Transcription
Back during COVID, if you wrote the word "watch" on a piece of dog turd, chances are you'd still be able to sell it. Swatch and Omega certainly proved that. Now, with a shrinking market, global tariffs, and reticent buyers, the wheat is being sorted from the chaff. But in the collateral damage, there are some incredible watch brands that are taking the fall as well. Today, I want to have a look at some of those brands, try to understand what they're getting wrong, and see if we can't figure out what it is that makes a successful watch brand right now.
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I want to keep this thought process otherwise uninterrupted for both of us. So, I'll frontload my begging. If you like this kind of video, please do like, comment, and subscribe. And please check to see if you are still subscribed. If you'd like to support me further, you can pick up some of my merch from the link in the description. You can also join my amazing Patreons who really do allow me to make videos like this that I enjoy so much. So, a huge thank you to them. There's a link to Patreon in the description, too, where you can join us for extra content and chitchat about watches. Thank you.
I'm using the Morgan Stanley Report collected with Watch Charts to look at brands' performance over the past 8 years to see who's climbed the top 20 rankings and who's slithered down like a despondent snake. Of course, Rolex crowns the leaderboard by, well, selling all the watches. And were this six years ago, longtime rivals Omega would have been right behind. They're not anymore. Living up to their part of the Alpha and Omega bargain and slipping down towards the back. According to the Morgan Stanley report, Omega are in fact dangerously close to losing a slot to Audemars Piguet. Next, closer to them in revenue than they are Cartier, despite selling 10 times as many watches as Audemars Piguet. We're talking about the watch brand that starred in the moon landings, that gave us one of the first series-produced calibers in watchmaking. When Rolex founder Hans Wilsdorf was squeezing his spots in the mirror, Omega was celebrating 50 years of being the best everyman watchmaker. It's not just recently that Omega's had troubles. It struggled to negotiate the transition to wristwatches. It struggled to negotiate the transition to sports watches, and it struggled to negotiate the transition to quartz watches, too. My dear old Nana is better at adapting to the changing times, and she's been dead for a decade.
Omega understandably has a bit of a Rolex obsession. We all do. It tried to undercut it on prices, to which Rolex promptly flicked it in the balls with the revamp of the Daytona. It tried to copy it with a colorful release of Aqua Terras identical to Rolex's Oyster Perpetual Collection, to which Rolex dunked its head in the toilet with the celebration dial. Omega even tried to eat Rolex's rainbow-colored lunch with a multicolored gem-set Speedmaster, which actually kind of worked, with resale values holding strong for this unicorn's afterbirth of a watch. And up until 2020 and the start of COVID, that kind of stuff at least helped it not exactly keep up with Rolex, but stay ahead of everyone else until Cartier came steaming by. It was on the cards for a while and ultimately signals issues with what the company is trying to do. Don't get me wrong, Omega's hardly about to shut its doors, but given its history, it shouldn't be looking up the skirt of a jewelry company's watch division either.
Here's the biggest [music] problem. When was the last time you saw a woman wearing an Omega? Not one who was paid to. Okay, fine. Name two, then. Compared to Rolex and Cartier, Omega just ain't it for most women. Hard to compete with two brands who've managed to double their customer base and, in Rolex's case at least, double its unit volume. But what about Audemars Piguet catching up? They sell the odd ladies' watch as well, but they're not going to be battling it out with Cartier for market share of the fairest sex anytime soon. Audemars Piguet has its own set of concerns, which we'll talk about in a bit. But at least in comparison to Omega, it kind of has a plan. By comparison, Omega isn't just throwing it at the wall to see what sticks. It's rolling around in the stuff and then complaining when some gets in its mouth. The insistence that the MoonSwatch is a good thing for Speedmaster sales is just lunacy. I haven't heard that much crap since my job passing out hand towels in a Taco Bell bathroom. A catalog with more options than a BMW settings menu screams desperation. The excellent Caliber 3861 existing alongside the reverse-engineered 321, despite being very cool, feels like bets more hedged than a man-of-war garden. Omega is flailing. The Speedmaster is available for $300 and $300,000, depending on how long you want it to last. Not to mention the uplift in prices. Yes, every watch brand seems to have the same relationship with inflation that I do with my father, but Omega in particular seems to be injecting some new blend of fentanyl that's got it so bent over all it can see is up its own butt. The Seamaster used to be roughly half the price of the Submariner. Then it jumped up to 2/3. Now they've got a new one that's got less features, no date window, and [music] that's 3/4 the price.
Here's a conversation I've heard a few times internally at struggling brands that perhaps they had at Omega. "Hey, since we're selling fewer watches than we were before and therefore making less money, why don't we just up the prices so we actually make more money than we did before?" Genius. And then everybody clapped.
