Reduce, Reuse, Recycle

Maurice Lacroix has joined the small group of kaputtniks who have opted not to participate in a traditional, large fair this year.

Again, my gut is telling me that this is not a reaction to what they may (or may not) feel is a poorly run fair.  Maurice Lacroix always had a good sized booth, and "drinky-night" was every night.  But I also know that sales have been iffy for some time, a few different heads of North American sales & distribution have been through the turnstile, and DKSH (their parent company) had been looking to offload them along with Glycine for quite some time.  Sort of like the local appliance store's "semi-annual" going out of business sale, only trying to sell a brand worth (according to the sellers) a whole bunch of money.

Unlike some of the other commentators out there who have been quoted with such bon mots as:

"If I don't get business class and a 4 star room IN BASEL?  I'm not going!"

Well, some of us are not quite so precious, so unless we get down to 10 brands in hall 1, I will certainly be there.

There are going to be brands who bow out - and if I am being blunt, these are brands that had a LOT of opportunities to make economies elsewhere (say, not sponsoring that yacht, for example), but refused to do it.  And now it's time to pay the piper. 

And for those who are believing the pundits who are crowing about increased export numbers and how that MUST mean that sales are up?  Walk into a Tourneau, or pretty much any other watch retailer.  Sales do not match the exports, which means the exports will continue to prop-up the grey market, which means that Touch of Modern will continue to do a brisk trade, which means that retailers will continue to feel the pinch, which means that they will look to other, smaller and/or unique brands to gain back customer share.  Which seems only fair as the big dogs are kind of sticking it to them right now.

So we shall see, but not to worry, there are plenty of other brands out there ready to take some space in BaselWorld.

Glycine is Now Owned by...

Invicta.  The official confirmation was just forwarded to me by DKSH about an hour ago.  So press release first, commentary to follow -

DKSH sells the Glycine watch company to the Invicta Watch Group 2016-08-11

DKSH sells its majority stake in Glycine Watch S.A. to the Invicta Watch Group, a US watch manufacturer.

Zurich, Switzerland, August 11, 2016 – DKSH (SIX: DKSH), the leading Market Expansion Services provider with a focus on Asia, sells Glycine Watch S.A. to the Florida-based watch manufacturer Invicta Watch Group. With this step, DKSH continues the restructuring of its luxury goods business which has made good progress since being announced in mid-2015. The parties have agreed not to disclose any financial details of the transaction. 

Dr. Joerg Wolle, President & CEO, DKSH, commented: “Selling Glycine to Invicta is a further important step in the ongoing restructuring of our luxury goods business. At the same time, we are convinced that the Glycine business is in good hands. The restructuring of the luxury goods business is well underway; we are delivering what we promised.” 

Invicta was founded in 1837 by Raphael Picard in La Chaux-de-Fonds, Switzerland. Glycine with its long heritage joins the Invicta Watch Group's other respected brands. Eyal Lalo, CEO of Invicta, stated: "I am very excited about Glycine joining the Invicta family. The synergy between the two brands will create growth for Glycine. It is our commitment to remain dedicated to preserving the quality and long history that made Glycine the respected brand that it is today. We will support Glycine while maintaining its independence and rich Swiss heritage."

Glycine was founded 102 years ago and since then has been producing premium watches at its factory in Biel, Switzerland. Lower demand in Asia, ongoing industry consolidation and the appreciation of the Swiss franc has led DKSH to restructure its luxury goods business – including the possibility to divest. 

Okay, let's discuss!

First and foremost, this is good news for everyone involved.  DKSH had not really been investing the funds needed to anything other than just keep the boat afloat.  And in these particularly treacherous times for the watch business, it is a recipe for disaster to simply keep the lights on.  It was common knowledge that Glycine needed to be sold, and although DKSH had really been working to sell Maurice Lacroix as well, this is at least one under performing asset off of their balance sheet. It also gives Invicta some actual legitimacy as a group, but one mid range brand, bundled with a bargain basement TV brand and an ailing fashion brand does not a "super group" make.  So although this is one acquisition, Invicta has truckloads of money and I suspect that they are circling other brands even now.  And say what you will about quality, customer service, etc.  for better or worse, the one thing that Invicta is good at is selling watches.  

The interesting thing in all of this is the "doom and gloom" being spouted by the various watch forums by fans - not necessarily customers by the way, but watch fans.  The logical presumption is that Invicta could not possibly be a good steward for Glycine.  But that is a wonderfully short-sighted view.  Invicta, in fairness, does have some baggage.  But it's important to understand what Invitcta's role here really is - financier.  Invicta has stated that they will leave Glycine as it is.  While that might be true in terms of staffing for the immediate future, it may likely change by BaselWorld next March.

