Bright shine that may be short lived - Financial Times

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2 ★ FINANCIALTIMESSATURDAYSEPTEMBER 11 2010 Watches&Jewellery Charm, charisma and a sense of humour Nicolas Hayek tribute Haig Simonian considers the legacy of ‘Mr Swatch’, the farsighted entrepreneur and face of an industry Contributors Scheherazade Daneshkhu Paris Correspondent Haig Simonian Switzerland and Austria Correspondent Nicola Copping Deputy Fashion and Beauty Editor Anna Fifield US Political Correspondent Nicholas Foulkes, Simon de Burton, Timothy Barber, Meehna Goldsmith, Lucie Greene, Avril Groom, Maria Doulton Claire Adler FT Contributors Stephanie Gray Commissioning Editor Steven Bird Designer Annabel Cook and Andy Mears Picture Editors For advertising details, contact: Sindy Walker on: +44 (0) 207 873 4208; email: sindy.walker@ft.com Within hours of his unexpected death on June 28, tributes to Nicolas Hayek came pouring in, as the man regarded as a farsighted entrepreneur and face of an industry assumed his place in history. All drew attention to Mr Hayek’s faith in mechanical watchmaking when others had written the sector off. And all praised his showmanship and ebullience as crucial factors helping him to succeed in the hard fought consumer goods business. Now, almost three months later, it seems fitting to take a fresh, and more distanced, view of his achievements, enhanced by reflections from friends and counterparts. How deeply even fierce competitors respected the 82-year-old entrepreneur emerged from the moving words of Johann Rupert, chairman and chief executive of Richemont, within hours of the announcement. “Nicolas Hayek’s death is an immense loss for Switzerland and for the watch industry. He was the driving force behind Swiss watchmaking, its leader and its saviour. Our industry has lost one of its champions, respected by everyone who dealt with him; a man of honour, gravitas and great personal charm,” the tough Richemont boss wrote. Today, after an emotional memorial ceremony in Bern Cathedral attended by hundreds of friends and followers, the comments remain fulsome. Jean-Claude Biver, head of Hublot and for more than 11 years an executive of Swatch Group and its predecessor company, knew from his first meeting with Mr Hayek on the sale of Blancpain in July 1992 that he was dealing with someone out of the ordinary. “After we signed the contract, he told me it was his habit to drink a glass of port to settle a deal and for good luck. So we did, at 11.20 in the morning! What impressed me above all was that he was always available – much more so than many middle managers. Seven days a week, 24 hours a day. He had this extraordinary ability to listen. He paid careful attention to what he was told, because he understood the importance of keeping in touch and having all the information at his fingertips. Charm and charisma were the two personal qualities Mr Biver remembers best. “Somewhat unusually among top bosses, who can often be dry or hard, he had great charm and a sense of humour. He could put people at their ease immediately. Even in MrSwatch:thetechnologyhadbeen underdevelopmentlongbeforeHayek’s arrivalbutheiscreditedwithreviving theSwisswatchmakingindustry Corbis difficult situations, he could lower the tension.” But like most watch industry leaders, Mr Biver devotes his warmest comments to Mr Hayek’s savvy as an industrialist and entrepreneur. Few may now remember the minutiae of the 1970s Swiss watch crisis, as first SSIH and then ASUAG – the two watch and component making conglomerates of the time – wobbled and then fell under the onslaught of cheaper Asian quartz products. In 1981, Mr Hayek made his entrance. Already an established management consultant specialising in heavy industry, his Hayek Engineering group was called in by the two groups’ creditor banks. In a series of what would be seminal reports about the prospects for survival, Hayek Engineering’s studies between 1981 and 1983 recommended merger, drastic cost-cutting and far greater emphasis on products and marketing. Then, crucially, in January 1985, Mr Hayek, who was growing increasingly restless as a consultant and wanted to become an entrepreneur, bought an option on a majority stake. The rest, as they say, is history. But in a new English translation of a book about “Mister Swatch” published last month*, author Jürg Wegelin sheds light on crucial points in Mr Hayek’s career – including the fact that the investment was opposed by many of his closest advisers. The short book, which also devotes space to Mr Hayek’s seldom recorded early years in Lebanon and Switzerland, is marred by some over-literal translations and assumptions about Bright shine that may be short lived Continued from Page 1 For example, LVMH reported that sales of watches and jewellery rose by a whopping 34 per cent in the first three months of the year, compared with the same quarter last year, but they slowed to 16 per cent in the three months to the end of June. Swiss watch exports rose overall by 20 per cent in July but exports to the US did not rise at all that month, despite having grown by 10 per cent between January and July. Sales to China rose by 75 per cent between January and July this year, compared with the same period last year, but in July the growth in sales had slowed to 20 per cent compared with July last year. Finally Tiffany, the USbased jeweller, reported sales in the second quarter of $669m, which was slightly below analysts’ expectations of $690m. None of this necessarily indicates a fall-off in the recovery but does suggest caution. Melanie Flouquet, analyst at JP Morgan, the global English-speaking readers’ knowledge of Swiss business, culture and politics. But it provides useful detail on aspects of Mr Hayek’s life and career that Swatch Group has sometimes neglected. Although the book is broadly complimentary, it was not authorised, and, on initial publication in German, was viewed with suspicion by its subject and his group. Swatch prefers to direct inquirers to another – uncritical – work, based entirely on long conversations with Mr Hayek.