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“The market led us to fine watchmaking”
Point of View

“The market led us to fine watchmaking”

Friday, 19 July 2013
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Christophe Roulet
Editor-in-chief, HH Journal

“The desire to learn is the key to understanding.”

“Thirty years in journalism are a powerful stimulant for curiosity”.

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6 min read

Compagnie Financière Richemont, the world’s second-largest luxury group, is 25 years old this year. The perfect opportunity to look back at its meteoric growth in an interview with Joint Chief Executive Officer Richard Lepeu.

Over the past five years, the Richemont Group, established a quarter-century ago, has virtually doubled its sales and profit to EUR 10.1bn and EUR 2bn respectively for the 2012-2013 financial year.

How do you explain such phenomenal success?

Richard Lepeu, Joint CEO, Compagnie Financière Richemont: Answering the question means returning to the Group’s origins, namely Cartier. A watchmaker since 1853, it had a reputation as an inventor of forms which sourced its movements from third parties, in particular Jaeger-LeCoultre. This was a culture more taken with the shape of the package than what was inside. But in fine watchmaking as in fine jewellery, it comes down to expertise. An expertise we wanted to acquire as we quickly realised the potential for development in this domain. In other words, if we were to become a major figure in the measurement of time, we had to invest in what was inside, meaning have command of watch movements.

How difficult was this?

Let’s not forget that historically, the leading watch brands were assemblers, movement designers and general contractors. These Maisons operated horizontally, with a degree of integration that didn’t match today’s criteria. In this respect, one of the Group’s founding acts was the creation of the Salon International de la Haute Horlogerie in Geneva, in 1991. This initiative left a lot of people perplexed at the time but its objective was to position the Group in fine watchmaking. The acquisition in 2000 of Les Manufactures Horlogères, which encompassed IWC, Jaeger-LeCoultre and A. Lange & Söhne, should be seen in this context; that of acquiring an expertise and a legitimacy which would then be shared across all the brands, beginning with Cartier.

Which other factors came into play?

The second element concerns the evolution in the clientele in general. Richemont is well-established internationally, particularly in Asia, and has been for a long time. We were one of the first to realise how important it was, in a very high-end segment, to invest in export markets. This proved an excellent strategy considering the evolutions in demography and wealth creation, which of course have created inequalities but have significantly benefited the luxury industry. It’s the market that led us to fine watchmaking; an eager and fast-growing market.

So the business model you applied was specific to Richemont?

Johann Rupert outlined the framework for the Group in 2000, namely to allow the different Maisons a substantial degree of independence, right down to the manufacturing of their products. Only services such as legal and financial would be pooled. The various Richemont units were redistributed across the brands. At the same time we invested so they could develop greater independence and have their own production activity, including movements. It has to be said that at this stage, there was still a long way to go. For example, when Officine Panerai started up again it was equipping its watches with exteriors and movements from third parties. Now Panerai makes its own cases and fits them with Manufacture movements. Ditto for A. Lange & Söhne, Jaeger-LeCoultre, IWC, Vacheron Constantin and Roger Dubuis. The same is also true of Piaget, an established Manufacture which has worked on quality, especially in extra-thin and skeleton movements for which it is an undisputed leader. Cartier, meanwhile, is continuing its integration, in particular through its new production unit in Couvet which will take over manufacturing of the 1904 calibre, previously made at ValFleurier, and launch production of a new automatic calibre which was developed entirely in-house.

ValFleurier which is also expanding…

ValFleurier is Richemont’s first big investment outside the brands. The objective was to provide the brands with industrial facilities until they are ready to go it alone, Panerai and Cartier in particular, although as I mentioned earlier, our Maisons are gradually building up their own manufacturing capacity. Cartier, Vacheron Constantin and Panerai will each be opening new facilities in September. Piaget also has plans to expand as does IWC. This development frees up space at ValFleurier which will further integrate in parts manufacturing, regulating organs, and precision-turning.

What about the Richemont Campus in Meyrin?

How is that coming along? This site is destined to become the “Geneva hub” of fine watchmaking, bringing together Roger Dubuis, Van Cleef & Arpels, a Vacheron Constantin workshop, and Stern which makes dials and Poinçon de Genève movement parts. The emphasis will be on the métiers d’art and on training in watchmaking, leading to a recognised diploma. Hence why we envisage this project as a full-fledged campus, a single site combining workshops, a training and research centre, a library and a production line. The fact is that the future of Swiss watchmaking lies at the very high end of the market. And the very high end supposes that we train professionals and craftsmen to do what cannot be programmed into a machine. In this respect, I believe it is our duty to prepare for the future with initiatives such as this. If others in the fine watch segment wish to join us, they are welcome.

Doesn't high end necessarily mean small quantities?

An industry is only solid if it can achieve a certain volume of production, something Swatch Group knows full well and which also applies at our level. Particularly as fine watches are just a drop in the ocean of timepieces that are sold each year around the world.

A few words on Richemont's future?

We are number one in fine jewellery, a more significant market than fine watches as well as a highly fragmented one, where established names such as ourselves are set to win market share. This is precisely what happened in China when the country opened up. The same is true of fine watches, and China is just one of the emerging economies now to be reckoned with on the global luxury map. Not to mention the fact that in three decades’ time there will be nine billion of us on this planet, with built-in expansion for our industry. But let’s not jump the gun. Today we need to keep control of growth, consolidate our production resources, and further integrate our brands. Our latest acquisition of a gold refiner should also be seen as reflecting the importance we afford to our reputation, as we will be able to control the origin of the precious metals we use. To conclude, Richemont is ready to respond to questions of investment and beauty with finely crafted, complex products whose emotional and heirloom value brings promise for the future, as much for their owner as for the Maison that imagined them.

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