But what I do feel likely will happen as soon as the ink is dry and the notary has signed off is a fairly aggressive push to clear inventory and bring in cash.  And it is therefore quite likely that Glycine watches might be found on one or more of the "shop at home" television programs in the months leading up to the end of the year.  Because for better or worse, Invicta has oftentimes turned to the short term, quick sale solution.  It is good for sales overall, gets watches purchased and lots of exposure.  On the other hand, it makes it challenging to drive actual retail partners or direct sales through a company website when you are constantly discounting your own products on TV.  It raises the inevitable question of - what is this watch actually really worth?  Glycine at present does not have much of a retail presence in North America, so there are really only so many people you could upset with his strategy. Fortis was dumping watches at less than keystone about a month ago on TV, so maybe this is just what has to happen to clear through the inventory.  Unfortunately, it then conditions future customers to expect the watch to be 70 - 40% of what the actual retail price is.  It is a slippery slope, and one that is not easily reversed one it has started.

From that point on, who knows?  But as is often the case in these situations, time will tell.

Yes, No, Maybe...

So news has reached the North Shore along with pretty much every corner of the watchosphere that perhaps, maybe, it is possible, that Invicta has purchased Glycine from DKSH.  Then again, maybe not.

Requests for comment/confirmation from both Glycine and Invicta have returned a somewhat deafening silence, so we will wait, and we will see.

If/when there is confirmation, we will let you know.  Stay tuned!

Revisiting the UN Sale a Year Later

I originally wrote this a little over a year ago when the sale of Ulysse Nardin was announced.  Now a year on, and things not quite as rosy as might be wished for, I wanted to look back and see how things have changed (and haven't).

"I look at a hundred deals a day. I pick one."

So now with most of the dust settled and the press releases read, re-read, written and re-written maybe it might be a good time to have a look at the bigger picture.

Now many more revered and respected have held forth, many insisting that they saw the acquisition of Ulysse Nardin coming "a mile away!"  Well, hindsight by its very nature is often 20/20.  So I thought I would call on that all-time humanitarian Gordon Gekko to perhaps view this in a slightly more pragmatic light.


 "He's right, I had to sell. The key to the game is your capital reserves, If you haven't got enough, you can't piss in the tall weeds with the big dogs."

I think in light of all of the speculation, the one question I have not really heard asked is - maybe, just maybe they actually NEEDED to sell?  Ulysse Nardin was a media darling in the age of Schnyder, and by that I mean the age of Rolf Schnyder.  Like every brand re-boot, (and if we are very, very honest with ourselves, this is what it was) a charismatic, iconoclastic visionary is needed.  But that in and of itself is not enough (note Blancpain and Hublot in the "post Biver as Patron" era).  You need something more.  The meeting of Schnyder and Ludwig Oechlsin was perhaps not unlike the meeting of Smith and Wesson… or perhaps more appropriately the meeting of Lorenzo de' Medici and Michelangelo.  Two things happened that took the steam out of UN's engine - Dr. Oechslin opted to pursue a life of the mind and "museum curatorship", and tragically, Rolf Schnyder had a "standing appointment" with his creator.  As it is a privately held company, we can speculate all that we want, but if I am viewing things through "Gekko The Great's" perspective, they needed to sell.  And it is possible that maybe there weren't that many takers, so they took.

And in fact, that perhaps still seems to be the case.  What is interesting in all of this is that with the acquisition of UN, Kering has basically put JEANRICHARD on an ice floe to join it's ancestors in the great beyond.

"It's not bad for a quant, but that's a dog with different fleas."

The other popular thought out there is that there was a bidding war and that somehow Richemont, LVMH and the mighty SWATCH got pipped at the post by Kering.  Survey says……. NAAAAHHHHH!

The Ulysse-Nardin that got sold is not the Ulysse-Nardin that was.  Moreover, it is not on a level with some of the recent blockbuster acquisitions like Harry Winston.  It is a great brand, but it represents a truly niche market.  SWATCH does not want or need a charming brand like UN.  Richemont has a fairly full stable.  LVMH?  Well let's just say that although there is turmoil under heaven, the situation is not exactly excellent.  

Again, with the "leaked" (allegedly) news that Maurice Lacroix was looking for a buyer, and a lack of companies STAMPEDING to buy it, my bet is that UN was probably NOT exactly fought over.