** A crucial chapter of the unauthorised biography involves clarification about the origins of the Swatch, and the fact that this timekeeping break- ‘He could put people at their ease immediately. Even in difficult situations, he could lower the tension’ through had been under development long before Mr Hayek’s arrival. Attributable largely to a pair of specialists under Ernst Thomke, the cheap, trendy and reliable Swatch was a vital contributor to the industry’s renaissance. But it was neither invented, nor even instigated, by Mr Hayek. “As an industrialist, he was unbeatable,” says François-Paul Journe, one of Switzerland’s most respected premium watchmakers. “But, one day, someone should write an authoritative biography that takes stock of the situation as it actually was. The investment bank, says: “None of our European luxury goods companies has pointed to a deceleration so far but Tiffany’s weaker than expected US same store spend [that follow Swiss watch exports data in July] is a call for scrutiny we would argue.” The real problem in the second half and next year for jewellers and watchmakers, Ms Danziger believes, will be in appealing to the so-called “aspirational” consumer – people who do not usually buy luxury brands but would like to do so. “As a result of the recession, many consumers who would trade up to luxury previously, simply pulled out of the luxury market altogether,” she says. “They are no longer participating so it will be a challenge to get those people back into the market.” The main reason that people are holding back is growing uncertainty about prospects for the economy over the rest of the year. Increased talk of the possibility of a double-dip recession does not inspire consumer confidence, at least in the short term. “Nearly three out of four luxury consumers surveyed believe that the recession continues, which in turn impacts spending on luxury goods,” says Ms Danziger. Given the importance of aspirational consumers in accelerating the growth of luxury goods in the since ‘Deeper penetration of new, large luxury goods markets is likely to bring a new wave consumers’ LucaSolca,analystat BernsteinResearch the 1990s, this is not good news. But if these consumers are scarce in the west, they can be found elsewhere, which is why so many luxury goods companies are still pinning their hopes on arrival of the Swatch revived people’s hopes in the industry. But don’t forget, watches were still being made successfully in Switzerland.” Even close allies, such as Mr Biver, acknowledge the need for perspective, given the – perhaps inevitable – concentration over the years on just one man. “Obviously, there were other brands: Rolex, Patek Philippe, Audemars Piguet, that contributed enormously to the prestige of Swiss watchmaking,” he acknowledges. “But they didn’t play the industrial role that Hayek achieved for his group. He revived an industry, not just a brand. An entire industrial fabric – that’s the big difference.” The Swatch Group – a company prone to hyperbole when talking about its people or products, notes: “Mr Nicolas G. Hayek’s greatest merit was his enormous contribution to the saving of the Swiss watch industry and the foundation and the commercial development of the Swatch Group.” “Mr Nicolas G. Hayek’s extraordinary vision enabled him to realise and ensure the sustainability of a strong watchmaking enterprise with high Swiss added value. He is rightly recognised as a leading entrepreneur in this country.” *Mister Swatch. Nicolas Hayek and the Secret of his Success, Jürg Wegelin, Free Association Books, £19.95 **Ansichten eines Vollblut-Unternehmers. Nicolas G. Hayek im Gespräch mit Friedemann Bartu, NZZ Libro, 2005. Only published in German and French and now out of print. the Middle East and Asia, China in particular. Unlike the mature markets, Chinese people like to splash out on the most expensive luxury items. In the US, the consumer is biased towards lower price points, while in Europe and Japan, they are somewhere between. According to Luca Solca, an analyst at Bernstein Research, this is probably due to the immaturity of the Chinese market. That suggests great potential for watchmakers and jewellers, despite fears of an economic slowdown. “Deeper penetration of new, large luxury goods markets is likely to bring a new wave of accessible and aspirational consumers in the future,” he says. Mr Solca estimates luxury consumption in China is limited at the moment to the top 5 per cent of the urban population, whereas in the US, Japan and Europe, it is about 40 per cent of the population. “Mega-brands would once again seem the key to penetrate successfully these large luxury consumer reservoirs [in the] long term.”
