Watchmaking has entered a new era. In an ever more global economy, the industry now counts in billions. Gone are the picture-postcard images of watchmakers in farmhouses nestled deep in a Swiss valley, lit only by candle as they toil at their bench, crafting one or two timepieces a year. Today, watchmaking is lining up the zeros in a segment that continues to grow.
The only way is up
After exporting CHF 19.2 billion worth of timepieces last year, the branch must now prepare to enter a new dimension. Indeed, fifteen years from now it could well be looking at sales of CHF 40 billion. An estimate based not on some obscure algorithm but straight from the mouth of Jean-Claude Biver, chairman of Hublot. A two, three, four, even tenfold increase in sales: with close to 40 years in the business, this marketing wizard knows the branch inside out. When in 2004 he took the helm at Hublot, which is headquartered in Nyon, near Geneva, the brand was turning over just CHF 40 million. It now posts sales in excess of CHF 350 million, according to an internal memo from the Swiss broker Helvea. What’s to stop the segment as a whole from doubling its weight, carried along by the enthusiasm and passion that watches unleash among buyers? Of course this could be Jean-Claude Biver at his usual optimistic self, but even when viewed from a more prudent standpoint, watchmaking is poised to grow.
Over the past ten years, and despite two major economic recessions in 2002 and 2009, exports of Swiss watches have increased by an average 6% a year. Even on a more cautious basis of 5%, over a ten-year period we can project that these same exports will climb to CHF 30 billion. This implies producing for an additional CHF 10 billion, with the attendant increase in staff and spending on marketing, communication, distribution and the rest. Pie in the sky? Not so sure. A study by economists at Crédit Suisse anticipates a 50% increase in global wealth by 2016, which will in all probability benefit the Swiss watch sector.
The billionaires list grows longer
A consequence of this continued growth, which other segments of the economy can only envy, is watchmakers’ healthy bottom line. Some, and their number is growing, have achieved blockbuster status. The expression, usually reserved for the pharmaceutical industry, refers to brands or drugs that generate over a billion in annual revenue. Now this exclusive club is welcoming new members from the watch segment. After Rolex, Omega, Cartier and possibly Patek Philippe, TAG Heuer and Longines could be next to break the billion barrier. Not forgetting movement manufacturer ETA, part of Swatch Group, which analysts calculate has already chalked up its ten digits.
TAG Heuer first. Over recent weeks, CEO Jean-Christophe Babin has declared several times that the brand looks set to make a billion if not this year then in 2013 at the latest. “If growth continues at the same rate as in the first quarter of the current financial year, then we shall reach the one billion franc threshold. We have another nine months to go, but I’m optimistic as we can still tap into new sources of growth compared with other brands,” he commented at Baselworld. As for Longines, established in Saint-Imier 180 years ago, various sources concur that last year the brand posted revenue in the region of CHF 950 million. A hair’s breadth from the golden number. Bearing in mind that Swatch Group, which owns Longines, is forecasting a 5% to 10% increase in sales for 2012, the chances that it will make the grade are high.
The sector is programmed to grow
Other watchmakers also have a billion in their sights. Geneva’s Chopard currently generates sales of some CHF 750 million from its watch and jewellery businesses and could, in the longer term, aim high. At Baselworld, there was talk that the Swatch and Tissot brands were poised to enter this fourth dimension. Omega can already lay claim to twice the amount. This high-flying Swatch Group brand made revenue of CHF 2 billion last year.
If these positive predictions are confirmed, Swiss watchmaking could, within the next few years, count close to a dozen billionaire brands in its ranks. Jean-Claude Biver is convinced: “The sector is programmed to gather momentum. It’s inevitable, like market forces.”
