← Openwork: Inside the Watch Industry
Openwork: Inside the Watch Industry
Breitling vs. Richemont – Opposite Bets on an Industry in Flux – Episode 78
00:53:07
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A
There is a grand reorganization of the luxury watch business, and it's happening in front of us.
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B
This is openwork, a look inside the watch industry. It's a podcast from Collective Horology. I'm Gabe Riley, co founder of Collective.
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A
And I'm Asher Ravkin, co founder of Collective. Collective Horology is an independent watch retailer based in Southern California. We carry a wide range of independent brands, including Ming David Kando, JN Shapiro, and more. To learn more about us and check out our available inventory, visit collective horology.com hey, you over your jet lag?
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B
I'm over my jet lag, I think. But you were up all night, so let's see how many times I have to edit you out. Edit out the yawning on the video.
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A
Well, listen, my dearest, never watch the.
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B
The video clips of this podcast on YouTube. You may wonder why I sometimes, you know, cut to smash cut to B roll. Apropos, nothing. It may be because Asher is yawning.
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A
I was at.
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B
He has two small children at home.
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I was at the emergency vet with my geriatric dog last night.
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B
Fair enough.
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A
So, you know, she's fine.
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B
That. When you texted me that this morning. And yes, Louise, bless her heart, when you texted me that this morning, I was like, how much yawning am I gonna have to edit out of the podcast?
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A
This is why I have a black coffee next to me.
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B
Yes. No, we're.
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A
We're thoroughly treading a little bit into, like, Marc Maron cat talking.
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B
Yeah, no, we are. We are. This podcast is sponsored by Room Service Coffee. Room Service Coffee in Ventura, California. Collective Run. Not on Dunkin, but on Room Service Coffee. But seriously, if you're ever in Ventura, visit us and visit Room Service Coffee. But.
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A
Room Service Coffee.
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B
Room Service Coffee. I'll send them an invoice shortly. We're done with the recording. But look, when we were at Watches and Wonders, wandering the halls, you know, one of the, you know, of course we go to check out the watches. You made that very clear on one of our podcasts. We want to see the watches. Don't hold back. But obviously we can't help but thinking about all the palace intrigue, who's in, who's out. And one thing became very clear. Not just at Watches and Wonders, but wandering Geneva at large is we're seeing two different. What are now holding companies. Two different holding companies taking two very different approaches to, you know, what we've already discussed is of time. Of change in the watch industry. There is a lot of change. There's consolidation, there are brand spinoffs. We all know that all sorts of global forces have really put the industry under pressure. And we have these two groups. One is Breitling, the other is Richemont. This is Breitling versus Richemont.
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A
Well, I think important to take a moment too. Not everybody may realize that Breitling is essentially a holding company now. And before we even get into that structure, I think it's good to look at some of the personalities involved because one of the significant drivers of the change in Breitling since it, I don't want to say relaunched, but essentially was reconstituted in its modern form.
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B
Pe Private equity.
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A
Exactly. I know what you want to say. You want to say it due to
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B
my role, I can't say much more.
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Fair enough. But anyway, George Kern came in to revitalize that brand. And wherever you may land on whether you like Breitling as a brand, whether you don't, you know, whether, whatever, I think it is fairly indisputable that he has taken that, that brand to a much more active state than it was in before he touched it. And, you know, I believe he was at IWC immediately prior to that.
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B
Yeah, yeah, I think he was actually at Richemont. He was head of the watchmaking, whatever they call it, the watchmaking division of Richemont, which we'll talk about.
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A
Yeah, and they, and they've, they really brought together an incredible, you know, cadre of talent. Sylvain Berneron, of course, was there up until recently and leading product, a former colleague of ours from Meta, Mauren Olawole, who's an incredibly talented person, is on the board.
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B
Right? Yeah, yeah.
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A
You know, these are not. These are thoughtful, interesting, creative people. So again, wherever you land on, you know, the watches market for them, whatever, pretty. I think pretty easy to admit that there's been a significant amount of change there. Now, that said, we've also seen that company start to acquire other companies. And I think that's the general conversation we want to have. We have a holding company that is forming, you know, a young star, if
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B
you will, growing and taking a fundamentally different bet on the market than an established holding company. And by the way, not only did George Kern come up through, through the Richemont Group, IWC and at the corporate level of Richemont, but he's brought in executives from Richemont to build out Breitling. And so you have this contrast in. You've got basically Breitling bulking up. We' talk about that, bringing in in talent and Building essentially a new holding company. And then you have Richemont taking a very different tack. We talked about the fact that they've can, you know, they've been consolidating brands, potentially looking to sell more, consolidating their presence at Watches and Wonders. And you have Breitling growing and not even participating in Watches and Wonders, but also very much in Geneva. So these are two brands that are almost taking these antithetical or polar opposite approaches to their business and to this moment in the market. And I find that fascinating.
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A
Yeah. So, and I want to get into that pretty much right now. But there's a couple other things I
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B
think are we have to talk about our other sponsor.
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A
Exactly.
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Neo Vintage Breguet. This episode's also brought to you by Neo Vintage Breguet. Who needs a new Breguet when you've got Neo Vintage Breguet.com.
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A
yeah, look when we, when we zoom out and we look at the holding company landscape today.
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B
Yep.
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A
And I want to explore this on some future episodes too, because it's interesting. We have sort of the industry stalwarts, right, the Richemont and the LVMH of the world and we're going to talk about Breitling as it relates to Richemont in this conversation. But we also have companies that have slowly built up over the last few years that are in that sort of like mid tier of like strong establishment, but a real focus on thinking of like Chanel, you know, where up until about a decade ago I didn't really.
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B
That's a great point.
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A
I didn't really think about Chanel in this way.
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B
A whole episode on the watchmaking of Chanel.
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Well, this is what I'm getting at, you know, so that's one interesting holding company with, you know, stakes in lvm, in MB and F, in Romain Gaultier, in Bell and Ross, you know, like these are really interesting brands with very strong points of view. So it's one another approach for us,
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B
I think, in Kinesi as well. Yep.