FINANCIALTIMES SATURDAYSEPTEMBER 11 2010 ★ 3 Tribute to technology that has redefined an industry Quartz anniversary Timothy Barber revisits a gamechanging innovation of the 1970s It is perhaps a minor irony that the passing of Nicolas G Hayek, the man credited with saving the Swiss watch industry from the mire of the quartz crisis, should have coincided with the 40th birthday of that very technology. Moreover, it is an anniversary that is seeing quartz tentatively reasserting its luxury credentials. In 1970, the first quartz watches were released after a race in the late 1960s between Swiss, Japanese and US companies to make the technology commercially viable. At that year’s Basel fair, the Swiss consortium CEH released watches containing its Beta 21 quartz movement, while Girard-Perregaux brought out its own quartz watch, the Elcron. Seiko, meanwhile, had pipped them to the post, releasing its Astron quartz watch on December 25 1969. This year, both Seiko and Girard-Perregaux have produced limited edition – and very expensive – quartz timepieces to commemorate the anniversary and fly the flag for quartz as a technology with luxury clout. Seiko’s new version of the Astron is a sleek, superengineered piece that is as futuristic as it is retro. Girard-Perregaux has installed a highly refined quartz movement in a oneoff edition of its Laureato sports watch line. That Seiko should want to mark the occasion is expected – the Astron is the timepiece that spawned millions of cheap, accurate watches enabling the company, along with Casio and Citizen, to launch its assault on Swiss dominance. That a Swiss company should join the party is more surprising, but G-P played an important role in perfecting the technology – the industry standard quartz oscillation, 32,768 Hz, was first set by its next quartz movement, released in 1971. That number is inscribed on the dial of the anniversary Laureato. “It was essential not to forget this important part of our history,” says Xavier Markl, G-P’s marketing director. Only 40 of the £7,800 Laureato watches have been made and, while the company has not outlined any further plans for luxury quartz watches, Mr Markl admits there is little point in developing an entirely new movement for sole use in such a small range. “We do believe there is a possibility to make highend, luxury watches with a quartz movement,” he says. Nevertheless, celebrating quartz is an unusual move in a Swiss industry that has promoted the emotional value of traditional mechanical craftsmanship over the superioraccuracy and simplicity of e l e c - tronic circuitry. To do this profitably, however, it had to learn how to take advantage of quartz. It was Mr Hayek who made this possible. Post-1970, as the Swiss industry grappled in vain with how best to employ quartz, the Japanese ran away with the market. The original, gold-cased Seiko Astrons cost the same as a Toyota Corolla car, but the simplicity of the engineering allowed the price to come down quickly. By the mid-1970s, Seiko was producing cheap, reliable quartz watches in their millions, while digital watches – another consequence of quartz – took consumers further away from the analogue beauty of traditional watchmaking. In the early 1980s, Swiss banks gave Mr Hayek the task of salvaging an industry that had lost 60,000 employees, numerous revered brands and most of its market share since quartz’s introduction. He recognised that the only way to restore the prestige of Swiss watchmaking was by cracking the market where prestige counted for little. “Until Hayek came in, everyone was stuck on this old business model in which a watch was just there to give you the time, and you’d have one watch for life,” says Professor Stephane Garelli of IMD Business School. “The genius of Hayek was to recognise that the perception of watches had changed from giving you the time to expressing an emotion and a state of mind, and that could vary.” Quartz had made watches into accessories, and Mr Hayek oversaw the production of the ultimate accessory watch, the Swatch. Released in 1983, it was a cheap, disposable, plasticsealed design classic, and became a defining symbol of 1980s style, selling in its millions. Mr Hayek’s revolution was as much a management masterstroke as an exercise in style and marketing. The two biggest watch companies were merged into what would become the Swatch Group, ailing brands were bought up and repointed, production was streamlined and the glorious traditions of Swiss watchmaking reborn. “Conquering the quartz market gave him the money to reinvest in the high end of the industry,” says Mr Garelli. “There are very few entrepreneurs who are able to manage mass-consumption on the one hand and prestige, exclusive brands on the other.” While few shout about it, quartz still plays a fundamental role in Swiss watchmaking. The lion’s share of Swiss watches sold – if not of the value – are quartz, and a number of quartz models are to be found in the collections of brands such as Tag Heuer. Thin, heavily bejewelled quartz women’s watches also provide some luxury brands with significant margin. Seiko, meanwhile, continues to be associated with the best of quartz technology – the new Astron is arguably the most advanced quartz watch yet produced. It is accurate to an extraordinary 10 seconds a year. “Our intention with the Astron is to say t h e quartz era is j u s t beginn i n g , and it’s n o t merely a b o u t c h e a p , throwaway watches,” says Rob Wilson, the company’s internationalmarketing manager. “After 40 years, maybe there should be a rebalancing of the enormous amount of negativity that we hear about quartz.” Seiko’snewAstron,perhaps its mostadvanced quartzwatch Watches&Jewellery Flyingtheflag:Seiko(above)andGirardPerregauxhaveproducedexpensive,quartztimepiecestocelebratetheanniversaryandpublicisequartzasatechnologywithluxuryclout
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Bright shine that may be short lived - Financial Times

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