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INDUSTRY DEBATE





Swatch’s argument is clear. Nick Hayek, the group’s current chief executive, hasn’t said much publicly on the matter, but the line frequently quoted from an interview last year sums up his company’s position: ‘In no other industry do you have one company supply all the critical parts to the people who then compete directly with it.


conglomerates. Cartier, owned by the Richemont Group, has a very strong relationship with ETA, for example. But, Swatch points out, these brands are its competitors, and it sees no reason why it should continue to furnish them with movements while it makes the investment, takes the risk and manages the considerable overheads required to develop and produce its product. Under the late Nicolas Hayek, Swatch’s strategy was to have a presence in every echelon of luxury watchmaking, and he built up a roster of brands that now lists prestige watch houses like Breguet and Blancpain, as well as more commercial propositions like


Rado and Hamilton, with Omega and Longines in between. Swatch’s argument is clear. Nick Hayek, the group’s current chief executive (and son of Nicolas), hasn’t said much publicly on the matter, but the line frequently quoted from an interview last year sums up his company’s position: ‘In no other industry do you have one company supply all the critical parts to the people who then compete directly with it,’ he said. Comparisons with the car industry are often made – Volkswagen/Audi, the world’s largest automotive group, doesn’t supply engines to BMW. Peel back the top layer of the argument and its clear Swatch Group can see a time just over the horizon when it can no longer satisfy the demand of its own brands as well as the competition. With the market already in rude health and the explosion of wealth seen in China and other emerging markets generating hitherto unseen levels of luxury consumption, the pressure on the supply chain is only going to increase, it says, and it needs the movements for its own brands.





The counter to the argument centres on competition. Swatch Group is already the world’s largest manufacturer of watches, with sales last year breaking the SFr7bn mark for the first time, and the opposition camp argues the withdrawal of ETA movements would leave





Swatch to monopolise the market. Small and medium independents that rely on ETA movements would go out of business, they say, leaving Swatch Group to sail off into the sunset on board the mother of all superyachts and the industry facing a crisis comparable to the aforementioned period in the 1970s and 80s, when 1,000 companies went bust and two thirds of the workforce were laid off. Such is the strength of feeling that last year,


nine watch companies challenged the ruling in court. One of the plaintiffs was Peter Stas, CEO of Frédérique Constant. Over the last 25 years, Stas and his wife Aletta Bax have built up the independent watch company from scratch and Frédérique Constant now sells around 120,000 watches a year. Between five and 10 per cent of these are powered by in-house movements, but the company is a long way from being entirely self-sufficient, still relying on the supply of parts through ETA. In a statement he released in the autumn, Stas was unequivocal: ‘A lot of companies will cease to exist while Swatch, the monopoly operator, will simply get stronger,’ he said. He may be right, but according to Christopher Ward, that means it’s time for watch brands outside Swatch Group to dig in, rather than navel gaze. ‘We think the industry outside Sellita and ETA has been relatively lazy – the smaller, independent brands haven’t


¯


The counter to the argument centres on competition. Swatch Group is already the world’s largest manufacturer of watches, with sales last year breaking the SFr7bn (£4.84bn) mark for the first time, and the opposition camp argues the withdrawal of ETA movements would leave Swatch to monopolise the market.


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