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A
And then there's what we've insinuated, you know, in previous episodes, which is this sort of very, very young but fascinating structure that we're seeing with Hodorology. Dominique Renault, for example.
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B
And you're also seeing Gerard Perregaux and Ulysse Nardan spun off from the Karen to the SO groups. That's another small up and coming, you know, holding company of sorts in the industry.
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A
So and all of these are taking action. Different paths and different approaches to financing, different approaches to marketing and how, and the types of brands that they're investing in and different approaches to how they're also investing in supply chain, et cetera. So today we're just going to look at Breitling, which is fascinating and as compared to Respawn.
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B
Yeah, because they're opposite bets.
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They are. But I do want to, I do want us to take a deeper dive on Chanel and so, and, and to a degree, Dominic Renaud down the road.
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B
I just don't know if we can, we can only do so many episodes.
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A
Oh, are we capped?
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B
It turns out, yeah. Our episodes are limited production. Each one is individually numbered. But yeah, no, I think you're right. I mean Hermes is an interesting one to look at as, as well similar to Chanel. So there, there's no shortage of interesting case studies. But these two in particular are household names and they're making opposite bets on the market, which I think is what's interesting to keep an eye on here.
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A
Okay, so let's take a look at Breitling. Y. Breitling has in the last few years acquired the rights to two other brands. One which was notoriously playing hard to get in the world of watches, which of course is Universal Geneve. And you know, on a personal level,
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B
my brand wasn't quite dead or dormant. It was, it was under different ownership which was sort of.
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A
Oh, it was dead. I mean there was no Universal Geneva watches in production. That's not. For decades.
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B
That's not true. Absolutely. It's true. Universal Geneva was owned by Hong Kong based Stellex Holdings International Ltd. From 1989 until it sold to Breitling in 2020.
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A
Yeah, that part I know. But were there watches in serial production up until when?
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B
Yeah, so they were making watches. It was, to your point, it was sporadic. It was essentially a rounding era. But there were. In 1994 there was a Golden Janus.
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A
Yeah, that sounds right. But what about.
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There were reshort attempts between that time in 1994 and 2023, but they were short lived. The brand did go into hibernation with, for long stretches with sporadic small scale releases but no real global push or distribution. So the brand was around, they made watches. But let's say for all intents and purposes were both right here. It was under different ownership. There were some watches made, but it was, it was a non factor in the industry.
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A
There we go. And then of course Gallet and it looks like the way that they're, they're straight.
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B
Who owned Gallet?
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A
I don't. Yeah, interesting the way that this was being structured though, is it appears that they're positioning Gallet as a more sort of entry level piece. They're using Universal Geneva as a more haute horology tiered product. And then of course, Breitling, which is the mass market beast, which sits in between the two. So interesting to see how they're starting to structure that and how they're building it around some of these historical brands. And recently, of course, we've finally gotten some visibility into what the real product line is going to look like for Universal Geneva.
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B
I thought it was really cool. They took a very different approach to what most brands do. I mean, everything about what George Kern is doing. I think this is a bigger theme here for Breitling is he's betting big. But like UG Invert introduced a full product lineup across different collections. They didn't just start with like, here's a pull router and a couple different dial var.
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A
Well, I mean, they did in the sense that when they launched the brand, like launched, quote, unquote, the brand a year ago, there was only two.
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B
But that is commercially available. Now that the brand will be commercially available, they've got a full collection of time only watches, chronograph watches across multiple collections, case, metal sizes, all sorts of things like that. Like, they will launch this brand sort of publicly and make it available publicly. And I think Breitling has to do it because of their, their size, the scale and the retailer network and all of that. They can't just have like two watches in a box in a case, you know, at a retailer. But like, so it's a very bold move to introduce full collections.
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A
It, it's interesting. And what's also fascinating about how they're approaching it, you know, one of the, one of the liabilities and the assets of Breitling is an unbelievably massive retail network here in the United States. I mean, you know, in any major or secondary or probably even third level dma, there's, there's a Breitling concession, which of course opens up a really interesting question, which is how they've chosen to market Universal Geneve through those channels. And there's been some discussion of this in like, what I hear also from dealer colleagues, which is fascinating. They've decided that they, that they want to understandably present this as an upscale brand and that they're doing that by looking for very key partners within the existing Breitling network.
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B
So are they essentially initiating a tip ball and saying to their retailers, like, if you want this part of the business. If you want ug, for instance, you've
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A
got to pitch it essentially like they're setting it up as if. As if it is the crown jewel that they wanted to be from the outset, which is a little bit of a dangerous game.
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B
Do you know what they're asking of retailers? Like, do they have to build shop in shops?
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A
They have to create their own.
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B
It has to be a Breitling boutique within their store or something.
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A
I don't know about the Breitling, I don't know enough about that part. But I do know from some folks I've talked to that there is an expectation of like a bit of a shop and shop build out something to that effect that really heightens the universal Geneve product. Because what's interesting there too is where they've decided to price the entry. So a steel pole router is in that sort of 16 to $20,000 range, which is fascinating because of course a pole router for years, up until recently, was a watch that you could get a pretty good example of a real one, a vintage one, for around two to three thousand bucks. That's gone up, you know, if you're looking for really good examples of that, but it's still a fraction of the price, which is an interesting dynamic. And we've seen this happen, for example, with like Omega and original 321s versus the Ed White, where three, you know, actual 321 calibers tend to trade, unless they're in incredible condition, tend to trade at parity or below a modern 321, which is kind of interesting.
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B
Yeah, well, There's a lot of 321 derivatives out there for sure, in vintage watches, for sure.
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A
But I find that kind of interesting that, you know, that there is this sort of, you know, lionization of a particular vintage movement and the actual product, like the real deal, tends to be valued lower than the modern equivalent. Which is sort of an interesting conversation separately.
