think the there's a little parallel between uh Bulgary and uh you're talking about Hermes before, where Bulgaria watches, I remember in the 80s, 90s and so forth, was really kind of an accessory watch. It were like uh there were many kind of uh uh rather cheap models and so forth. There was a way of entering the the you know what? I'm saying completely bullshit right now because I'm thinking of Gucci. I was thinking completely off.

SPEAKER_02 2:35:20

So never never mind. It's we're almost three hours into our discussion.

SPEAKER_00 2:35:27

Okay, so next topic. Uh but we're reaching uh the the the end. Uh almost, I hope. Uh and let's talk about one brand that is still this is also a big player and which has developed significantly its business over the last five years, talking obviously about Brightling. Uh and what can be said about Brightling, because I mean we hear things, we hear things, let's put it that way, regarding the regarding the brand. I mean, it has had a phenomenal uh growth, uh explained through I mean multiple for multiple reasons, uh huge retail network that uh expanded with their own type of boutiques and so forth. I'm talking about like 300 points of sale, bright link points of sale, not necessarily their own, but nonetheless throughout the planet. Uh that must have costed a fortune to uh to to to implement. Uh obviously help push. I mean, you have to fill those stores uh with uh with bottles and so forth, which explains probably some of the uh of the growth. So, where do they stand now?

SPEAKER_02 2:36:35

They have uh lost the growth momentum now for uh for the second year in uh in a row. Uh they're flattish, they were slightly minus, and we estimated them at a minus uh three. Um they are still doing which is not bad. No, which is not bad. And uh they they have you know they have they had that very strong uh growth uh period where they would uh have some organic growth, meaning from from their own uh uh products, uh growth of sales, but also a good part of it was capturing uh sales and margins from the middleman, distributors, uh commercial agents, etc. And that of course pushed a lot and in such a spectacular way from around the 300 million when they took over to the uh uh 800 something where they are today, and around uh 830 million turnover, it's quite remarkable. They're still up there. Don't forget, some people are already telling me, yeah, you know, it's done with Brightling. I don't think so, they still have a lot of potential. It it's the the work done at the beginning for the rebranding, for the rebuilding of the pillars. Uh always talk about brand territory, which was mainly about expanding from only one, which was aviation, uh, going to uh uh water aviation and whatever. You know, they they built up that in a very academic manner, so as to say, very academic exercise of marketing, rebuilding up uh their uh whole um uh retail operations, etc. etc. But as of today they are a little bit you know stuck and they have strong competitors. Uh, to name them uh Tudor is a strong competitor, especially in the US, where Brightling is has been strong since ever. Uh, but uh Tudor is catching up very fast. Uh Omega, Taghoyer, uh all very strong competitors, and last but not least, a brand called Rolex, because there are they have still uh some brands, uh some products which are on the same price ranges. And um yes, it will need a substantial push. There was a recent article in the Financial Times which was quite critical about how well things go, because uh, as we both know, the owners are two private equity funds, CVC and Partners Group, and uh private equity funds by definition are not here for eternity. Yes, that's for certain.

SPEAKER_00 2:39:37

But at the same time, when CVC came along, it was almost 10 years ago. I thought they would be there for three to five years, and they're still there.

SPEAKER_02 2:39:44

Yes, but the CVC uh earned a lot of money. Yeah, they made a lot. They made substantial amounts of money, indecent amounts of money. They they are happy, they are still in yeah.

SPEAKER_00 2:39:58

The new one may be a bit less.

SPEAKER_02 2:40:00

The partners group it's more difficult, and as you have probably read in the article, uh CVC cut down uh the valuation of Brightling of its Bright Link share by 30%, uh uh partners group and CVC by 50%. Yeah, so that's quite a not so positive message of how you think that things have gone.

SPEAKER_00 2:40:26

I've never understood from the start the valuation at 4.2 billion that was made a few years back. That does uh without being in the in the books of the of the company, anything like that, that seemed from the start quite high.

SPEAKER_02 2:40:37

The financial world and especially private equity, it's about being greedy and thinking that it can always be more and more and more. I'm not saying private equity is bad per se. They help a lot of brands and companies to grow and to change gears when you need money and you are not big enough to go uh to the stock market, uh, private equity steps in and it's a little bit the intermediate step uh between being uh private and independent to being private but linked to a private equity fund or company, and then the next step would be IPO or not. Um so at Brightling, it's the the question will be what can re-trigger that growth momentum. They have a very outspoken CEO, to say the least. He's very he's very I appreciate Mr. Kern a lot because he's very clear about his uh his blueprint or his roadmap uh about what he's going to do with that brand, and he has delivered a lot of things. Now, you know, he's a little bit in a difficult situation where you came with a lot of announcement. It's like the boxer on the ring, you know, who trash talks his adversary, and one day you are on the ring and you have the guy, Yoom, you have trash talk, and you discover that he's a little bit higher than you and stronger. I love boxing, by the way. You have to start figuring out because you're a little bit smaller, a little bit less maybe athletic than your opponent, and you have to start figuring out tactics. It's not that you're not going to win the current uh heavyweight, undisputed Mr. Uzik. Uh he's an extraordinary boxer, he's a lot smaller than most of his opponents, but he boxes so much better. So to take that image over to Brightling, Brightling can achieve that. Uh uh, and Mr. Kern is certainly one of the best CEOs in this uh industry. Um the big question mark now is the relaunch of the two sister brands. Mr. Kern was, but I was saying this a long time before he started saying it, that the industry had way too many brands. Okay. I was always saying that long term we would have maybe 15 to 20 uh relevant brands at a certain level. We are not talking artisan watchmakers who live their life, but the the institutional brands. And uh Mr. Kern always said then since a few years ago that in the long term the the watch industry would be made of uh by about 10 brands, and of course, Brightling would be out, as we obviously understood, would be one of the ten, and uh that there were too many brands, etc. And all of a sudden it tells us that he's adding two more to the estimated 450 Swiss made uh watch brands. So you look at that and you say, well, one brand and one brand which needs another kick to go up to the next stage of growth, and then you come up with two other projects. That that's that's my questioning, Galais below, Galais uh two and a half thousand to four thousand, a history with chronographs, that's a common threat with uh with uh Brightling and Universal Genève, and Universal Genève, which should be uh above, uh substantially above uh Brightling. Uh and then of course the goal is to regain momentum for the house of brands as they call it. So it's to avoid saying that they are a group, you know, it's a nicer term, it's a nicer uh terminology to say that you are a house of brands, okay, fair enough. And the three are very fine brands. I my lecture of that strategy is that it's bringing a lot of complexity, um, and that you need to focus.

