It is no secret that today’s prestige watchmaking business is a far cry from the charming cottage industry of yesteryear. After a decade of multimillion-dollar acquisitions and consolidation, luxury conglomerates now control an estimated 80 percent of the Swiss watch industry, including many of its oldest, most venerated brands. With the exception of purists and fanatics, most people are neither aware nor concerned that corporate entities such as Richemont and Swatch Group actually are behind many of the familiar brands identified on the dials. Still, the mergers and acquisitions of the past decade have sparked a renaissance among independent companies and artisans, who are defying the odds not only to survive but thrive.
Certainly Patek Philippe, Girard-Perregaux, Audemars Piguet, Chopard, and industry giant Rolex have only enhanced their prestige by remaining stalwartly independent. In recent years, several have rebuffed enticements to cash in and huddle under the security of corporate umbrellas. "It’s a personal attitude—I am mentally independent," says Dr. Luigi (Gino) Macaluso, president and CEO of Sowind Groupe S.A., whoalso serves as president and CEO of Sowind’s JeanRichard and Girard-Perregaux brands and Sowind Manufacture, which supplies movements to other companies. Macaluso, who declined what he calls an "astonishing offer" in 2000, says he could not abide with being folded into a huge corporation and relinquishing his control to a board of directors. "This is a family business," he says. "We want to control everything. We’re concentrated on long-term goals. Management decisions are not based on monthly performance reports."
Despite their prominent status, even the most successful independents now must concentrate equally on protecting their resources and making long-term capital investments to preserve their leadership positions in a marketplace dominated by behemoths. For smaller independents and individual artisans, however, the struggle takes on a David-versus-Goliath proportion. To carve out their niches in the market, these little guys must be highly resourceful in developing partnerships and strategies that allow them to continue to produce inspired timepieces incorporating the intangible element of soul.
Today, the conglomerates richemont and Swatch Group dominate luxury watchmaking, with Richemont owning Cartier, Vacheron Constantin, Jaeger-LeCoultre, and many others, and Swatch Group’s holdings including Blancpain, Breguet, and Glashütte Original. Swatch also owns the industry’s most important movement suppliers. A number of other smaller groups own a handful of brands each. In a capital-intensive industry, these groups hold advantages over smaller, independent companies because of their ability to invest in high-tech industrial facilities, human resources, and worldwide marketing and distribution.
Corporate ownership does not necessarily impugn the quality of a watch. In fact, many brands are experiencing unprecedented prosperity, now that they have access to the resources of a major holding corporation. Thanks to Richemont’s deep pockets, Piaget and Vacheron Constantin have created impressive new manufacturing facilities, while others such as Breguet, Jaeger-LeCoultre, and IWC are releasing some of their most innovative and well-conceived watches in years. But despite the advantages of economies of scale, some collectors are becoming disenchanted with the increasing industrialization of a craft they hold dear.
Chef and watch aficionado Nick Stellino is among the purists aware of who owns what in the Swiss watch industry. Stellino is increasingly put off by what he perceives as a level of sameness across some of the prestige brands held by giant holding companies. "Some of the large conglomerates are taking watch collectors for fools by putting the same movements into different brands and machine stamping the back," he claims. "Sometimes, the more the curtain is pulled back, the more out of love you fall."
And it is difficult to fall in love with a faceless corporation, which is why marketing gurus work so hard to maintain each brand’s original identity and heritage. In doing so, they are taking cues from Patek Philippe, which continues to exert a powerful hold on collectors’ affections. The persistence of the Stern family (owners of the brand since the 1930s) to remain true to traditional techniques—even when the approach seemed neither fashionable nor profitable—has set the standards by which the entire industry measures authenticity and quality.
Whether it is the Sterns, Chopard’s Scheufele family, the Audemars and Piguet families, or individuals such as F.P. Journe, independents great and small are associated with identifiable personalities, with whom collectors connect on an emotional level. "We have a personalized relationship with the market," says Girard-Perregaux’s Macaluso. "Behind the brand name, you find true human beings." Many companies fail to realize that collectors not only want information about the watches they buy, they also long to connect a human face with the product.
Such romantic yearnings hark back to the traditions of early watchmaking. Centuries ago, manufacturing was controlled by the independent artisan, who, by relying on the contributions from his most talented colleagues in various disciplines, was able to create the finest piece possible. These collaborations enhanced the quality of the products while also advancing the technical state of the art.
This intertwined manufacturing system remains a critical component of the watch industry and essential to the survival of the dwindling number of small independents who must rely on others to survive. "There has been what I call a ‘tissue horloger,’ an interwoven fabric of companies that depend on one another to make watches," explains Max Büsser, managing director at Harry Winston Rare Timepieces, an independently owned watch company. "In the 1960s, there were more than 1,600 independent companies. Today, there are fewer than 650."
Ever since the resurgence of mechanical watches in the 1980s, powerful luxury conglomerates, such as Richemont and LVMH, have been targeting watch companies. This trend accelerated dramatically in the 1990s, as the largest groups tried to integrate their holdings vertically and reduce their reliance on competitors. Movement makers, manufacture facilities, and watchmakers themselves have all become strategic assets and prime targets for acquisition. The consolidated environment has made it more difficult for the remaining independent companies to compete.
Human resources is just one area where small companies are hard-pressed to keep up with the big guys. Many independent companies must go to great lengths to retain qualified watchmakers, who became a rare commodity when mechanical watchmaking nearly died in the 1970s. "There are never enough qualified people in the watch industry," explains Karl-Friedrich Scheufele, CEO and co-owner of Chopard. "Some watchmaking schools still have only 18 people graduating a year."