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B
But a lot of people are griping. I think they're price anchored to ug, you know, to your point, sure. The brand hasn't fundamentally been in market. There's no price comp. So what people anchor to with the pricing is the. Is the vintage stuff. But the vintage market is just so fundamentally different from the. The new market. Yes. I get why people are disappointed that like, you know, and I get why people would think like, oh, like a vintage pole router, let's say I'm. For argument's sake, I can get one for about $5,000 or less in Good, good condition. And now the new. And I'm excited the new one comes out and it's multiples of that, and I can understand why people would be frustrating. However, when you look at the quality of those watches, I think they do justify their. Their pricing. I mean, these are not Breitling movements in them. They, they. These are in house UG movements. Their horology movements are at least certainly well made, well finished, beautiful movements, beautiful watches. The product intrinsics themselves of those new pole routers, I do think are in line with the pricing. I think the strategic question is, is it a problem that they decided to fundamentally reposition this brand to a new market segment than when it hit where it had been historically? I don't know the answer to that.
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A
Well, I think when we look at how they've chosen to distribute, it gives you some idea of how they want to position. Right. Because one of the first questions that I had about this, and obviously, like, you know, when you're a hammer, everything looks like a nail. So my first question was, why are they not looking at independent boutiques for this kind of product? And I think the answer to that can be found in who it is they think they're competing with and who it is they think they're building a product for.
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B
So that's an interesting question. Who do you think UG competes with or who do you think they think they're competing with now?
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A
I think that they want to be competing with Vacheron and Jaeger Lecoultre and sort of like the. The 20 to 30 to 50k tier of those brands.
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B
Jaeger makes a lot of sense as far as who they'd compete with. Vacheron, though, you think? Really?
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A
Yeah, I think that's who they're targeting. I don't know if that's ultimately where they're. But when I look at like, price class, maybe it's not the same client, but I think like broader competitive set, that's what you're looking at now when you look at the product line, the Cabriolet, the pole router, the Compaqs, these align. You know, you could. You could mix these from a competitive standpoint against JLC pretty well, I think, but that's sort of the price class that they're competing in, which means they're not really talking to the collect, in my opinion. I don't think they're positioning this as a play towards the universal Geneve vintage collector.
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B
No, they're. They're positioning this towards the clients of watches of Switzerland and Bucherer and that sort of set.
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A
That's right. And that these watches should be viewed against the backdrop of what. What they'll be cross shopped with.
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B
Yeah.
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A
So if you think of it, in some ways Breitling is following a very well trodden path by building products at different price points for different audiences that they believe that they can erode market share from other brands. On the question there then becomes. Well, when you invest in a heritage brand like this, it comes with benefits and it comes with baggage. We discussed some of that baggage. Of course the benefit is it's a name rec. You know, there's name recognition, there's name I there that you don't have to, you know, like anyone who spends some time and watch collecting for those couple years or even, even if they don't know that they've heard Universal Geneva out there. So there's something, something to that. But I think it's an interesting play because they are definitely trying to take on more established and, and entrenched competitive competitors, which they wouldn't have had to do if they decided to focus on an independent market, but that independent market would be a lot smaller. So they're to your point about ambition? The ambitions are clear and you can see what they're trying to do. I don't know that success is guaranteed here by any stretch, but I can see the strategy as they're building it.
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B
Yeah, the UG thing makes perfect sense to me. I mean, and we'll talk about this certainly with Richemont, but in a market that we all know is moving up in price point, where the average selling price of a watch keeps moving up and up and up and many brands are trying to move up that way. Positioning UG there. It's like you have Breitling. It's an incredibly strong brand that sells very well. You don't need need something to compete with your own brand. So if you're George Kern, you can go down market or you can go up market. And with ug, I think it was the brand that made sense to go up market with. It's a prestige brand in the mind of a lot of watch collectors. Forget pricing aside, but Hodinkee and certainly Ben Clymer and that crowd have certainly given the Universal Geneva brand a lot of positive shine over the last decade. Plus it's viewed as an aspirational brand, an important historical brand, a brand that so many people love and are rooting for. So it ha. And then and we talked about the product intrinsic, so it makes sense you would Position UG there. The question I have is about Gallet on two levels.
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A
Well, but before we get to Galle, I do want to just touch on the poll router because they have made some interesting product choices with that, which also I think speaks to who they're trying to hook into this line. Look, it's easy to be cynical and to look at a product like the pole router and dismiss it outright for pricing or whatever. I will say that. And I haven't gone hands on with these watches, but from the photography of them, I have to say I do find these to be very attractive and very well thought out watches. And the caliber in the pole router is very, very nice.
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B
The people we know who have gone hands on with these products are impressed.
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A
Yeah. So, you know, I do think that, like, if you were speaking to a client who had very vague name ID on Universal Geneve and you put a 14,000 Swiss franc pole router date on a strap in front of them, it's the 80s, $17,000 watch, give or take, that you could make a compelling case for that against, you know, a Jaeger LeCoultre master control, which is, I think, a little bit more affordable. But like, in the same general, the same general gist. This, I think, actually, if I'm being frank, I think has a little bit more character to it than a JLC master control. So you can really tell who they're building this for and how that's going out across the product line. The real question for me is less how could you position something like this in a cross sell, but who they're going to partner with to sell it? Because this brand, for it to live and to succeed, you're gonna need retail partners in a retail network that fundamentally gets it and is and sees a value in, in selling it. And there's an interesting push and pull with that with holding companies. Right. Because what we're seeing here, I suspect, is a company saying, since you work with us already on Breitling, we're gonna give you this incredible opportunity.
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B
Yeah. Now we're not talking about UG for a retailer in a vacuum like Breitling, I would imagine for dealers who carry them is a significant and important part of their business. And they probably want to keep Breitling, the company happy.
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A
I'm sure that's part of it. I mean, and, and, and to be clear, by the way, right now, they're not listing any retail partners on their website. All they're listing is that new boutique that we saw them building in In Geneva.