SPEAKER_00 2:45:18

Uh-huh. Well, I mean, if they're using the same industrial capabilities throughout the three brands, then it's kind of difficult obviously to position the Universal Genève really way higher if it's more or less the same.

SPEAKER_02 2:45:31

I mean, it's uh No, it's not uh the goal, it's that they will have uh dedicated uh calibers and that they differentiate.

SPEAKER_00 2:45:39

Well, they probably think they need to, but not Universal Genève. They're never gonna do tens of thousands of watches, I think.

SPEAKER_02 2:45:45

You know, it's uh No, that's that's that's the tricky point. That's the good point that you're bringing up. It's that that somewhere uh economics kick in, and that where you are faced with industrial challenges, you need to figure out uh uh where you need to go in terms of uh economies of scale, but still you have to differentiate from each other, etc. etc. You know it's Sword Group 1983, SMH, it was uh it was called, they decided to crush all dedicated manufacturers, the longin manufacturer went away, the uh dedicated omega uh manufacturer went away with a rich history, people were crying, seeing the machines being thrown out uh of the of the factories. And uh it was probably a good decision to save the whole group. Uh Mr. Hayek Sr. and Mr. Ernst Tomke, uh the um the head of ETA took the good decisions to concentrate everything, and then 20 or 25 years later, you restart building up the omega manufacture, and probably one day there will be, and then you have Broguay, which uh and Blancpin, Blancpin, the very fine manufacture, uh etc. So you you restart, in fact, the reverse way. The remains to be seen, you're always um smarter bossed than uh than before, but that's we'll see.

SPEAKER_00 2:47:29

So Brightling have, I mean, they've done some important sponsorship investments uh recently. Uh I mean you were talking about okay, the price of, you know, for I mean the price of activation of such sponsorship is quite significant. I mean, they've done one with the NFL. The entire NFL is probably one of the most expensive franchises that you can associate with. Uh okay, it's a significant one. I mean, we have tens of millions of people looking at this, but uh in America, uh, I don't know to if it has a worldwide appeal, not so sure about that.

SPEAKER_02 2:48:05

But I mean, American market is already uh remind me American football is the guys with the helmets pretending to play rugby. But those are the ones, those are the ones for my my American man.

SPEAKER_00 2:48:17

I don't want to be a punched. Throw the ball throw the ball forward. I mean, it's not like what's going on. It's not the game, but anyhow, they've so they've done a massive uh deal with uh the NFL, with all the teams basically, uh, and then we'll have to activate all this. So that's gonna be significant costs. They've done a new deal now with uh Aston Martin, Formula One, coming back to what we were mentioning before, uh immediately coming out with uh exclusive limited edition of uh 1,959 pieces, if I'm not mistaken. But positioned at I can't remember if it was 10, 12 or 13,000 Swiss francs. I mean, you're in the roller category uh uh uh there and things like that. It's becoming a little bit complicated, I would imagine, you know. Uh so I mean I understand that they need to look after the the growth. Uh I recall well in in your report you're saying that I mean in they're not very exposed to China because it's a very small market for them. So it doesn't it could represent an opportunity, also uh, or at least I mean it doesn't have an impact on their uh current numbers. Um but yeah the the the ultimate goal you think of all this uh coming back to the owners is uh to do an IPO uh anytime, uh or what would be the the outcome there, just to make things as sexy as possible until that stage?

SPEAKER_02 2:49:42

Probably uh if I were to guess, uh probably the the goal is to go public, yes, definitely. When I don't know, they don't know either. Uh everything has to be aligned in terms of uh what they produce as uh figures, top and bottom line, but bottom line being even more important, and uh and the stock markets have to be prepared for that.

SPEAKER_00 2:50:10

Yeah, so it could also explain a little bit the devaluation uh process that they went through just to if they go in the under the IPO uh route, so it's I mean it's a bit more in phase with uh the maybe the reality of the business and uh the depending on how successful it will be in the next few years, then maybe it's it'll be more in line. So uh talking about the the the rest of the industry in a certain way, uh, and uh talking about let's focus a bit more on the independence. We know that it represents a very kind of a small uh portion of the of the big uh watchmaking cake. Nonetheless, within your top 50 brands, you do have a few uh players that are, I mean, their numbers are not so uh I mean they're they're pretty good. I mean, they're they're pretty impressive. Uh talking obviously the FPJ and the MBNF and so forth. Uh tell us a little bit about these guys.

