At the Shenzhen Watch Fair, Jianguang Shang, CEO of China Haidian, talked about the holding, its two Chinese brands and his ambitions for its new Swiss flagship brands Eterna, Porsche Design and CodeX.

China Haidian, based in Hong Kong, is a family company that is 60 per cent owned by its chairman, Hon Kwok Lung, 57, and 10.89 per cent by Keywise Capital Management, which is also based in the former British colony. The rest of the capital is floating on the Shanghai and Hong Kong stock exchanges. Unlike with Fiyta and Sea-Gull, therefore, the Chinese government does not hold any shares in the company. China Haidian, owner of the Ebohr and Rossini brands, has 3,000 full-time employees. Its tentacular distribution network comprises 2,900 points of sale spread across five networks (one proprietary network and four joint ventures). In 2010, Ebohr financed a new Swiss brand, Codex. One year later China Haidian purchased the venerable (1856) Eterna and with it Porsche Design watches, which are also produced at the same factory in Grenchen, in the Swiss canton of Solothurn. China Haidian’s 2011 turnover was 1.47 billion Hong Kong dollars (HKD) (approximately CHF 185 million) and its net profits were HKD 282 million (CHF 36 million).
Jianguang Shang, 60, who is both CEO of China Haidian and Managing Director of Rossini, talked exclusively to Europa Star.

Europa Star: Was the purchase of Eterna and Porsche Design in 2011 part of China Haidian’s group strategy?

Jianguang Shang: Yes! In 2010 we started to restructure our activities by selling off any that were not related to watchmaking, in particular our copper factories. At the end of 2011, China Haidian became a genuine watchmaking group. With Ebohr and Rossini we have two out of the top four Chinese brands in terms of volume, the second of which has been the domestic market leader for ten years! The arrival of Eterna and Porsche Design in our group is an excellent opportunity for our development of watchmaking technology, our influence on a global level and the outlook for our business.

ES: Certainly. But what level of autonomy will you leave these brands of tradition?

JS: We will not interfere with their business because we want them to keep their Swiss identity. We will, however, help them to fulfil their potential in the Asian markets, and in China in particular. Internally we call Eterna “Sleeping Beauty”. We will wake her up using the financial power of our group. But, I repeat, our assistance will be limited to financial support and marketing. For everything else they will have total autonomy.

ES: And is Porsche Design Sleeping Beauty’s sleeping sports car?

JS: Just like the famous sports cars, Porsche Design watches have their own engines. Here too, we aim to improve the brand’s commercial performance. Actually, we do not differentiate between the sports car brand and the watch brand, even if they no longer have the same shareholders.

ES: But Porsche is known for its cars, not its watches…

JS: The Porsche Design watches are the perfect embodiment of the Porsche cars in terms of their styling and technology. Such closeness is, incidentally, quite rare in the Swiss watchmaking industry.

ES: Will you use Porsche showrooms in China to boost sales?

JS: Our strategy for Porsche Design is still a secret.

ES: Eterna is also a movement manufacturer. Could you foresee it supplying the high-end models for your Chinese brands, or even—why not?—stepping into ETA’s shoes as a global supplier, since Eterna will go back to quartz?

JS: Absolutely not! Given the growth forecasts we have for Eterna, we would be happy if it could just satisfy its own demand for movements. Quartz at Eterna? I don’t know where you got this information from but it is out of the question! Ebohr and Rossini rarely use Swiss movements, they are generally Japanese.

ES: So why don’t Chinese watches finally use Chinese movements? Sea-Gull’s movements seem to have improved a lot…

JS: They have improved but it will take some time yet before we use their movements because quality is our overriding concern.

ES: In 2010, the Swiss brand Codex was set up with financial support from Ebohr. But it had a difficult start and its first director was clearly not on the same wavelength as the Chinese managers. Was this a problem of cultural compatibility?

JS: You need to distinguish between the investor and the company, since they are two very distinct entities! Of course the investor is looking for a return on investment, sometimes quite quickly, but in the watchmaking industry we know that you have to look at the long term. At Codex the watches are made in Switzerland by Swiss employees and using Swiss marketing. Ebohr is merely an investor! On the other hand, the day that the brand decides to enter the Chinese market, we will offer them direct support.

ES: You have to admit that China and Switzerland is a bit like the tale of the hare and the tortoise! One goes too fast and loses itself a little, while the other progresses slowly but surely towards its goal…

JS: (Laughs) Here is how I see things: what we need in the precision industry is the Swiss model. This country produces the best watches because the Swiss are serious, professional and perfectionists. This is why we do not get involved in operations. So is there a cultural difference between China and Switzerland? Yes: the Chinese work for money, but money is not the main motivation for the Swiss. We are aware of this antagonism, in fact we fear it! This is why we leave the management to the Swiss teams without any interference from our side. The moral of the tale: to invest in Switzerland, you need to understand the Swiss culture, otherwise do not invest in Switzerland.

ES: But when Swiss quality meets the profitable Chinese market there are fireworks! So why not launch Codex in China immediately?

JS: Its market is mainly in Europe, but it will progressively open up to Asian markets. But we haven’t set any deadlines for this.

ES: In the conference with the leading players in Chinese watchmaking, Tao Li, your colleague at Ebohr, mentioned the idea of hiring Swiss designers. Will “Swiss design” be the new trend?

JS: Of course we want to take advantage of the Swiss industry to improve our designs. But the idea is not to copy Swiss design but to meet the needs of the Chinese customer. You have to understand that the watch market is a pyramid, with the Swiss brands at the top. Ebohr and Rossini have left the “low-end” segment to position themselves in the low- to mid-range, the most promising segments for the next few years. This is why we are constantly looking to improve our wristwatches. And it’s worth remembering that Swiss design is easier to implement than Swiss technology!

ES: Another speaker advised Chinese watch brands to take advantage of Chinese culture, which is legitimate in the watch business. But today, apart from some culinary aspects, what Chinese things are left in China?

JS: How many people buy a watch because of its Chinese culture? Don’t look for Chinese culture in our Rossini and Ebohr models because they have their own culture. The former plays the “business” card and the latter “fashion”. This is exactly what the customer wants. From time to time we can add symbols from Chinese culture, like a dragon, but that will only be popular for a short while. A modern watch brand cannot sell Chinese cultural heritage!

Source: Europa Star August - September 2012 Magazine Issue