"The most valuable commodity I know of, is information"

But more importantly is what Ulysse-Nardin represents - information and innovation.  With Unlysse-Nardin backing what is said to be up to 1/3 of ochs und junior (Ludwig Oechslin's dream factory), and with Dr. Oechslin said to be retiring from the museum, it is not outside of the realm of possibility that the magic could be returning to UN.  Let's be clear, ochs und junior is most likely never going to be a profit leader, (and if what Beat Weinmann has said, it is not intended to be).  But let's just say it is an inexpensive item to carry on the balance sheet to keep the sorcerer in the court.

And, well, it seems the writing might indeed be on the wall.  Let's hope for watch fans and for UN's profitability that there will be some more Oechslin magic.

"You gonna tell me the difference between this guy and that guy is luck?"

Remember pals and gals, although we always think of Kering as the OWNER of Girard-Perregaux and JEANRICHARD - they are more accurately the majority stake holder with 51%.  So the fact that they have plumped for 100% of Ulysse-Nardin actually gives them a better, unfettered toehold in the luxury watch segment.  And it is not down to luck that they were the eventual buyers.  

Don't get me wrong, UN is going to be a project, but with the experience of working with Girard-Perregaux and completely revamping and "re-birthing" JEANRICHARD, Kering now has some good experience with updating and reviving an existing brand while not "throwing out the brand DNA with the bathwater".

And by putting a pillow over JEANRICHARD's sleeping face and smothering it, Kering has all but ensured more resources can now flow in the the UN budget sheets.

"...bright but not bright enough,  Sherlock, roll the dice and play a little Monopoly… what box would Sir Lawrence land on in Erie, Pennsylvania?"

Those out there convinced that Richard Mille is next on the acquisitions list… maybe, but I don't think so.  Let's just say that there are too many hurdles.  Richard Mille first leaked that the acquisition would happen, and Kering (then PPR) disclosed that although those conversations had happened, it would not move forward until Mille untangled "personal affairs".  That was more than a year ago.  And it is possible that Kering spent most of it's pocket money on UN.

Nobody has bitten on much of anything - although DKSH is keen to "offload" their two brands and who knows, maybe even their share in Bovet.  I could be wrong, but given the general mood out there, the lack of Full Retail Buyers, the number of grey market watches sloshing around the "info-web", and the ever increasing number of calls and emails I am getting from brand reps, brand managers looking for an opportunity, and the brands those managers and reps work for calling and looking for new talent, I don't get the sense that anyone is in a mood to acquire.  BUT, and it's a big BUT - this could also be the moment when changes of ownership will happen.  Things will get so clearly bad that a fire sale might seem like the only solution.  And even though things aren't great out there, maybe some folks in China have been saving their allowance, Christmas and birthday money and are ready to swoop in.

Other pundits have posited Breitling, Chopard among others as being on the potential hit list.  Maybe, but instead of thinking high prestige, it might be time for Kering to think high volume.  Maybe, say, a brand making watches in the Mido price range? 

I could, of course, be wrong - I've been wrong before ; )

Finally, let's remember that although we are all passionate, for many people this is simply business -


It's all about bucks, kid. The rest is conversation.

Ultimately, this is the unknown territory we find ourselves in.  In the great "quartz crisis" it was all about technology and the somewhat stoic belief that to change was unthinkable so it would be better to die.

Thankfully an engineer/consultant was willing to suggest change and in changing rescue the Swiss industry, and a man who as a boy loved his steam machine was willing to roll the dice that there were others out there like him, and more than anyone else saved and helped to reestablish mechanical watch making.

We who write about this stuff are always asking ourselves - who is the next Hayek, the next Biver, the next Macaluso or Stas?  It seems unfair because these guys were (and are) giants.  Those that follow will struggle to step out of those shadows.  But in fairness, those that follow need to do more than just follow.  They need to actually lead.  And when you've been groomed and guided and mentored, it is hard to establish your own point of view.  Moreover, it can be daunting to voice an opinion that might be contradictory.

I would like to leave you with a bit of a "parable" -

Back before longitude was "knowable", it was not uncommon for groups of ships to sail together.  And as you can well imagine, you would not dare make your own changes or alter course without the consent of the Admiral.  As oftentimes the Admiral was on a different ship, communication back and forth would be slow and confused. Moreover, the communication could often be misunderstood in transmission.  

What we are seeing now, for better or worse, is that brand directors, managers and sales reps are not unlike those captains and midshipmen of years gone past.  They see that they are heading for the rocks, but are afraid to voice concern and change course.  Thus not just one ship is lost on the rocks, but several.

Sponsoring sailing teams, appointing DJs as brand ambassadors - these money splurges are not going to save your brand from ignoring the fundamentals of ANY business - be it your kid's lemonade stand or Boeing.  It boils down to a pretty basic idea of supply and demand.  With the exception of Rolex and Patek, nobody else in the watch world seems to have an understanding of:

1.  How many potential customers there REALLY are, and -

2.  How many of those potential customers will REALLY be willing to buy their watch at the price they are asking

Once we get that figured out, on to world peace!