SPEAKER_02 2:51:06

Yeah, that's quite uh impressive. Moser, yeah. H Moser, yeah, yeah, around the 36, 37 uh rank. Uh it's quite impressive what those brands have achieved in the last few years. They managed to scale their business uh without losing uh their legacy, their DNA, not compromising what they stand for in terms of uh of values. It remains to be seen of how far or how high you can go up with a brand like Moser. Is Moser a brand capable of going to three, four hundred million sales? I don't know. I don't have the answer. I think it will take a lot of time and a lot of money reinvested in the in the brand. They do they do a very good job. Um, the only questioning again, you you you know, you start thinking is looking always at the same thing, but it is it it is important. The secondary market at H. Moser, it's not where it uh would need to be to reassure uh their clients and aspirational clients that they are here for the long term. There they they really need to address that issue. Francois-Paul Journal skyrocketing sorry just regarding H.

SPEAKER_00 2:52:25

Moser a bit, but at the same time, I mean they come up with the uh timepieces, uh sometimes you know whether it's a tourbillon or a minute repeat or anything like that, at a price point which is much less than it would be in another with a with a big name. True. So maybe even if the the second market is a little bit down, at least the your your entry into that uh uh world of I mean very qualitative watchmaking is more of a fair deal, I would say.

SPEAKER_02 2:52:56

It is, and and it's one of the strengths of this brand, besides building up that community. Edouard Melan, the CEO, uh, and his brother Bertrand, who is in charge of the of sales, they do a very good job. Uh I'm sometimes getting invited again. Next disclaimer, I'm not working for Moser. Uh they are just friends, not just. Uh Edouard has been a long-term and loyal friend since many, many, many years. Um, they do a very good job at entertaining that community. And when you are invited at a at a Moser event, you you feel that it's it's easygoing, you know, it's not you know like that enforced coolness. Um and I think that's that's one of the strengths, the accessibility in terms of price, tourbillon at a at a very uh good price. But nevertheless, you know, if you buy at a certain price, even though you're saying that it's a good uh uh value for money, yes, certainly. But even though I pay 50,000, I would like to think that I'm not losing 30 or 40 percent of the value, not saying that it's happening on all the Moser watches and to that extent, but some of the Moser watches that, but you know, they are they are growing, they are uh they are near the uh 4,000 watches a year, so it's a it's a change of paradigm. They are self-financed, they are profitable, that's the most important thing. They are growing, they still have a lot of potential. I'm I'm very I I trust that they are taking the good decisions this year. Uh I was promised that I would see extraordinary new products. Uh the contrary would have surprised me, but uh uh we'll see, uh, probably at Watches and Wonders. They have already started.

SPEAKER_00 2:54:56

Because they they they they do have this capacity of coming very often with new products. I mean, it's a they don't just you know stay there, okay. Oh, we've had one, oh, this is one hit wonder whatsoever. I mean, they they they really there's a continuous uh development phase with these guys. And I think the fact that I mean their team is rather young. I mean, it's uh most of the management team and so forth, and I think that maybe they it they have a different type of energy than a good drive. They have a good drive, they need to uh they became a little bit more quiet to compared to some of their communication, you know, it was but they did that at the right time, it helped them stand out and they were smart, they didn't have big budgets and things like that, and they got, I mean, that's right under the spotlight. Sometimes people appreciate, not appreciate it, but at least they gave them exposure, and now they can be a little bit more mature, maybe. Maybe. Maybe.

SPEAKER_02 2:55:54

Uh yeah, that's uh that's the thing. But of course, you know, you can be you can. Pushing and the revolutionary uh uh uh young guy of uh of the bunch, and then all of a sudden people will tell you, you know, now you're uh a grown-up, so you cool down and you you stop you know uh running around and and uh and uh making those funny videos with Edouard. But it's a they they the uh the people who advised them and uh and uh the the management team they were very clever at repositioning the brand uh where no one would have expected them with a fresh young energy, and that's one of the very uh strong points about Moser.

SPEAKER_00 2:56:41

Yeah, when when they took over, uh I mean there had been already uh quite a lot of development made on the technical side, but I mean people associated H. Moser as being more, I mean, a boring brand, uh, if I say it very bluntly. I mean, this is a bit harsh to say this like that, but in contrast to what they've achieved, meaning taking it from there and making it indeed something cool. Uh and this is quite remarkable. Without, I mean, the products are not exactly the same. I mean, they've evolved a little bit, but they're not radically different. Uh, but nonetheless, they managed to bring in all this coolness around the brand, the products, the way indeed they communicate and so forth. I think so. It's quite uh, yeah, it's uh it's also you were talking before about those brands that should be, you know, that are kind of benchmark that can be uh taught in uh business schools and things like that. I think the the the H. Moser case is an interesting uh business case, too. Just my little thing.

SPEAKER_02 2:57:42

Indeed. And uh I'm preparing a book about branding, okay, and Moser will be one of the chapters of that book. Okay, well, they just sing it with a young guy called Romain Millet, who is excellent, a lot more smarter than I am. That's not difficult, that's not setting the bar very high. Uh, he's very smart, a lot younger, and we we we are currently writing that book. It takes a lot of time forward, all right. Always new ideas, and yes, indeed, uh Moser is a very interesting uh case study. Uh-huh.