This next brand breaks my heart to talk about. And in introducing it, I want to share an anecdote about it first. This is about where it was at 20 years ago. Sat comfortably alongside Patek Philippe in revenue terms. Since then, Patek Philippe has absolutely monstered its life goals, leaving its compatriot of many years languishing behind in exactly the same place it left it. Have you guessed who I'm talking about yet? Blancpain. You can't know anything about watches and not know that he was the absolute dude. He had a brain the size of a planet and he put it to good use, laying down the law for the likes of Patek Philippe and Audemars Piguet to come. Blancpain was spitting gears 64 years before Patek Philippe and a whole century before Audemars Piguet. To put that into perspective, that's pretty much the difference between Alexander Graham Bell and Steve Jobs. So, how do I put this delicately? What the chronometer-rated is going on? How does a brand with the incredible history and legacy of Blancpain go from a retirement-age head start to level pegging to just outright getting pegged by Patek Philippe and Audemars Piguet? Well, I think perhaps with the lower volume, high-end example of Blancpain, we might even uncover a little more about why those weird decisions are being made over at Omega as well.
We'll pick up on Blancpain's story at its 1975 post-quartz revival at the bench of watchmaker Daniel Roth. Yes, the very same. Before he took to signing dials with his own name, he was able to claim responsibility for bringing the incredible brand back to health. Not only was he a top-notch watch bloke, he also understood the true identity of the Blancpain brand. This is important foreshadowing, so remember it for later. There are a few people who understand the Blancpain brand. François-Paul Journe is one of them. But Daniel Roth actually got to steer the tiller for a period, and with it came a resurgence that put it back in its rightful place on the map. This quite unsurprisingly garnered the attention of investors. And in 1999, Blancpain was acquired by the Swatch Group, owners of, amongst many other watch brands, Omega. That was a satisfying puzzle piece clicking together, wasn't it? It was part of an ongoing battle between the Swatch Group and another luxury conglomerate called Richemont to hoover up the vestiges of the quartz crisis in the hopes of landing a winner. For the Swatch Group, the biggest winner would be Omega. And for Richemont, it would be Cartier. Blancpain, on the other hand, all but got abandoned on the shelf alongside Glashütte Original, Panerai, and Jaquet Droz. But I'm getting ahead of myself.
How did Daniel Roth, a watchmaker at Audemars Piguet, come to be creative lead at the incredible Blancpain? Brothers Jacques and Pierre Crosetta, children of the famous Crosetta jewelry family, had acquired a deteriorating Blancpain in the hopes of reviving it. But given their limited experience and desire to not do a job, they knew they needed someone better suited to the creative role. Daniel Roth was not only Blancpain-obsessed, as many watchmakers were, are, and will continue to be, he was also an unbelievable talent. But even he, before he took the job, spent a year back at watchmaking school recreating a Blancpain pocket watch in order to effectively get into character as one Mr. Abraham-Louis Breguet. From there, he didn't try to paint his own picture of what a Blancpain looked like. Rather, he chose to make the watches he believed Blancpain would have made himself, were his big brain not 6 feet under feeding worms. Daniel Roth got it. He understood why Blancpain made watches in the first place. He understood his obsession with an aesthetic driven by readability and function. He understood why complication was so important to him. Daniel Roth's watches are now some of the most collectible Blancpains ever made, all because he understood the identity of the brand. And there it is. Unfortunately, Jacques and Pierre got into a bit of a pickle with the tax man and ended up in prison for 6 months for fraud. And so, Roth noted it out of there to start his own thing, and Blancpain was sold to a company that couldn't sound any more evil: Investcorp. Investcorp eventually sold on Blancpain to the Swatch Group in pursuit of more on-brand investments like Volcano Layers and Secret Moon Bases.
When you think of big corporations, what comes to mind? Is it passion, obsession, and focus? Or is it quarterly reports, board meetings, and fake potted plants? The nuance that Daniel Roth extracted to breathe life back into Blancpain was but a fart in the wind compared to the incredible ambitions of the Swatch Group. That is, to make money. Think about it. The success of 1970s Blancpain was down to one dude. One. If he'd said no thanks to the Crosetta boys, or he'd skipped that year at watchmaking school, getting to know Blancpain like the folds of his own nutsack, Blancpain could today be just a name in a museum. The differentiating factor is just so delicate that I don't think big corporations can realistically cultivate [music] it. Instead, they treat it with the heavy-handedness of Tom Cullen stroking a dog. M-O-N spells money.
