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Rejuvenation in Old Watchmakers

Su Jia Xian looks at how watch brands that fall from grace bounce back and become more successful than ever.

Watch brands, like luxury brands in general, rise and fall with changing tastes. But their fates are unpredictable, as the lucky ones can be brought back from the edge of the grave. That’s because a brand tells a story and represents an idea.

When the idea goes out of fashion or the products the brand creates diverge from that story, the brand’s equity weakens and its products fall out of favour. But ideas can be reinterpreted, reimagined and rejuvenated.

In fact, the entire Swiss watch industry is an awe-inspiring tale of rejuvenation. From its nadir in the 1980s – the workforce in Swiss watchmaking was down three quarters – as a result of the rise of the quartz watch a decade earlier, the Swiss watch industry staged a roaring comeback. Last year saw record figures for watch exports and record margins for many of the big watchmaking groups.

This success was premised on the simple shift – watchmakers went from selling objects that told the time to purveying objets d’art. Watches remained watches, but they conveyed an entirely different message on the wrist.

The idea of rejuvenation is well illustrated by several of the most prominent and lucrative watch brands. Officine Panerai, founded in 1860, and Hublot are two notable examples of how immensely successful that rejuvenation can be.

Before the Richemont luxury conglomerate acquired it for a pittance in 1997, Panerai was a minor Italian manufacturer of instruments and watches for maritime and navy use. Though several celebrities sported its timepieces – action stars like Sly Stallone and Arnie Schwarzenegger were big fans – it was a tiny, niche brand. In its entire pre-Richemont history, Panerai had probably made only several hundred timepieces.

After the takeover, the brand was uprooted from Italy and moved to Switzerland. Boosted by heavy marketing along with shrewd leveraging on its celebrity wearers, it is now a powerful global brand.In recent years, Richemont chairman Johann Rupert has repeatedly cited Panerai as one of his most successful investments. In fact, he has noted publicly that the first limited edition made by Panerai after the takeover – the platinum-cased Radiomir PAM21 – was profitable enough that the series of 60 watches paid for the entire cost of the company’s acquisition.

Richemont does not reveal figures for the individual brands in its portfolio, but Panerai’s return on investment since 1997 is a figure that would put most private equity funds to shame.

Hublot, launched in 1980, is another grand success, one that is as personality-driven as Apple was under Steve Jobs. Jean-Claude Biver, himself a key figure in the revival of the Swiss watch business in the ’80s, took over in 2005. Not unlike Jobs, Hublot was his third act – earlier in his career, he had created Blancpain and then revived Omega.

The brand was then a faded star. It had enjoyed great popularity in the ’80s, thanks to its unusual combination of gold cases with rubber straps. But, by the time Biver took over, rubber straps were no longer a novelty and its watches looked sadly dated.

The irrepressible Biver took the same formula – rubber and gold – and fashioned it into the watch of the decade. He made Hublot bigger and shinier, creating the perfect timepiece for the go-go years just before the housing crisis.

In expensive nightspots around the world, Hublot watches were suddenly easy to spot from across the room. By 2008, when luxury-goods conglomerate LVMH acquired the company, Hublot sales had grown almost tenfold in just four years.

The purchase price was reputedly 400 million to 500 million Swiss francs (S$562 million to S$703 million), with Biver taking a fifth for his stake in the company.

So what is the next great revival in watchmaking? It’s likely that it will not happen any time soon, with the slowdown in watch sales overall. It will take the next great era of irrational exuberance to produce another irrationally exuberant watch brand.