SPEAKER_00 2:58:21

Yeah. And then you were about to talk about another.

SPEAKER_02 2:58:25

I mean, he's the kind of the the godfather of uh independent watchmakers, uh Mr. Francois Paul Jour. Yes. Uh interesting. Uh it's another interesting case study because two decades, it was loss making. I don't know. I don't don't get me wrong, maybe they were making a little bit of money, but they had very, very loyal shareholders uh sticking to the project, never putting any pressure on uh Mr. June to change anything. It's kind of difficult. To put pressure on I mean you can try. Yeah, it would be quite a challenge. Yeah, yeah, yeah. It would be quite a challenge. No, but June is just it's one of my favorite uh uh uh independence because the the watches are so beautiful, the the design is so unique, the whole uh branding is totally coherent, the narrative is very well done since the beginning. Uh and finally, now since a few years, they are overshooting the independent uh market uh with with uh with new products, they are concentrating on limited edition with the boutiques, which are even more extraordinary uh products. Um, overall it's just a success story. Uh it remains to be seen what the plans are in the long term. Uh, I wish he lives until 120, uh Mr. Joan. I wish you do. But uh on average it doesn't go that long, unfortunately or fortunately. Um, and then it remains to be seen what the next chapter will be, because when you're an eponymous uh brand and uh the name giving uh person is not anymore around, then you need you know to adapt a little bit the national.

SPEAKER_00 3:00:33

But at the same time, I think the the the products they have such identity, absolutely uh they they they and the brand exists exactly.

SPEAKER_02 3:00:41

So since the beginning, they built up a brand. Like at uh another kudos to uh the betune. Another uh brand is not they are not in the top 50. I wish they managed to to join the ranks uh anytime sooner or later. But uh Dubitune also that that feeling that you have not only uh genius watchmaker, but you have a a brand that's very important with with the narrative, with with uh the values, etc. So um, yeah, that's journeys.

SPEAKER_00 3:01:18

I think the with the with the between no no don't uh uh with the between if you see watches from 15-20 years ago, it was a little bit more, you know, uh whereas indeed from since five, ten years or five five years, let's say I mean it there's there is indeed some coherence, a crazy one, an unusual one, and so forth, but there's uh whereas with June, I think it was always very very very stretched. Very aligned. Yeah, it was like uh there's there's not much deviation uh from his initial vision. No, uh that's where the guy I think he's yeah, he's quite a general.

SPEAKER_02 3:01:51

Yes, Mr. June has in tremendous horological culture, knowledge about uh about the history of watches, and you see it and you feel it in his uh products, and he is unlike some other independents, he's open to what watchmaking is today with the elegant. Imagine the success of this. It's crazy. Crazy. And all those people telling me it's crazy when he launched it, it's crazy. Drewing this, this will with this will ruin his reputation and this and that and that. But you know, at the end I look today, the prices on the secondary market are it's like skyrocketing, to say the least, because uh they're also there are also people looking after that so that the prices go up. But and and the sales is just, you know, I have sometimes people of outside the watch industry asking me, Oliver, why can't I get my hands on this and that? François-Paul Joan watch. I say, well, because there are so few worldwide, and he has such a strong community of buyers. I mean, there are people who dislike the person, uh, but the others they just love him.

SPEAKER_00 3:03:18

They they it's well, he could have easily increased his production volumes, not an issue whatsoever, but nonetheless, I mean, keeping it.

SPEAKER_02 3:03:30

Yeah, yeah, more or less. He does quite a few uh elegants, yeah, that but uh the on the mechanical part he's quite uh stable, and uh yeah, so it's totally you see where the journey goes, that's why the the watch collectors buy into this journey, and um yeah, it's one of the very few success stories uh since uh the rebirth of serious mechanical watchmaking. We could name uh Frank Muller, uh we can name uh Richard Mill. Yeah, that's interesting.

SPEAKER_00 3:04:06

In your in your uh uh report, I mean Frank Muller is uh declining. Declining, but I mean still there. I mean the volumes are still quite uh in the the turnover, at least. I mean, it's quite uh impressive. In the top 20, if I recall.

SPEAKER_02 3:04:22

Yeah, it's uh it's uh always a surprise for people uh to their uh 22. Uh it's always a surprise for people to they ask me, but how how is it possible that Frank Muller is still at that level of of uh sales? And uh there are many reasons to it, and and the the the current, let's say, little bit the weakness is that uh on the branding side they could do a lot more, they could do a lot more. They do a lot of things which are a little bit out of fashion to say the least. I don't think they like to spend that's one thing, probably, but on the other side, when you visit the manufacturer, yeah, it's impressive, and here really I want to make a statement again. The disclaimer, no, I'm not making disclaimer. I was invited. Uh I I had visited Frank Miller Watchland about 20 years ago. I was re-invited, I think it was last year, and I visited the whole manufacturer. It's just amazing, amazing. There are no other words what those people produce in Geneva on their in their own premises, uh, in-house. I visited on another day, I visited the dial manufacture in the Jura, uh Lost in the middle of nowhere, Nebraska. Very nice place, very passionate people making only dials. I visited their atelier where they are making their own leather straps and rubber straps, etc. Extraordinary knowledge. The product deserves a lot of respect. Of course, there are all those stories, you know. One, I don't want to uh mix that uh with uh with the actual situation. No, but it's an and creativity. The creativity on the product at Frank Muller, incredible, too much, too much. When you go at uh at the annual uh product launches, when you're at the end at the end of the thing, is you you're like, wow, that okay, this was you know, there are too many, too many, too many colors, too many models, too many, too many sizes, etc. They should focus a lot more. Again, I'm giving advice and I'm not uh haven't achieved that extraordinary success story that they have achieved, uh, Mr. Sir Makes and his partner, uh Frank Muller, not my family. Um but they should focus and they should put a lawm a lot more emphasis on their uh on their branding uh in the in the large sense of the of the word, in the in their narrative, and you know, going a little bit uh more modern, more 21st century than 20th century.