The Canary in the Coal Mine - Maurice Lacroix

Let's start with the facts:

Maurice Lacroix "shared" the news with Bloomberg that they were looking for someone to buy them.  Or more specifically the holding company DKSH has made the decision to exit the watch business.  Essentially, one way or another, DKSH wants to see the back of Maurice Lacroix as well as Glycine.  But the emphasis is clearly on MLC.

Those are the basics.  But I also think it's safe to say that MLC did not get here overnight.  The signs were there for those looking for them.  And perhaps the saddest part about this is that the people who really lose in this deal (or the other deals like this that will be revealing themselves shortly), are the people who bought into the elaborate vision painted for them.  From the customer who paid full price, to the retail partner who bought in, to the regional brand manager who trusted in the company.  Certain others have (or will) un-couple from the mother ship unscathed.  Smiling.  Happy.  On to the next brand or brands.  Others will have this following them, not unlike a stain on their favorite tie that no amount of dry cleaning will remove.  And while that isn't fair, fairness is a pretty malleable notion.

That is the way of business.  Some guys get the golden handshake, some get the fuzzy end of the lollipop.

And if you think this is the ONLY situation like this, the only brand that is in peril, you need to put down the crack pipe.  Others are treading water, sucking wind, hoping for another million or two to be injected.  And this is where the rubber finally hit the road for Maurice Lacroix and DKSH.  Consider this - in less than four years they have gone from the birth of a "super luxury group" buying Maurice Lacroix, adding Glycine, a stake in Bovet, to essentially engendering a yard sale to extricate themselves from the watch business.

I could be wrong, but I suspect that maybe this is one of the events that is going to mark a shift in the way that the watch world operates.   It was coming regardless of Maurice Lacroix's "news" this AM.  It just so happens that Maurice Lacroix rolled on it's back and showed its tummy first.  More brands will follow suit.  It is inevitable.  You will only throw money at a problem for so many years if you have a healthy detachment from you ego.

The DKSH folks enthused that there was "interest"... whether that is fact or hope remains to be seen. Safe to assume that SWATCH and Richmont will pass. Kering is getting ready to lay off people at UN, and JEANRICHARD is on life support. The other Asian players currently owning Corum and Eterna have their hands full. Corum is showing signs of life. With a truly gifted person like Samir
Merdanovic I have no doubt that Eterna movements just might supplant ETA. Eterna watches are another matter, but let's stick to one crisis at a time ; )

If anyone might be able to fix this I would put my money on the Stas family.  But they might not be interested.  Beyond that there is always LVMH, but the lion in winter might give both of these a pass as they are working on fixing Tag Heuer which is not exactly a small task.

So as ever, we will watch, we will wait and we will see.

I would like to leave you with this -

In many vineyards, roses are planted amongst the vines.  Why?  The roses are a bit more "temperate" than the vines.  If there is something "alien" that might infect the vines, the roses will get it first and the vigneron will have time to address it before the entire vineyard follows suit.  In times even further removed, miners kept canaries in a cage to ensure that the air was still breathable.  If the canary died, it would be your signal to head to the surface.  

So while this is regrettable, while it was avoidable, let us hope that it is not something that everyone in the industry will feel compelled to ignore because their hubris and arrogance has whispered seductive words of invincibility in their ears.  

So to "crib" from one of my favorite movies - Patton:

Patton: [voiceover] For over a thousand years, Roman conquerors returning from the wars enjoyed the honor of a triumph - a tumultuous parade. In the procession came trumpeters and musicians and strange animals from the conquered territories, together with carts laden with treasure and captured armaments. The conqueror rode in a triumphal chariot, the dazed prisoners walking in chains before him. Sometimes his children, robed in white, stood with him in the chariot, or rode the trace horses. A slave stood behind the conqueror, holding a golden crown, and whispering in his ear a warning: that all glory is fleeting.


  

Stop the Press! News from Bovet

This is just in from Bovet regarding their new strategic partner - not just a distribution deal, pals and gals, but also now a shareholder.  Here's the unfiltered info:



PRESS RELEASE

DKSH and BOVET in strategic partnership

DKSH Holding Ltd.

Date: August 28, 2012

DKSH, the leading Market Expansion Services provider with a focus on Asia, and the Swiss luxury watchmaker BOVET, have signed a long-term collaboration agreement for enhancing the position of BOVET timepieces in Asia. DKSH will assume marketing, sales and after-sales services throughout Asia, while also taking a strategic shareholding in BOVET and both its manufacturing facilities (DIMIER), thereby allowing for cooperation in the production and supply of watch components.

