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Under the leadership of Francesco Trapani, the watchmaking and jewellery arm of LVMH (TAG Heuer, Hublot, Zenith, Bulgari, Louis Vuitton, Chaumet, Fred, de Beers) will be entering this year’s edition of BaselWorld with increased firepower, thanks mainly to the success of TAG Heuer, Hublot and Zenith, and the increasing power of Louis Vuitton watches. The recent announcement that TAG Heuer’s emblematic CEO Jean-Christophe Babin would be transferring to the luxury steamer Bulgari at the end of June 2013 surprised observers, especially given the man of indefatigable dynamism’s close attachment to the “values” of the sporty brand. But it is his undeniable success at the head of TAG Heuer that destined him for this very difficult (and unofficial) mission to bring Bulgari up to the same level as Cartier. This will be a considerable challenge for the watchmaking and jewellery arm of LVMH, which hopes to strengthen its presence in the global jewellery market, a sector that is still split among a multitude of local actors but which is worth some 100 billion euros (against around 60 billion—at retail prices—for luxury watchmaking) and where the margins are very comfortable.
Zenith achieved sales of around CHF 150 million in 2012 after selling around 25,000 watches (including 100 high-end pieces like the Colombus) and has just invested CHF 20 million in the extension and refurbishment of its historic factory building, which dates back to 1908. The main objective is to bring together under one roof the main professions at the manufacture, since until now they have been spread uncomfortably across a maze of small buildings nestled along a hillside. Some 1,200 kilometres of cable have been laid and a sophisticated oil recovery system has been implemented, which helps to heat the building. Furthermore, the machine park has been improved considerably, but a lot of traditional machines used for small but highly specific tasks have been kept.
All the El Primero and Elite movements, which are used in all Zenith watches, are manufactured from A to Z in these facilities, which employ 270 people, of which 200 are involved in production (out of a total of 300 people employed at the brand worldwide). Production has been growing constantly since 2009: 50,000 movements will be produced in 2013 against 8,000 in 2009. These 50,000 movements are divided across 60 different calibres, all integrated from the outset (no modules). Research and development, construction, prototyping, tool making, cutting, movement blanks, steel cutting, machining, stamping, cleaning, trimming, polishing, decoration, bevelling, pre-assembly, creation of kits, assembly, escapement-making, adjusting, testing... all these crucial operations now take place as part of a streamlined workflow, which was difficult in the previous set-up. There are no less than 3,500 references and 12 million components locked away in the company’s Cardex.
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“Zenith is a textbook case,” explains Jean- Frédéric Dufour, the enthusiastic and attentive CEO of the brand. “Zenith was one of the leaders in Swiss watchmaking for 100 years but then it gradually lost its true identity. In its heyday Zenith sold 80,000 watches per year in Italy alone. When I arrived in 2009 we sold 300 watches per year there! In all, Zenith produced around 10 million watches and created 650 different movements, including the first chronograph in 1899. Zenith was a sleeping beauty that we had to reawaken.”
When he arrived, J.-F. Dufour concentrated on two vital points: redefining the collections and rebuilding the manufacture. His predecessor, Thierry Nataf, had the merit of putting Zenith’s name back among the leaders in Swiss watchmaking, but he did so by rushing too far ahead. The average price had risen to 5,500 euros. A new entry-level segment was there- fore added at around 3,000 euros. The ultimate goal is to put Zenith back where it used to be as the leader in in-house chronographs between 5,000 and 8,000 euros. It seems within reach, since the brand has recorded 30 per cent annual growth in sales since 2009. The strategy followed has been that of a return to the brand’s roots as a purveyor of genuine instruments of precision. The long- standing partnership with Felix Baumgartner, the first man to have broken the sound barrier in freefall—a fall of 39 kilometres—is, in J.-F. Dufour’s opinion, “not just a huge media coup but an absolute world-first that goes well with other historic firsts in which Zenith was involved, such as Blériot’s first flight across the channel in 1909.”
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In conclusion, the brand still has a huge potential for growth.
Its principal markets: Hong Kong is number one, followed by Switzerland, Germany, China and the USA. But, careful not to put all his eggs in the same basket, J.-F. Dufour has started a major programme of redevelopment in South America, where historically the brand was well known.
LVMH - increased firepower
TAG Heuer breaks the billion barrier
Zenith, a textbook case
Vuitton, vertical integration from above
All change at Bulgari
Denim and Caviar by Hublot
Source: Europa Star April-May 2013 magazine issue