SPEAKER_00 3:07:22

I've seen they they've done, uh contrary if it was last year, a couple of years ago, a bit more some movies that were a little bit more uh edgy and wow, a little revolution there. It's not okay.

SPEAKER_02 3:07:35

Once in enough, once every 10 years. I think I I if I were them, I would also advise them, you know, to tell that story of the of the of that uh entrepreneur which uh Vertan Sermaques is, but he doesn't like to talk about himself. And uh but he has kids now, that new generation. Hopefully, uh Sassoon, his brother, sister, uh they they they should bring in a new, a fresh energy, and hopefully, but still they are still there, they are still selling. People always ask me where do they sell their watches? Well, take a plane fly to Asia, and you will see the power, the strength of Frank Muller, the brand, it's just incredible. You have mono-brand boutiques uh, for instance, run by their uh partner in Asia Sincere, which are just amazing. You know, it gives you a totally different uh brand perception that than the one we have here.

SPEAKER_00 3:08:40

Yeah, for sure, for sure. So, in your report, I mean you are going through 50 brands. Obviously, you must have done some research a bit more. Many more many more of that. Uh to um finish this part of the conversation because we still have one chapter, uh, is regarding those top 50. Uh there are special brands that you would like to do uh some some kind of special mention. I was thinking, for instance, of I mean Jacob and Co. is still going pretty strong. They're very and they were very proud about it, they uh they they commented it, they did this big PR thing like that. And uh you see that it it meant a lot for them.

SPEAKER_02 3:09:17

At least I have a new good friend. Hello, Mr. Jacob, thank you. Thank you, and kudos to you and your team.

SPEAKER_00 3:09:27

And uh the other one is uh is interesting, I think, is uh Christopher Ward. Yeah. Uh that was making it in the top 50 and things like that, because I remember when they were they launched this uh I don't know, 10-15 years ago. They put it a bit more emphasis on it, I would say. Uh and they have also an interesting model because they're they're only selling direct uh with a price point that is reasonable. Yes. Uh I remember at the time, I mean some watches were starting like I think 1500 or Swiss round, something like that.

SPEAKER_02 3:10:02

Yeah, even below.

SPEAKER_00 3:10:04

Even below this. Okay. Tell us a little bit about them.

SPEAKER_02 3:10:07

Yeah, um, Christopher Ward, yes, it came quite as a surprise to some people uh that they joined uh the the top 50, but they did a huge uh increase of their sales, uh which by the way, as a uh UK company, it's a Swiss-made brand, but it's a UK company, they have to publish their numbers, and so uh anyone can look up the numbers. So uh at least there is uh no opaque uh real plus whatever percentage, but yes, what's the amount? We can't tell you. No, uh, there it's totally clear and transparent. Um the sales model of uh 100% D2C is very interesting, very good, and it's telling a very compelling uh truth about our business is that the get-togethers, the stupid, simple get-togethers where you have uh passionate people like you and me sitting around the table showing each other the watches, etc., that still works despite uh digital, despite uh uh the metaverse which uh came and went out as quickly as it came. Um that's very interesting. And and uh Christopher Ward uh is taking is putting a lot of energy, the people in the team, to travel around and talk to the people and and explaining why uh and this and that and that. That's very important. That's that's what makes it unique because he could buy for the same price a Tissot or uh or a Frédéric Constant uh to take uh some examples. And no, they buy Christopher Ward because they met a guy who told them the story and why they did this and that product, etc. Kudos to them, it's excellent, excellent product, excellent product, very innovative, very at accessible prices, interesting products. The weak point for me in this, that will be another one, uh another chapter, the because it's a success story. Um the weak point is the narrative. When you go on their website, etc. It's for me, it's it's the one point where they need to improve, they need to put up some muscle. Uh, it's not coming over as a very convincing, that's my perception. Um, but apart from that, it's excellent, and it's the proof that with Frederick Constant, Raymond Veil, uh Christopher Ward, etc., all of them in our top 50, that you can achieve to some extent quite a uh sustainable success uh in a price range where I would tell you, don't even dare to try to launch a micro brand. And they did, and they are successful. So there is a market out there. There are people buying watches at 1,000, 1500, 2000, or whatever. There are people out there. You have to convince them with a fresh uh uh and compelling narrative about uh your micro brand, and of course, your products have to be to bring something new to the table.

SPEAKER_00 3:13:41

Of course, of course, of course.