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B
Yeah.
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A
So maybe they're just going to try to even keep it tighter like that and just have it be a really exclusive kind of product. So I think that they're trying to keep their powder dry, they're exploring different options, they're setting a competitive landscape and they're going to figure out how they're going to roll that out. But if they do go into retail partners, as I know they were kicking tires on last year, it's going to be really critical that they find the ones that know what they're talking about and know how to position this in a way where it isn't sort of an afterthought and a salesperson doesn't default to a more easily known and more accessible watch. So, you know, but I think for,
- [20:55]
B
for a retailer, it's a no brainer. If Breitling is an important part of your business, not only do you want to make Breitling happy, but they're bringing you an opportunity, which is, if you're a retailer, particularly in the United States, where we see the market is moving up and up and up in terms of average transaction value, this has got to be very appealing. Plus you know firsthand from Breitling, particularly under George Kern's leadership, that they're going to do it the right way. They're going to, the watches speak for themselves, but you know, that they're going to do the things that they need to do, do well, which is marketing and branding in particular. Like, I think George Kern gets that and understands the importance of that and has demonstrated over a long career that he will do that and invest there. So I think it's a very appealing proposition for a retailer. In fact, I can imagine there are brands they would happily eject from their store if they needed to, to replace it with Universal Geneve. But this is what leaves me scratching my head. Everything I just said said is what leaves me scratching my head about Gallet. Because it's a very different proposition on so many levels. Number one, it's a brand that doesn't have the cachet of Universal Genevieve. Now, there are people who love vintage Gallet and collect vintage Gallet chronographs. In particular, I know our beloved, our friend Eric Wind, I know loves a good vintage Gallet chronograph and there's a, there's a market for it and there are people who are enthusiastic about it, but nowhere near on the level of, of Universal Geneva. I mean, this Gallet, vintage Gallet is very much a deep cut with its own kind of very small cult following. Number two, from a price positioning standpoint, this is an entry into one of the most crowded, difficult and declining market segments there is.
- [22:48]
A
Yep.
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B
So, you know, you are. Talk about a Sisyphean task in pushing a boulder uphill. Launching any brand in this category is tough. Now you're, now you're doing it with a brand that is very insidery and like a big thing of what you need for a brand in the sub $5,000 price segment is brand.
- [23:10]
A
Yep.
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B
I mean, these watches are built on brand. There's so much competition from a product standpoint. There's a lot of good products in that segment. You really need to have a brand to break through and really need to invest in a brand there on a scale and at a level you probably don't even need to with Universal Geneve. I mean, you're going to be competing with the likes of the brands that are spending the most money in the segment. You're competing with the Swatch Group brands. You're going to outspend Longines. Are you going to outspend Tissot? You're going to outspend Tag Heuer? I don't think so. So to me, I'm sort of scratching my head over this one. I think what George Kern has done,
- [23:49]
A
it could also be for a different market. I mean, we're talking about what we know about that segment of the market in the United States, but that segment
- [23:55]
B
of the market we know is struggling globally. If you look at the export data from Switzerland, we know that that's. This is a segment of the market under pressure. When we look at the brands, we'll talk about Richemont in a second. Like, this is why they're spinning off Bauman Mercier. Yeah, they don't want to compete in that segment. It's. It's difficult.
- [24:12]
A
Yeah.
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B
You know, and Bauman Mercier is a brand that does have more recognition certainly than Gala and it struggles.
- [24:18]
A
You know what I mean?
- [24:19]
B
The export data shows that the. We've talked about the Swatch Group earnings.
- [24:23]
A
Yeah.
- [24:24]
B
And you know, they're really struggling in this segment of the market. This is a. You're launching a brand into a meat grinder. So this is either. Hey, it's Gabe. Openwork is proudly ad free and requires no paid subscription. If you'd like to support the show, please take a moment to subscribe, rate and review on your podcast platform of choice. Please also check out and subscribe to collective horology on YouTube where you'll find hundreds of videos we've made made on independent watchmaking. You can find our channel@collective horology.com YouTube and of course, you can always support the podcast by picking up a watch from over a dozen independent brands along with our latest merch@collective horology.com thanks for listening and for your support. Now back to the show. I think there's two ways to look at it. Like one is to scratch your head like I'm doing and I'll play the devil's advocate. The other way to look at it is like what Breitling is doing is building a business for the long term.
- [25:20]
A
Yeah.
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B
And Georges Kern, you could argue, has been methodical in his approach to the business. Number one, he came in and he writed the Breitling brand.
- [25:31]
A
Yes.
- [25:32]
B
Got that on the rails. Then step two, he expanded into new market segments starting with Universal Geneve. And he was, we didn't even talk about one of the things they did that was so clever with ug. And speaking of Hodinkee, Ben Clymer speaking of Eric Wind, like he had an advisory committee for Universal Geneva to guide the direction of the brand and the products of the brand. This was not done in a vacuum. This was done in close consultation with the, the watch community, which I think is very savvy when you're doing something like this. But he's been meticulous about it. It's like we're going up market as the as, as the industry moves up market. And then the Gallet thing I think is a right turn for, for me, for all the reasons I just articulated, except to say if your task as George Kern and the bigger move is even more long term in nature than the last 10 years. He started at Breitling in 2017. My theory, my theory on this is he's building a holding company structure for the long term. He's not only writing the Breitling ship and getting that thing on the rails. He's not only moving up market with ug, but he's building a full fledged holding company that's diverse across a variety of price segments. The sub $5,000 price class will ultimate come around. The pendulum swings both ways. And just like the market is running away for the $20,000 and up watches, in a couple years the, the opposite will be true and it will be the brands that are in that sub $5,000 segment that are showing strength. It's just, it's a cyclical business. That's the way this works. And he will have built a holding company structure that's Long term in nature, that's diversified across price segments, that has a global retail network and, and for private equity owners, sets the company up for an ipo. Because private equity, we know, and look, we don't know, but generally the trend with private equity, the way they approach this stuff is they make an investment and generally it's a long term investment. I mean, gosh, if private equity has been backing Breitling for the last 10 years, that's significant. I'm sure they're happy with the performance, but they need an exit. They need to put that capital to work on the next thing that's going to grow to that level. And so what Kern is doing here is, you know, making a bet that in the current market, where we may be scratching our heads at, but certainly sets up Breitling for the long term to go public as a well diversified holding company. That's my theory of the case there with the Gallet thing.