Zurich, Switzerland, August 28, 2012 – DKSH rigorously continues the strategic expansion of its Luxury & Lifestyle business. Following the selective expansion of its marketing, sales, and after-sales services network in the luxury and lifestyle goods sector by acquiring the long-established trading houses Desco von Schulthess and Hagemeyer-Cosa Liebermann, plus the marketing and distribution rights to, and controlling majority in Maurice Lacroix, the luxury goods activities of DKSH are being strengthened by a further significant strategic partnership. DKSH is taking on the exclusive marketing and distribution rights for BOVET timepieces in the Asia region, thereby complementing its high-status product portfolio in the premium segment. Moreover, DKSH is acquiring a strategic shareholding of 20% in BOVET, which covers both the BOVET 1822 brand and its two production facilities for horological components under the name of DIMIER. This move generates valuable synergies in manufacturing collaboration and in the supply of strategically vital components for watches.

“Today, the Asia Pacific region is the biggest market for Swiss luxury timepieces. We see DKSH, the leading independent provider for marketing, sales, and distribution of premium luxury goods in Asia, as the ideal partner for professionally marketing our premium BOVET timepieces in the growing Asian markets,” says Pascal Raffy, owner of BOVET 1822 and DIMIER 1738.

He goes on to say: “Promising perspectives are opening up through this strategic partnership. With the in-depth market expertise of DKSH in Asia and its comprehensive network, we are confident in the further dynamic growth of BOVET in this region.”

This strategic partnership with BOVET further strengthens the position of DKSH as the leading independent services provider for the marketing, sales and distribution of premium luxury goods in Asia. In addition to its blanket distribution network across Asia, DKSH also employs its own watchmakers in the core markets of Japan, Hong Kong, Korea, and China, ensuring professional and prompt after-sales services for those exclusive luxury brands.



Dr. Joerg Wolle, CEO & President of DKSH Holding: “We are proud of being able to represent BOVET when dealing with our long-established Asian customers. BOVET timepieces are synonymous with the highest levels of Swiss watchmaking art and technological innovation.”

“We are highly enthusiastic about the growth potentials and synergies that will be generated by the strategic linking of our comprehensive marketing, sales and after-sales services network throughout Asia with the manufacturing competence of one of Switzerland’s most exclusive and prestigious watch brands,” adds Gonpo Tsering, Member of Group Management and responsible for the Business Segment Luxury & Lifestyle at DKSH.

Both parties have agreed not to disclose any financial details of this transaction.

About DKSH Group

DKSH is the leading Market Expansion Services Group with a focus on Asia. As the term "Market Expansion Services" suggests, DKSH helps other companies and brands to grow their business in new or existing markets.

Publicly listed on the SIX Swiss Exchange since March 2012, DKSH is a global company headquartered in Zurich. With 650 business locations in 35 countries – 630 of them in Asia, DKSH employs Group-wide 26,000 specialized staff. In 2011, DKSH generated net sales of CHF 7.3 billion.

The company offers a tailor-made, integrated portfolio of sourcing, marketing, sales, distribution, and after-sales services. It provides business partners with expertise as well as on-the-ground logistics based on a comprehensive network of unique size and depth. Business activities are organized into four specialized Business Units that mirror DKSH fields of expertise: Consumer Goods, Healthcare, Performance Materials, and Technology.

With strong Swiss heritage, the company has an almost 150-year-long tradition of doing business in and with Asia, and is deeply rooted in communities and businesses across Asia Pacific.

About BOVET

BOVET timepieces are magnificent works of art, whose origins date back to 1822, the year in which Edouard and Alphonse Bovet founded their workshop in the picturesque Val-de-Travers region of Switzerland, shortly thereafter venturing into the China market and so becoming the first and foremost provider of exotic pocket watches to the Emperors and their courts. Today, under the guidance of Pascal Raffy, a visionary with a passion for Haute Horlogerie, BOVET is thriving, manufacturing exquisite and unique timepieces distinguished by their elegant pocket watch-inspired design, sumptuous details, and rare specialties.


From extraordinary complications with a focus on in-house tourbillons, to rare artisanal decorative crafts such as miniature paintings and fleurisanne engravings, each BOVET timepiece is brought patiently to life under the expertise and skill of its master watchmakers. BOVET seeks to preserve and cultivate the art and craft of traditional watchmaking, whilst taking it to new heights, much to the delight of the the most discerning connoisseurs and collectors throughout the world.