SPEAKER_02 3:13:42

Yeah, that that is always the difficulty of those micro brands, very often, is that they start, and we could talk about uh my friend uh Thomas Bayot, who has uh also uh uh success. Uh he's now rolling out and that, and I'm coming to that point. At the beginning, they all want to do 100% D2C, and they all make their price calculation based on that because you don't have to spend margin, you just just spend on your marketing activities, but no margin for the middleman. So you can be priced below your uh direct competitor from an institutional brand. The problem starts when you have uh saturated your market with direct clients, and then you start looking for the next ones. And the next ones uh you need uh, you know, you can't pick up everyone because you can't be that same week in Tokyo and Los Angeles, and then it starts to become expensive. The next step is tock tok tock, Mr. Retailer. You just lost uh ABC uh institutional brands, I'm a replacement for them, DAC team, bam, boom, but then you have to give him a margin, huh? That's uh obvious. And then the problem starts because then you have to recalculate if you still earn enough money to give him that margin, to continue your other marketing activities. So that's the tricky point, and that's where Christopher Ward is so interesting because they kept it to the 100% D2C. They have the whole margin, but they need to invest in the uh direct uh to consumer approach, which implies that you are reactive, but with artificial intelligence, uh today you have so many tools uh uh at hand uh where you you know you can interact with your clients to a certain and then they want to talk to you.

SPEAKER_00 3:15:49

Oh interesting, very interesting.

SPEAKER_02 3:15:51

Okay, final chapter.

SPEAKER_00 3:15:52

Yes, okay. Um because we've been talking about Swiss brands, mostly okay. Uh but there are other industries out there, and for the first time in your report, you acknowledge that well, there could be some kind of potential threat in a certain way. Uh tell us a little bit uh about that, and we'll start with the obvious because I mean we're with the Japanese uh watchmaking industry. Yeah, what does it represent?

SPEAKER_02 3:16:21

It's um yeah, first of all, I shall start with this. Uh this report is done for financial investors uh who want to invest in equity of listed companies for obvious reasons, and uh we are focused on uh Swiss made or Swiss-owned uh brands and groups. That's the first uh explanation why uh Grant Psycho is being mentioned for the first time. It's not in the ranking, it's estimates that we are uh making. Grant Psycho is a serious player, um, and and the very interesting point is that their history as a global brand is very, very recent, in fact. It was um launched in the 60s as a as the high-end brand of uh Psycho, obviously. They have another brand called Credo, but that's another story about being coherent in marketing, which in this case is uh quite questionable. Uh but anyways, so 1960s, tac tac-tac, they launch uh that brand. Uh they consider that it's only for the Japanese market, and in uh 2010 they go to the US and they start opening up on the on an international level, and they start understanding that you can't do what you do in Japan just one to one and do it in the US or whatever. Anywhere else in the world. So they are successful, but not that much. And then they need to adapt in the way they present products, the way the narrative is done. But the very interesting part about Grand Psycho, besides the products, which are very, very interesting in many ways with high frequency, what they call the high beat, etc. The interesting part is that the brand territory is very unique. And then finally, COVID, but they decide to come to Europe 2020. They open up a uh flagship store, Paris. That was a very, very strong statement. Place Vendôme, the place to be in Paris. And they have a flagship store also in New York, and they have London, Tokyo, Ginza, in Kyoto. I think yes, Kyoto is. I think it's Kyoto. So they have a few flagship stores around the world, but they come to Europe only in 2020. And again, that learning curve that a European retailer doesn't necessarily work the same way the Japanese colleague works. So you need to readapt. They are very successful, very, very. Are there a threat today? Yes and no. They do uh consolidated worldwide, we estimated uh about 50,000 watches and about 210 million Swiss. It's quite something. There would be around, I estimated that they would be around 27 in our ranking.

SPEAKER_00 3:20:13

Quartz, mechanical, everything included.

SPEAKER_02 3:20:16

Yeah.

SPEAKER_00 3:20:16

Okay.

SPEAKER_02 3:20:17

Grand cycle. Okay. Um so it's uh it's an interesting product. Uh very bold uh uh design language for some products, very bold. From for others, it to my taste, it could be a little bit more modern and refreshing, but other products are just beautiful, both the movement architecture, and they were very smart because they they uh learned a lot what uh the the European and American collectors would are cherishing, uh the finishing of the movement with uh with um uh polishing, engaging angles, etc. They had Philippe Dufour, the god of watchmaking. Uh that's more of an irony than a real, but still Philippe Dufour is the one who's in Japan he's perceived as a living legend. He is a living legend. He is a living legend. He is the one who who uh brought back uh the tradition of craftsmanship to to uh to do those magnificent uh finishing on movements that now every young young Turk is uh is uh promoting. Rajep Rajepi, uh Simon Brett, uh name them all over the place. Um Grand Psycho, interesting brand, very uh innovative in terms of uh movements. Um I spoke about the the high beat. Uh um they managed also to always continue the the auto quartz watches, which we in Switzerland gave up very soon. Uh the Swatch Group uh had that technology, which they tried to launch at uh Omega and Tissot. We were not successful to say the least, at least for Omega. Um, because it's not that the product was not good, we didn't manage to explain to the people that it was the best of both worlds, and that's what Grand Psycho does so well is to tell people in fact you have the best of both worlds. So you have the mechanical part, and then you have uh the quartz part, and that's the best you you you can have. Um, they won the uh GPHG uh a few years ago with uh that uh wonderful uh uh now I forgot the name uh tourbillon with a force constant. I had uh the I was very happy because I was sitting at the dinner then with the the watchmaker who had uh made that the movement was very interesting. It was a talking piece, and very few people.