- [27:58]
A
Yeah, I mean, I think that makes sense and obviously time will tell on this. You know, I find it interesting when we look at that relative to Richemont. Right. Because on one sense, one sense we're seeing some parallels. Right. Setting up different brands at different price classes against specific competitors that they believe that they can take market share from. Makes perfect sense. Basic business stuff, not a big deal. What is interesting to me is, you know, Richemont has had a number of divestments. You mentioned Bauman, Mercier, Ynab. So that's, that's Yuke's not a porter. You know, they divested from as well. And of course they spend in a very different kind of way than Breitling does. They spend against these massive shows. They contribute to the foundations that support these shows. You know, they are active in, in the social, the media and the commercial economies of these brands like Richemont is entrenched in the industry. And I think this is why when people think about holding companies, they tend to think Swatch, lvmh, Richemont, Swatch, lvmh, Richemont. That's it. Even if there are these others that participate and are active, but they're also, because they are, are in that structure, they are anchored to some pretty heavy weights that they have to pull down the street. Right. All of these brands, you know, Swatch pulled out, of course, after Basel went away. You know, they no longer participate in these major watch shows in Geneva in the way that we saw Breitling for many years. Used to do theatrical events, sort of programming in Zurich. Yeah, that they would do Immediately before watches and wonders to kind of capture people who were coming in for those shows. I mean, they've done crazy theatrical stuff like, you know, releasing watches while in mid flight on, you know, an aircraft and things like that. That do two things, of course, one, create a spectacle that, that garners press and media and interest. And two, also, you know, creates a draw and a magnet for their retail partners to want to participate. You know, it's tough being out there
- [30:00]
B
for these weeks and think they got the memo, though, which is as cool and theatrical as those events may be. Like, everyone just wants to go to Geneva for that one week and then go home.
- [30:09]
A
That's what I'm saying. Like, it's just, it's just challenging for, for, you know, for individuals to be
- [30:13]
B
able to get a presence in gen. Which hotel were they in? They took over, I think an entire floor of it was maybe the Ritz or the Four Seasons, one of those hotels.
- [30:22]
A
Yeah, but my point with this is because they're flexible with that and because they've gone for a little bit of flamboyant flair, they can kind of do whatever they want. And it's not, it doesn't look like news, quote unquote, that they're pulling in or out of something. You know what I mean? Like if, if when we, like we noted, for example, that Montblanc pulled out watches and wonders, like that's news, right? Like, that's a big deal. They've been there for a long time. Speculation comes out of that. Blah, blah, blah. If Breitling decides to show one year and not show another, it's just Breitling
- [30:54]
B
doing Breitling stuff, George Kern being a maverick.
- [30:57]
A
So in that sense, you know, they have a lot more flexibility and that stuff matters when you think about the, the manpower, the time and the cost involved in that sort of thing. So it gives them the ability and the flexibility to say, we're going to lean in hard on a year where it really matters and we might pull back a little bit on a year where it doesn't. And that doesn't make it look like Ms. Tweed needs to, about whether or not, you know, there's, there's, there's trouble at home. So, you know, this is the challenge, of course, of being a much bigger, much more entrenched industry giant, of which Richemont is anything they do. You know, people like you and me are going to, are going to polish our glasses and like poke at anything Breitling does. We're going to sort of look at, in a Different way because they're a much younger company. They've given themselves the right to pivot. That's a real strategic advantage.
- [31:38]
B
Yes, a hundred percent. 100% it is. Which is again, why I'm a little bit perplexed by, like, building the traditional holding company diversified across price segments, because it's giving them less flexibility. It's like, couldn't they just hold on the Gallet thing and wait until the market moves that way, then be ready for it?
- [31:57]
A
But I mean, another question would be like, you know, look, I mean, there's plenty of Breitlings that existed in that mar. In that price class for many, many years. Why not just keep them there? Unless they're trying to do the two
- [32:06]
B
still making those cool quartz watches, like, with the cult, things like that.
- [32:09]
A
The cult know, the endurance. I think they are. I think those are like, the most affordable kind of ways in. But. But putting that aside, they may be trying to do the Rolex Tudor thing, where they're trying to bring the basement up on Breitling so that they can make space for another brand, which of course, is, you know, what. What Rolex and Tudor have been doing for the last decade. So they could very well be trying to take that approach. Now, granted, Tudor obviously has much stronger brand than Gallet, you know, obviously. But maybe that's the play they're trying to. Trying to activate. Look, I think the other side of it, too. And this is kind of an interesting question. We talk about sometimes, like, the Tudor test at, like, the 4,000, $5,000 watch, which is, you know, a lot, and we hear this a lot, you know,
- [32:52]
B
the audience, our trade secrets here.
- [32:54]
A
I mean, it's true, though, there are a lot of folks who will look at a watch in that price class and go, well, for that money, I could just go buy a black Bay.
- [33:00]
B
When we buy watches in that price segment and we have brands we carry that are in that price segment, the question you and I, I ask repeatedly is, can I justify this watch relative to a Tudor black Bay that is like the benchmark in the category for that price point. A smart way to spend $5,000 or less for a lot of people. For a lot of people, for me, even, right? So now the answer doesn't have to be, does this watch compete with a Tudor black Bay on price and on specs? It could be like, does this. Is this an. Another interesting way to spend that money? Because it's an interesting design, but that's
- [33:36]
A
how we feel
- [33:39]
B
object or Ming or
- [33:40]
A
Gaga laboratorio, you know, where it's like they exist as design objects unto themselves, that the comparison is moot.