Take Jean, probably the most successful Blancpain cover band. When old Jean hangs up his tiny screwdrivers and calls it a day, a big group is going to come knocking. And when they do, they're going to scoop it up and break it by trying to up revenue, ultimately killing profit. What makes Jean distinct? The machinations of one single man. Take him out of the equation, and all of a sudden, you've lost the lead singer. The best you can hope for is enough budget to brute-force delay the decline. At worst, you'll get whatever in the hell happened to Roger Dubuis. They screwed that brand so hard it needs a wheelchair.
To demonstrate the point even further, let's take a look at the watchmaker's watchmaker, the cuckold of watchmaking, Jaeger-LeCoultre. Founder Antoine LeCoultre was, I imagine, someone who'd be considered a little on the spectrum today. A man with such obsession for engineering on the micron level that he even went and invented the first instrument that could actually measure a micron. If he'd been alive today, he'd be fine-tuning his DPI settings in Counter-Strike instead. He was a nerd. His company was picked up by Richemont in the 2000s along with IWC and A. Lange & Söhne, all of which had been successfully revived by a name you should most certainly know if you want to reach peak watch nerdism: Günter Blümlein. Günter wasn't a Harvard Business graduate or a finance mogul or even an investment guru. He was an engineer, an obsessive one, a little bit like Antoine LeCoultre. He decided that mechanical watches ruled and quartz definitely drooled. Where Omega grappled with space-age quartz abominations, he had Kurt Klaus realize a perpetual calendar complication that could be adjusted entirely by the crown, so long as it wasn't backwards. He brought the Lange 1 out of Saxony, A. Lange & Söhne's most important creation to date. And for Jaeger-LeCoultre, he encouraged the reverse engineering that revived the Reverso, without which the brand would not be here today. He got it. He understood what made those brands different and what made them great. He knew how to recognize the talent needed to realize those brand identities in crystal-clear Dolby Vision.
Today, however, the brand is managed by an accountant, a man who joined as financial controller in 1996 before rising to the top jobs 6 years later. He's still there today, although he was gone for a stint as Richemont CEO before he, um, came back again. You'd have to ask him why, but I imagine the downward trend of many Richemont brands on the Morgan Stanley chart might have had something to do with it. But to be fair to Mr. Lampert, why can't an accountant be CEO of a watch brand? After all, being CEO is a role that primarily seeks to consolidate the talent within the brand, not make every decision themselves. If an engineer can be responsible for the finances of a watchmaker, then a financier can be equally responsible for the engineering. Surely? Well, no, I don't think so. Or maybe only if that engineering is entirely budget-based. A business that makes nuts and bolts might thrive under a financial eye. A business that turns those nuts and bolts into expensive fidget spinners you buy with your emotions is probably not quite the same fit.
When I meet people who buy into these interesting mechanical brands, usually there's some kind of insatiable curiosity behind it that just can't stop at Rolex. It's a curiosity that Daniel Roth has, that Günter Blümlein had, and that F.P. Journe has between bouts of grumpiness. And that curiosity is the lifeblood that keeps watchmakers alive. It doesn't have to be that way, however. Group brands can be successful. Cartier, part of the Richemont Group, is clearly doing gangbusters. Vacheron Constantin as well. Well, I think we may be looking at numbers that are a little skewed because, in the case of Vacheron Constantin, if you took the previously unloved Overseas out of the equation, I think it might paint a different picture. One by numbers by a child with poster paints. We'll talk a little bit more about the Genta effect in a minute. As for Cartier, it's such a giant that really it gets to operate pretty much independently of the rest of the Richemont Group. When Jérôme Lambert was CEO, his authority didn't cover Cartier, probably just as well. The Parisian brand understands that its customers are connected to it by emotion and not by the bottom line. That's given it a false field of protection since, you know, it's one of the only Richemont Group brands that's actually posting a decent profit. Richemont actually has a new CEO now, one who led Van Cleef & Arpels to success and a man who may perhaps be just a little bit curious himself. I'm very interested to see how that goes because if he can bring any of the creativity and imagination that was allowed to flourish at Van Cleef to the rest of the group, they could be on to a winner. I don't think being part of a large group is a self-fulfilling prophecy of failure. It's more that failure becomes a lot more likely because there are so many more people to get in the way of creativity. Instead of dreamers, you get thinkers. Thinkers who think in business and finance, and not joy and excitement.
I've been increasingly dismayed by a circular pattern I see with brands I like. Often, it seems led by some venture capital approach to maximum growth. It starts with a new, exciting company that does things better and perhaps even cheaper than the established competition, which attracts the attention of investors who inevitably drive up profitability by lowering quality and increasing prices until they hit a run rate that gets them bought up by a big conglomerate who strip out any last vestiges of passionate originators and replace them with qualified business and finance people. And then it all goes down the toilet. If the brand gets lucky, it's then sold back out the group and revived by a passionate individual who gets what it was originally all about. Maybe I'm being naive, but what's not enough about being successful by, you know, being good at what you do, by being different and interesting? That can be profitable, too, as Breitling have demonstrated by getting creatives involved that have brought that brand back onto people's radars. Funnily enough, the guy in charge of Breitling went toe-to-toe with Richemont's former CEO for that top group job, but had enough of all the corporate games and went out on his own with Breitling instead.