Like many of the larger independent companies, Chopard has taken matters into its own hands. Its manufacture in Fleurier has reduced the company’s reliance on outside suppliers, while its in-house watchmaking school is augmenting the number of young watchmakers entering the company’s ranks. Chopard is also working with neighboring independent companies Bovet and Parmigiani to rekindle Fleurier’s vitality as a watchmaking center and attract valuable young watchmakers.
Such cooperation between independent companies has long been a common practice, but in today’s corporate climate, pooling intellectual resources and technology has become a competitive strategy. "We try to discuss areas of common interest with other companies like ours," says Olivier Audemars, board member and shareholder at Audemars Piguet. Macaluso of Girard-Perregaux is also exploring potential joint ventures in technology with colleagues.
"Maintaining relationships with suppliers, many of which are also filling huge orders for the groups, is a critical challenge," adds Audemars. In response, Audemars Piguet has invested in key suppliers, such as complication specialist Renaud & Papi, to maintain the flow of innovative products bearing the Audemars stamp.
Other small companies are joining forces to make more extensive investments that will protect their supply chains. F.P. Journe has teamed with fellow independents Harry Winston and DeWitt to establish a dial-making facility. Dial suppliers are notorious for variable delivery schedules, which can delay production, especially for smaller companies with lower-volume orders. Making their own has obvious benefits for the trio of companies.
The Excenter Chrono by Harry Winston, $24,000, is distinguished by a triple retrograde chronograph display.
Clearly, the most essential component of watchmaking is movement manufacturing. It has also become a topic of controversy. Swatch Group in particular has become a lightning rod because it owns ETA, Frederic Piguet, and Lemania, which collectively compose the largest block of movement suppliers to the entire industry. Such a concentration of power naturally draws criticism. Accusations of creating an unfair competitive environment were rampant when the group announced that as of 2006, ETA, the industry’s largest supplier, would deliver only finished movements to outside companies.
This was a profound development for many small companies that rely on ETA base movements when creating their own complicated models. Watchmakers commonly use ETA movements, or parts of them, as bases upon which they add their own proprietary complications. These companies are too small or unwilling to invest in developing base movements or complete calibers of their own. By denying access to disassembled movement "kits," Swatch Group is depriving many small companies of the ability to produce their own complicated pieces on the shoulders of ETA technology.
Swatch Group declines to comment because the issue has prompted an investigation by the commercial oversight arm of the Swiss government. Swatch’s position, as expressed by company chairman Nicolas Hayek, is well known: It is in the industry’s best interest for companies to develop their own movements rather than ride piggyback on those of another manufacturer.
Regardless of whether you accept his motives as altruistic, Hayek’s argument is not without merit. If you are a stickler for original watchmaking, this type of technology transfer is problematic, whether it is done outside or within a conglomerate—as noted by Stellino. The difficulty is deciding how to define authenticity. Working from these supplied base movements, different companies add vastly different levels of original mechanisms, techniques, and finishing, so collections that utilize the same base movements can vary dramatically.
Swatch Group’s announcement has had important consequences, both intended and otherwise, across the industry. Independent manufacturer Ulysse Nardin, for one, is adding more original movements to its line and receiving a positive response from the collector community. "More people realize now that you have to design your own movements," says CEO Rolf Schnyder. "You can use some supplied parts, but the design itself has to be unique."
Other companies are going a step further and entering the movement supply business, recalling a bygone era when the industry was served by many small movement specialty companies. Parmigiani is one such manufacturer that is expanding production of high-end movements to supply other manufacturers.
The growth of movement production by independent companies mirrors a new flowering of talented watchmakers, an increasing number of whom are opting to work for themselves. "The pool of artisans that had been shrinking is now growing again," explains Büsser of Harry Winston. "The watchmakers who started at the beginning of the ’90s are now mature and are working for themselves. You see a much higher level of creativity from small companies today because they don’t have the marketing resources to compete with the larger companies. They are condemned to be creative to survive."
Peter Speake-Marin is exactly this breed of young watchmaker. Originally from England, he moved to Switzerland to pursue his career and eventually became a complication specialist, working by commission for prominent brands. For the last three years, however, he has been producing watches under his own name and has found a receptive audience. "I go to great lengths to make watches the way I want them to be made," he explains. "This appeals to collectors who are veering away from the big corporate manufacturers. There has really never been a better time to be independent. There is so much interest at the moment, even people in their first year of production are getting orders."
And newcomers continue to emerge, a testament to the enduring entrepreneurial spirit of the fine watchmaking industry. Many of these unfamiliar brands are entering the market with watches at the cutting edge of design. Greubel Forsey, formed by two watchmakers previously with Renaud et Papi, debuted this year with a double-axis tourbillon, an avant-garde complication that is being showcased as the premier achievement of much larger brands.
For those collectors seeking a personal connection with the watchmaker behind the timepiece, the approachability of this new generation of watchmakers, as well as their audacious creativity, has irresistible appeal. "I simply love watches," says the chef/collector Stellino, "and I love that a human, through a series of mechanical constructions, can capture something as fleeting as time and do so with beauty."
Despite all of their competitive disadvantages, the small independents exploit this human element to thrive in the shade of their giant neighbors.
Audemars Piguet, 212.688.6644, www.audemarspiguet.com
Chopard, 800.246.7273, www.chopard.com
Girard-Perregaux, 877.846.3447, www.girard-perregaux.com
Greubel Forsey, available exclusively at Westime, 310.271.0000, www.westimewatches.com
Harry Winston, 800.988.4110, www.harrywinston.com
Patek Philippe, 212.218.1240, www.patek.com
Peter Speake-Marin, +41.21.825.5069, www.thewatchworkshop.com
Ulysse Nardin, 561.988.8600, www.ulysse-nardin.ch