- [33:47]
B
But if you're, but if you're introducing a watch and a brand in the sub $5,000 segment that's going to be in the same stores as a Tudor, that's going to be sitting in a case somewhere between a Tudor and a Tag Heuer, then you got to make sure you're delivering a product at a very high standard, particularly if you're a new entrant to the category.
- [34:10]
A
So to me, you know, we. So fine. So we see this asymmetric structure.
- [34:14]
B
Why Baum and Mercier struggles.
- [34:17]
A
Yeah, well, so to me, this is where the interesting question comes up. So, fine, so we've painted the landscape of these two, you know, the industry behemoth and the challenger, if you will, you know, multi billion dollar, but still challenger brand of the Breitling holding company. We see the, this, let's say Breitling succeeds, okay, George Kern is successful. Universal Geneve picks up speed. You know, these pieces, you know, there are some halo pieces from within Universal Geneva that collectors actively seek. You know, let's say they've got it figured out with Gallet and they create a, you know, several hundred million dollars business there and it's all humming along. And now that holding company is a multi billion dollar holding company and they ip I see why that's good for the private equity. I see why that's good for George Kern. I see why that's good for the board.
- [35:12]
B
He'll go down as one of the great Watch executives of all time up there with Jean Claude Beaver and Gunter Bloom line. Sure. Kern will be on the Mount Rushmore of Watch executives in that world.
- [35:22]
A
So here is the question then. If they do that, are they going to trade away the dynamism that they currently have access to, to the ability to pivot and move and participate when they want to and not when they
- [35:36]
B
don't and all become another behemoth holding company that loses that agility.
- [35:42]
A
Yeah, years ago when I worked at
- [35:43]
B
M Dynamism, the excitement.
- [35:45]
A
Years ago when I worked at mtv, there was a guy who worked in MTV News who had been there for 25 years.
- [35:49]
B
Kurt Loder.
- [35:51]
A
I actually did meet Kurt Loder. No, it wasn't Kurt Loder. Tabitha Soren Sway.
- [35:55]
B
You know, Tabitha Soren is married to Michael L. Lewis. Really?
- [35:59]
A
Yeah, yeah, yeah. Today I learned. No, it's got a guy who used to run the entire news division. Lovely guy named Ben, has a great, great documentary he made about Mr. Rogers. Because he literally grew up next door. He was, he was Mr. Rogers neighbor.
- [36:12]
B
Interesting. Yeah. My wife as a child grew up in Pittsburgh and her family bought their home from Mr. Rogers. So she literally grew up in Mr. Rogers house as a child in his neighborhood. Yeah.
- [36:24]
A
So. So Ben grew up next door to him. Anyway, anyway, Ben used to talk about moving the giant wheezing beast of an animal. That was mtv, you know, and like, in order to like, if you wanted to change any element of MTV News, there is this, you know, just. And it's an amazing mental image of
- [36:45]
B
moving an aircraft carrier.
- [36:46]
A
Yeah.
- [36:46]
B
Versus a little boat.
- [36:47]
A
Everything has to pivot and move and slow, you know, go slowly and what, what are they building like? They're feeding this giant wheezing beast and build. To me, a successful holding company is like, have you. Have. Is the beast still nimble enough to move but vicious enough to consume its rivals, or have you fattened it up to such a point that like even getting it to pivot is full of so many internal meetings and Google, Google Docs and investor, you know, pitches and blah, blah, blah, that by the time you've pivoted the business, the pivot is no longer relevant. So that's going to be the challenge, I think, for, for a company like, like Breitling as they continue to avoid that fate.
- [37:26]
B
But this is what, this is exactly what Richemont is doing. They're getting fit as a holding company, so they are shedding the businesses that are low margin and low return for them and some of the segments and the categories that are low margin and low return. So obviously Bauman Mercier, they're like, this segment is tough. It's, it's a knife, it's a dogfight. We're out yet I sold it. They're focusing on the brands that, you know, Cartier sells at a similar lower price point, the average transaction. But, but I mean, that business is a, is a juggernaut. That's a no brainer. It's untouchable.
- [38:01]
A
Yeah.
- [38:02]
B
But moved away from Bauman Mercier. I do think this is my conspiracy theory. My opinion. I think they're moving Montblanc out of watch making. And I'll tell you why. They didn't participate in Watches and Wonders this year. They haven't launched, had a significant launch since product launch. Montblanc Watch product launch since Watches of Wonders. Watches and wonders in 2025. Like, I can't think of anything. The latest watch they did launch coming out of the Minerva Maison Minerva branded. They took the Mont Blanc Name off the dial. I think with Mont Blanc, they've decided Montblanc is an incredible brand, a global brand, especially in pens and fine leather goods and all many categories. It's an incredibly strong brand. But I think they've decided in the watch category, the SEC again, the segment Montblanc watches are competing in is this really difficult segment that they've decided to walk away from with Bauman Mercier, a brand that is dedicated to and focused on watchmaking. I think they're doing the Homer Simpson slowly backing into the head edge with Mont Blanc's watches and slowly walking Mont Blanc away from that, from that business. It's just too tough to com to compete there. And as nice as though those Montblanc watches are like those ice divers are very nice watches, but do they offer a fundamentally different point of view than a Tudor Black Bay or a fundamentally better value proposition than that or an Aquaracer or anything else? No, not really. So I think they're walking away with that. So now they're getting fit in the. Just in watches in general. They're trimming up, they're getting fit, they're focusing on the things that sell and the focusing on the things that drive margin. And so what they're doing in a sense is exactly what, what you're, you're saying, you know, you got to be careful of. It's just like they're slimming down. They're too big, they're too bloated, there's too many SKUs, there's too many brands, there's too many stakeholders. They're, they are getting fit and making it easier to operate and not trying to do everything in watches, but instead focusing in watches on what works. And so this is, I think it's a fascinating moment and it shows as slowly as these businesses move. To me, it demonstrates that, you know, Richemont well, two things. One is they have a level of self awareness and they're willing to get fit and tune up their business. And good for them. I mean, how many forget just the watch industry, but in how many industries in general do businesses go in into denial about their terminal decline? Right. You know, like, so I think it takes a level of self awareness and they're. And they're taking action. Two, it's a very different bet from what Breitling is doing. Not only are they slimming down while Breitling is bulking up, they're moving with the market. They're moving away from the segment of the market that's the most difficult. They're not trying to com. Compete there or introduce new products there. They're just, they're out.