SPEAKER_00 3:23:17

They only did 20 or uh 10 and 10. I think so. Yeah, it took them 10 years to develop. Very few. Very interesting piece, that's for sure.

SPEAKER_02 3:23:27

And uh yeah, the competitors are Omega, uh Brightling again, Rolex, uh, etc. And they it seems that in America and in Europe they are well perceived because they are seen as a uh trustworthy alternative to the to the main players that they just uh named.

SPEAKER_00 3:23:51

But they're I mean their watches are not particularly cheap. No, they are not. No, no, they um and when you're talking about some of these watches with those very artistic uh dials and things like that, some of them they go for I mean a crazy amount of money, I think. You know, I just really I was really uh impressed. But overall, as a brand, are they gaining momentum? Uh are they on a positive dynamic? Absolutely, yes, yeah.

SPEAKER_02 3:24:17

Yeah, they're also gaining momentum because, first of all, they do a very good job, they are on a very, very unique brand territory. They are not ashamed to say we're proud because we are Japanese, which is good. Uh they they stand apart from the rest of the Swiss watch industry. That's very good, but they are very they're seen and accepted from the Swiss watch industry in a very positive way. That's very surprising. They're at Watches and Wonders. Uh they are yeah, they they participated in the GPHG multiple times, yeah. Yeah, and uh no, that's good. They they are part of the watch uh family, that's good. Um and uh yes, they have a very positive momentum, especially currently in uh in the US. But there any watch CEO is telling you that he's growing double digit, etc. etc. It's just that the end of the year when you take the numbers and you add up, you say okay, double digit, but what about the rest of the world? That's another no, we don't restart the discussion.

SPEAKER_00 3:25:28

But uh double digits after the comma.

SPEAKER_02 3:25:32

Yes. No, but the most most of the uh the people making a good work in the US currently they are very, very successful. It remains to be seen if that over uh positive momentum in the US is here to stay. You know, at some point, and and we have already seen the most recent export figures, even though you have to be very careful because there was this build-up of inventory uh due uh to those infamous punitive uh uh tariffs by Mr. Trump and his administration. So the built-up of inventory, and then you have to refill, but much later, etc. etc. So that's a distortion of what you can read uh from the from the statistic. And yes, probably the US will calm down uh some point.

SPEAKER_00 3:26:30

But I think with the US, also something that we didn't mention, but I think is is interesting is that uh as a whole, okay, it's the biggest market for Swiss exports right now, but at the same time, I mean the US consumer pool is not a very well educated one. I mean, they know if you ask people about uh watches, most of them would say Rolex, but they won't be able to tell you other types of brands and things like that. Then you have the savvy uh people, the guys that are uh uh collectors, not talking the ones that are uh buying into independence, because independents are selling a lot to American collectors. Absolutely. Um but for the the the other kind of more mainstream but institutional brands that you that you mentioned, they still lack quite a lot of uh of uh notoriety uh uh over there. I think. I mean it's uh Rolex is really, I mean, stay is has taken everything basically. So I think that's it's it still represents opportunities for uh all these types of brands that we were just mentioning before. Uh if there's a bit more awareness that is made around these people and things like that, and that people say, Okay, well, watch my making doesn't resume itself to Rolex, basically.

SPEAKER_02 3:27:47

Uh yes, that needs time, that needs education, that needs uh in media to play the role as educator of uh of uh knowledge, and yes, Rolex is over-dominant. If there is one market where they over-dominate uh the game, it's certainly the US. I mean, it's more than 40% market share of the luxury business there. It's it's just unique in any luxury product category worldwide. It's uh okay, you could come up with the example of the Mont Blanc uh uh writing instruments, they're also very dominant, etc. But compared to Rolex, it's not quite comparable in terms of size. So, yes, Rolex is very, very dominant. It's it's I mean, anyone knows what Rolex is, uh uh and and the and the other brands, their um their challenge is to increase the brand awareness against the overdominant competitor. It's complicated, yeah, for sure. Brightling is very strong since ever. Uh but then then Omega is very successful in the US because they have invested massively the last 10 years to open up boutiques. They have a very successful e-commerce uh for the US dedicated to the US market, and uh they have increased their brand awareness tremendously. So it needs time, it's a huge market, you need to invest substantial amounts of uh of money. Um, so yes, Grand Psycho, to come back to Grand Psycho, they are very, very successful in the US, but also in Europe and uh and on their home market in Japan, anyways. And then the second example that we brought, and uh that's not uh by coincidence, it's uh our Chinese uh Indian friends, sorry. Uh our Indian friends from uh Titan and they have ambitions, they are very strong on their home turf, but now they want to go global. They have tried Titan, they have tried with a Swiss brand called Favreau. We know how it went, not very well to say the least. Sorry to be frank. Um, and uh that brand was taken over by other Indian people, which is the number one uh uh retailer in India, itos. Uh they they have a Swiss manager, Patrick Hoffman, and the Swiss team, and they they do they do a good job, it will take time. Uh but Titan on its side, they are they are uh they signaled that they have ambitions. Definitely, yeah. Absolutely. They are still if you have to compare Grand Seiko, is all almost an established player. Uh Titan is the new uh kid on the block.