Recently, I had a conversation with one Maximilian Büsser, CEO of MB&F, about the investment from Chanel. Chanel, if you didn't know, has minority shares in F.P. Journe and Kari Voutilainen as well and is known for leaving the brands they invest in well alone. So, Max was telling me how when Chanel were doing their due diligence, he pitched them his 5-year plan. It went something like this: "Year 1, he said, is a bit lower than this year because coming out of COVID, demand was dropping down a bit. Year two stays steady. Year three moves up a bit, maybe, but not much if it does. Year four, kind of the same. You know, stable, but not a hockey stick graph to the moon." Chanel questioned him, asking him if he really wanted to show this lack of strong growth to the people investing in his business. "Yes," he said, "MB&F is here to support its staff and make collectors happy, and that will continue to be the plan." Chanel invested. Why is this the exception and not the norm? Why is Blancpain not a small team turning out just a few thousand incredible watches a year like F.P. Journe does? Why does it have to be a bloated, loss-making mess that has so many people involved who couldn't care less about watches? And that applies to many of these group brands where a few incredible, passionate, talented people are strangled into silence by the loudmouth business school brains that don't know their arbor from their elbow.
I said we'd briefly revisit Audemars Piguet and any watches that were designed by or influenced by Gerald Genta because that's been a whole bubble in and of itself that's thrown a real curveball for a lot of brands. Through COVID, the integrated bracelet watch has gone from being a complete non-starter to the absolute best seller. And where some brands have avoided pivoting their entire brand to fit in one basket, others like Audemars Piguet seem to have jumped straight in with both feet. To say out loud that Audemars Piguet is in fourth place and chasing after third by retailing somewhere in the region of $2.3 billion worth of Royal Oaks, Royal Oak Offshores, and Code 1159s is kind of nuts. We know the bulk of that isn't Code 1159s, so that's a lot of Royal Oaks. Yes, brands have their halo models, but the Daytona isn't making up the lion's share of Rolex's revenue. In fact, the complete opposite. The numbers are low, and its desirability drives sales to the Datejusts that you can actually get. Audemars Piguet's performance is impressive, but it's just not sustainable. Look how many watches Patek Philippe has on its site and how rare Nautilus and Aquanaut allocations are, and then realize they're making less money than AP, who only have one non-Royal Oak model. And that Code 1159 only came out in 2019. Talk about threading the needle. With no fallback, the inevitable decline of integrated mania. Royal Oaks in colors other than blue go below retail now, would see a massive crash in the brand as the decision would have to be made to either lower prices to draw sales or reduce volume to maintain demand. Audemars Piguet didn't have their Datejust with the Code 1159 until 2019, and it was a completely new model and not something they've been historically known for. For a company that's existed since 1875 to have a catalog with its oldest model originating from a century later is weird, to say the least.
There's been some recent churning of the rumor mill that suggested new Audemars Piguet CEO Ilaria is stepping down after just 2 years, and the resounding response seems to be one of relief, given how AP seems to have found itself in this very precarious situation. But I don't think that's fair. I don't know if she's leaving or not. AP themselves say not. But given that product development cycles in this business take around 5 years, she's not really had any chance to demonstrate her capabilities yet. Anyway, she's currently sleeping in the bed made for her by someone else. Audemars Piguet isn't alone in this. Vacheron Constantin's recent success seems to be in a great part due to the good vibes around the Overseas and other watches of its ilk. And they capitalized on that by bringing back the 222, the watch that became the Overseas. But what happens when interest in integrated disintegrates, which it already is doing with blue-dial Overseas dipping below retail back to obscurity?
Daniel Roth understood something very important, and credit to the Crosetta and now Dionis, they understand something too. People buy things they need and things they want. Things they need, they buy for logical reasons. Things they want, they buy for illogical reasons. A Blancpain, an Audemars Piguet, a Vacheron Constantin, they're [clears throat] all illogical purchases. And to make that lack of logic make sense, they need to be steered by someone who gets it. Not a businessman, not an accountant, not a board of executive directors. Someone curious. It can be a big brand, it can be small, it will be what it will be, but it will only be a success if it truly has identity. Because without identity, who are they? They're, well, the scariest thing of all, the thing nobody wants to be. They're nothing.