- [41:04]
A
Look, I think as a final thought here, you're right. And it's interesting to look at that evolution. I mean, time will tell on both of these fronts.
- [41:14]
B
Yeah. In some ways, just as I said, like the Breitling thing may be really smart over the long term. People may say Richemont was really short sighted for walking away from this segment
- [41:23]
A
of the market potentially. But what I think we are continuing to see, and we saw this in person at Watches and Wonders. We've been talking about this for years and it's happening now, is that there is a grand reorganization of the luxury watch business and it's happening in front of us. You know, seg like market share is up for grabs. Certain things are forever, you know, protected by an incredible fortress business like, you know, the Rolex and the Paddock and blah, blah, blah. But the vast majority of other brands, it's a lot of opportunity for moving here. And as client preference changes, as vector for purchase changes, as PRIC evolves, as all of these things change, the kings of the industry no longer are just guaranteed their place there. So, you know, I look at this and I'm like, be, you know, write off Breitling at your own peril. Write off Richemont at your own peril.
- [42:22]
B
You know, we can't predict the future.
- [42:24]
A
No. But what we can see is that each of these individual companies, you know, a little bit less so for the Swatch Group, but certainly for everybody. At least this is what we've seen. We don't know what's going on behind the scenes.
- [42:35]
B
Yeah, Swatch Group seems like a, like a mess. I mean, you can look at Breitling and say very clear strategy. You can look at Richemont now and say very clear what they're doing. Swatch Group, it's like you're scratching lvmh.
- [42:45]
A
Very clear what they're doing. But, but whatever, let's putting that aside for a minute because who knows what's going on behind closed doors in Hayek land. But we do have evidence that, you know, prior success is not necessarily being counted on for future opportunity. And that is pivoting and changing. So I think we got to keep our eyes on some of these nascent holding companies, companies and the pressure that they're going to put on the, on the industry stalwarts or if they get gobbled up, which is also, I suppose possible. But you know, if these businesses continue to build what they're building their market cap like their, their actual value, whether they're, if they're public or just their internal value if they're not is going to be significant. And I'm really curious to see how that also changes the retail landscape because as different brands move to different holding companies companies, different holding companies are going to have different relationships with different kinds of retailers. You know hodorology. Dominique Renault is working in a very specific narrow niche but they're developing a retail network there that is formidable. LVMH has a formidable retail network. Rolex owns a retail network. All you know, so all. And all of these are changes that have happened in the last five years. So we're seeing a grand reorganization of this into industry in a way that we've never seen it before. And when you look at it on a narrow level. Sure. There's like, you know, how brands compete against each other market share, blah blah, blah. When you look at it on the, on, on the, on the, the scale of the business continents are moving.
- [44:16]
B
Yeah. It's interesting about Rolex. You're right. I mean they, they've moved into retail. I guess Richemont has as well with Watchfinder Co. To some extent pre owned retail. Retail but to some extent got out of Yuke's Neta Porte.
- [44:30]
A
Why not?
- [44:31]
B
So that's a. And Obviously I guess Mr. Porter did some watch retail.
- [44:36]
A
Porter did a lot of watch retail but they never quite cracked that get out of that. Yeah, it never really worked.
- [44:41]
B
So let me ask you one final question. This is a brand we've talked about a bunch lately and that's been in the news lately. We went out to drinks with a Swiss watch executive. Very well connected Swiss watch executive while we were in Geneva who told us that from what he hears JLC is very much in play as far as a management buyout goes. I don't know that we've heard from Richemont or JLC on this. This was reported.
- [45:06]
A
The rumors out. We've talked about it.
- [45:07]
B
Rumors out. It's been reported. I believe in Ms. Tweet and maybe business mantra. But what did you see from JLC at the show in terms of the way they showed up as a business and where they're making bets and where they're moving from a business standpoint because of course they did those master controls on, on bracelets which are quite, quite nice looking watches. And we read a lot into the present presence of other brands.
- [45:34]
A
Yeah.
- [45:34]
B
At the show or lack thereof. What did you make of how JLC showed up?
- [45:40]
A
Look I. I mean, there are some things about jlc and we've talked about this where we've been frustrated because we felt like this is a brand that, you know, has permission to do anything and largely chooses to do nothing.
- [45:52]
B
Oh, there's that old chestnut. Yeah.
- [45:54]
A
But that, that's been largely true of them. However, I think we have to. We have to give credit where credit is due in terms of some of the problems. Product releases this year. You know, the memovax travel clock that they released with Mark Newsom, like that is a stupendously cool object. And the thing that I like about
- [46:12]
B
it, we know that they've turned down others on clock collaboration. Some very significant folks in the industry. We've turned down on. On Atmos collaborations in the past. So that surprised me that suggested that there's a fresh management of.
- [46:24]
A
Yeah. And you know, travel clocks notoriously don't land so well in the modern day with. With the collector. Cool class. But there's two things I think are important to take away from the Mark Newsom collaboration. You know, one is first of all, got to respect it's ballsy to release a clock. Number one, clocks are not like, you know, a thriving segment of the odorology industry at the moment.
- [46:47]
B
No. And. Or a segment of the industry where if you're trying to make waves, where you'd place a bet 100%.
- [46:53]
A
So there's that. And the second is the design of, of that clock. To me, I look at that and I go, okay, imagine it.
- [47:01]
B
That as a watch.