SPEAKER_00 3:30:53

So I mean in Titan, they're they're saying that they were producing like 70,000 uh mechanical watches uh per year, but obviously not at the same price point than uh uh Grand Seiko. I mean uh you can't compare them at all. And in terms of quality, I mean it's obviously not the same product. Uh but uh those it's funny to put uh in perspective those 70,000 watches compared to I can't remember 13 million quartz watches that they produce per year. Okay, so it's a very very but it shows that I mean they they know how to handle big quantities, let's put it that way. And uh I believe yeah, they they they could uh they could expand uh in the near future, even though it's gonna take time, and even though they're fast learners. Uh, what about uh Chinese uh brands? Uh is that an an issue? Because we don't really hear about them. I mean, we hear about one that is has been uh quite out in the public bear, and so I'm talking about them that are being accepted this year at Watches and Wonder, if I'm not mistaken. Yes. Uh some people are a little bit shocked by that, yeah, including me.

SPEAKER_02 3:31:55

Yeah. Okay. Not by the fact that the Chinese brand is being accepted. I'm shocked by the fact that we refuse Swiss made watch brands and that we let in a Chinese watch brand. That is for me very hard to understand. I think it's a very negative uh signal. It's um not a smart way to federate the people, and uh they should be careful. They have a big competitor called the Dubai Watch Week. Have you ever heard of that? They are growing and they are federating the people together. Uh Watches and Wonders would be well inspired to take a little bit of that philosophy. Sorry, on the side.

SPEAKER_00 3:32:43

No, no, quickly, uh side note about the Dubai Watch Week. They actually, in their communication, said that today they're the biggest, they were the world's number one, the biggest world fair, watchmaking fair, because they had like 90 brands, something like that. Yeah, and whereas in Water Than Wonder, okay, now you have six six or something like that. So they're already you know see starting to uh tease a little bit on the fact that yeah, we're we're the biggest. It's good competition is going to be good. Competition is good, absolutely.

SPEAKER_02 3:33:10

But it's good. They have a good, okay. They have they have many, many uh positives for them. Um it's the nice weather. I mean, when you're in Dubai, you can just step out, smoke a cigar, it's nice, and then everybody is in a better move. It's it's very secure. Okay, I'm I'm uh about uh currently that uh horrible happenings uh due to the war. Uh but uh normally uh Dubai is a very, very safe place. Uh you can walk around with a one million dollar watch, no one is going to harm you. Um, yeah, that's that's very positive, and that helps them, and you are outside, etc. And it's easy to meet each other. Uh that's that's all the the positives about the Dubai Watch Week. Um, watches and wonders are still very, very important. Uh it's the happening and it must remain that, you know. It's uh yes, but they have to open up faster, they have to accept faster. The place is there. I mean, you know, when I hear people talking, yes, but you know, we limit because of uh uh logistical issues. If you have those, I used to work in supply chain for 12 years, you know where to find me. I'll help you to figure out how you can accommodate two or three times as many brands as you have today. Okay, so no arrogance them up. No, no, but there are many ways. There is enough space. So there's enough space. I mean it's I will always say Geneva has probably the best, worldwide, the best exhibition infrastructure. Punto Bas. You have a rail uh railway station, you have to walking distance, the airport is in walking distance. Um you have uh you have the highway just underneath, etc. You have it's a seven-minute uh train ride from the city center to the exhibition hall, and then you walk, that's good for your health. Uh you walk a little bit, five minutes, and then you're at the premises. It's just extraordinary, it's extraordinarily well uh uh organized. Uh watches and wonders very, very well organized. Maybe it should be a little bit smaller. Uh some booths don't need all that space, I think. And then we could accommodate a lot more people and open up, open up.

SPEAKER_00 3:35:52

They could, you know, we've been saying this for years and years and years.

SPEAKER_02 3:35:56

We need to come back to the to the whatever 1,000 brands at Basel World watch brands. Uh but but maybe I don't know, uh, 200 brands would be already better. That's uh that's the positive time to watch us next door.

SPEAKER_00 3:36:11

I mean, you have 200 brands exhibiting in Geneva at that point at that moment.

SPEAKER_02 3:36:16

That's why I'm coming up with that figure. There is space there, and then there would be everyone at the same place in the evening. If people want to have fun and party, they can go downtown. It's very near, it's a village. Uh, it is uh Geneva. It's all in uh almost in walking distance. So, yes, they need uh they need really to come up and and besides Dubai Watch Week, it's so very well thought through with the panels, interesting panels, the workshops, the the interactions between the people. Excellent, everything they do, kudos.

SPEAKER_00 3:36:54

Absolutely. So I think we'll talk more about the Chinese, the future of the Chinese watchmaking industry. I propose you in the next episode. I don't know when that will be, but I think that's a subject in itself. Before Christmas. Before Christmas for sure, yeah, yeah. So yeah, I think we've uh my klepsidra is empty since quite a long time ago. So I know that we've spent a few minutes, let's put it that way. Yeah, yeah, probably uh went for a world record right now. So congratulations, congratulations, exactly. And we just never stopped. But I guess we could continue. Uh that's the that's the sad part. That's a crazy sad part. Okay, so thank you very much for watching. Hope you well enjoyed this and maybe even learned a few things. And uh, we're always it's always a pleasure to I mean to share as much information as possible about something we are passionate about. So thank you and see you real soon. Bye.

SPEAKER_02 3:37:52

Viva Watchmaking, thank you for listening.