- [47:03]
A
Well, a imagine as a watch. But also imagine what would happen if you took Mark Newsom's reductive design approach and applied that to a broad. The thing about that, that clock that's so cool is how vibrant it feels.
- [47:16]
B
Well, it's both quintessentially jlc, but very fresh and contemporary in its design. And that's what I meant. Imagine if you apply that design aesthetic to watches.
- [47:25]
A
So I look at that, that would be exciting. Is the thing about the IWC venturer that we saw too, again from a. From another major house. Right. Part of what makes IWC successful in my mind is that Christian Knoop finds like a, like he can squeeze blood from that stone every year in a way that you just do not expect. And it, it keeps the design language.
- [47:46]
B
You're right. If someone was like, check out this experimental watch. You'd be like, oh, that's an iwc.
- [47:50]
A
Exactly. So it feels like it's in the design IWC vernacular, but it's also a Brand new, completely interesting, vibrant watch. When I look at that from jlc, that travel clock feel the same. And I have not felt that way from JLC in a long time. So respect. Love that. And then when you look at like, you know, some of the high complication pieces, and I mean, look, JLC has been doing high complication pieces for years, doing some really incredible stuff. I was gonna nail it, but they really did. And a lot of those grand comps, they weren't reversos, you know, like they were their own thing doing really exceptional stuff. And we see that, for example, with like the grand traditions, like the, the, the tourbillon jumping date, for example. Like, really, really good example of them showing, like, we are a legitimate hod horology house. We always have been. And we're showing that to you now and then making a more, I think, reasonable and competitive sport, you know, sporty. If you will watch in what they did with the master control line on the bracelet with the perpetual.
- [48:49]
B
What do you think of those?
- [48:51]
A
I think they're fine. I mean, like, personally, like, I'm not, like, I'm not the target for it. So, like, whatever.
- [48:55]
B
But I mean, from like a business
- [48:56]
A
standpoint, I think it's a great idea. It's 100% the right move. Absolutely.
- [49:00]
B
And you think if they launched those in a vacuum, maybe without the calendar, maybe without the clocks, maybe without the super complicated stuff, it would have been easy to be cynical about what they were doing. Yes, but they came correct this year. Right. I mean, if you think about it, they really had a raft of novelties.
- [49:19]
A
They did. And I think if this is the first step in a new cardinal direction. Direction. I'm honestly the thing that, like, as I said, the thing that really demonstrates opportunity for me is the Market Newsom stuff.
- [49:31]
B
Yeah, well, it's a good point. Okay, so let's take the biggest creative
- [49:33]
A
risk they've taken in a really, really long time.
- [49:36]
B
So let's take the ownership speculation of JLC and put it to the side whether they remain part of Richemont or not or whatever. Maybe they're getting their mojo back as a brand. And that's good regardless of, of who owns them and where they sit.
- [49:51]
A
It also, I think, think if we go back just as a final thought, to, you know, Universal Genev. Universal Genev started by, by, you know, playing by. By doing base hits. Right. We're gonna nail the. We're gonna nail the pole router, which, by the way, I think they did.
- [50:06]
B
Oh. On those limited pieces that.
- [50:08]
A
No, no, I'M talking about, like, their. Their initial product release just a couple weeks ago.
- [50:11]
B
Yeah.
- [50:12]
A
You know, I think the compact pieces are okay.
- [50:15]
B
They're fine.
- [50:15]
A
They're not, you know, they're not great. In my mind.
- [50:18]
B
They feel a little bit too du jour.
- [50:20]
A
Yeah, well, they just don't feel differentiated at the price point that they're at. But the Polaroid is pretty good. So the real question there is going to be, you know, okay, you're making a nice watch. What are you going to do with this? How are you going to grow it? What's your roadmap? Why do you need to exist? If they can answer those questions effectively, and I think they have the leadership to do it, then they could be in an interesting spot. And this is where we start to see the tectonic shifts. And the tectonic shifts will hopefully not just result in interesting business changes. But. And this is what we all hope for good watches.
- [50:49]
B
Yeah.
- [50:49]
A
Part of what's like, the reason we were all so irritated with Jaeger LeCoultre is because we want them to make good watches, you know, not just like a watch with a nice enough movement, like an interesting watch. They finally did it. It's a clock, but they did it. I'm serious. I don't mean that as, like, shade. Like, they did it good for them. The best thing we can all do now is go out and tell everybody how awesome that clock is and get people to, like, put eyes on the brand and then. And then the brand, you know, you shove the brand into the spotlight. If Jerome Lambert decides to take it out and do something with it, he's got our attention now, so do it.
- [51:28]
B
And if they stay within Richemont, they have our attention as well.
- [51:32]
A
Exactly.
- [51:32]
B
And just as. Just as Richemont has clearly gotten the memo on tightening up their business business, maybe they've gotten the memo in jlc. We'll see.
- [51:41]
A
We'll see. But this creates all sorts of interesting dynamism in a market that is pivoting and changing. I love it. This is good news for the business. This is good news for collectors, all of this.
- [51:51]
B
You're right. I think it's easy to say, oh, well, Breitling, R. Two very different approaches to the industry. They're polar opposites in all these ways. One is getting big, the other is trimming down. Blah, blah, blah, blah, blah. But you're right. It's if you back way, way, way out. These are just two businesses in the wider spectrum of the industry and represent what's going on in the industry in general and what makes it so fun to follow the industry at this moment, which is this is an industry going through a period of massive and accelerated change. Thank God we've got a podcast about exactly that. Yeah.
- [52:28]
A
Shall we leave it there?
- [52:29]
B
Let's leave it there. All right. Well, thank you so much for listening. Openwork is, of course, a production of Collective Horology. You can find us online, online@collectiveherology.com and please do get in touch with your questions, feedback, suggestions, all that good stuff. And to do that, you can email us@podcastollectiveherology.com.
- [53:06]
A
I assume we're going to cut this.
- [53:07]
B
Yeah.