The Business of Watches [005] Frederique Constant CEO Niels Eggerding On Why He's Fighting To Keep FC's Perpetual Calendar Under $10,000

0:00Welcome to the Business of Watches, where horology meets high finance and each ticker tells a story of markets, margins, mishaps, and mechanical mastery. I'm your host, Andy Hoffman, Senior Business Editor at Hodinkee. In this series, we dive deep into the global watch industry, a place where centuries-old craftsmanship intersects with billion-dollar valuations, executive brand strategy, and investor speculation. From Swiss Valleys to Silicon Valley, we trace the movements shaping this uniquely resilient sector. Just how big is the business of timekeeping? Well, some estimates place the entire watch industry from ultra-luxury maisons to smartwatches and microbrands at north of$100 billion globally.

0:51But behind that figure is a complex web of legacy, innovation, and ever-shifting consumer tastes and demand. This is the podcast for collectors, analysts, watch buyers and sellers, and anyone who's fascinated by the intersection of wristwear and wealth. Because if time is money, then money is most certainly time. So let's get down to business.

1:20It's hard to think of a watch brand more international in its origins and ownership history than Frederic Constant. The value and volume-focused Swiss-based mark was started by a couple from the Netherlands while they lived in Hong Kong, and today it's owned by Japan Citizen Group. A stalwart among European watch consumers looking for a balance of price, quality, and classic design, Frédéric Constant is ranked among the 50 largest Swiss brands by Morgan Stanley and Lux Consult. And now it's looking to boost its presence in North America, especially the U.S. Running the show is Niels Eggerding, a Dutchman who has been with the brand since 2012 and in the managing director or CEO chair since 2018.

2:15There are a lot of moving parts with this brand at the moment, from the challenge of keeping the price of its perpetual calendar below 10 ,000 euros to sustaining demand and production of its low-priced models that account for more than 90 % of its volumes, and they allow the brand to keep pushing the envelope with high horology at approachable prices. And finally, growing the U.S. business at a time when tariffs are making the country hostile to Swiss watchmakers. Here's our conversation with Frédéric Constant, CEO Niels Eggerding.

3:01We're here with Niels Eggerding, who is the Chief Executive Officer of Frédéric Constant. You also oversee Alpina as well. Thank you for joining the podcast. I'm super happy to be with you, Andy. Excellent. Excellent. So, you know, let's start with where we are. We're more than halfway through 2025. It's been a challenging year. A lot has gone on. There's been a lot happening. Tell me, you know, where Frédéric Constant is at and what you're doing in this market? Yeah, so I think a brand like Frédéric Constant, we have been, you know, I always say that the brand has the diversity to act in multiple ranges because we do manufacture, but we also do a lot of volume.

3:52But manufacture is the biggest speaking and loudness of our storytelling, but it's only 7 % of our volume. How much percent? 7 % of our volume. 7 %? Wow. But it's high value. Yeah. But we still do a lot of volume in the manufacturer. So we do like three and a half thousand world timers a year. And that's just one movement we have. But 93 % is volume. And in the past years after COVID, we cannot neglect the fact that the hype was high end. And we could lift on this hype. We did Tourbillon. We did the Perpetual Calendro Tourbillon. We did exclusive world timers. We launched several new movements.

4:32And we really seen the success of that. But what you don't see with that is your margin because it's an expensive production line for us. And because we are accessible in price with that, we don't have a lot of margin there. We need the volume to basically reinvest back into innovations on money for tour. And I'm very happy that last year the volume picked up. And we are ahead of the game for me. We have invested a lot of noise, distribution, everything is well set. And for me, it's just a matter of not turning the machine on the right way. Let's talk about the history of Frédéric Constant. It has some history, it has some heritage, not quite as much as some of the other Swiss brands.

5:17But you've been here around 13 years and you've been in the CEO job for about eight years. But what is the history of Frédéric Constant as a Swiss watchmaker? It all started, I'm talking about 37 years ago, by a Dutch couple, Peter and Aletta Stass, the founders of the brand. They were expatriates in Hong Kong, and they always had a passion for watchmaking. They were traveling back from ski holiday up and down to Switzerland, looking at the windows at retailers, seeing the brands like Fascheron, Gilles Le Coutre, love the brands, but as a Dutch, you don't want to expand so much, right? So they came up with the idea, why don't we make a watch that has the same look, but is much more accessible in price.

6:04And they started to work on the kitchen table back in Hong Kong because Peter was working for Philips as a marketing director for products. And Aletta was doing legal for ING, the Dutch bank. And they were really doing it on the side. And they created some samples going back and forth. took them a year and they went to a hong kong-based show where swiss watch brands hong kong-based brands china brands were selling japanese brands and a japanese distributor was super interested and they were the first one placing an order of 300 pieces and there it all started so they produced of course with not having suppliers not having movements nothing so it took them two years to produce the moment they shipped the watch it was sold in one week and they placed an order of 3 000 pieces so for them the idea of having a watch brand and seeing the success was one but feeling the success was number two and they felt it and they went into okay this is this is a hit we can continue now and from there it really started and it built to a brand now after 37 years, I would say we are no longer adolescents.

7:16We are major, we are senior, but we are far from the big ones that are existing for 200 years. But still yet, we are in the top 37 watch brands in Switzerland. So it's quite an achievement, I would say, for a young couple in that time. And Frederic Constant and Alpina are part of the Citizen Group, owned by Citizen of Japan. What's the history of that acquisition? When did it happen? And what role does Citizen a big giant watchmaking company, play in the brand now? Well, it all started back in 2016. It took one year of discussions in that time with Peter and Aletta and they really wanted to have their feet into the Swiss business with a luxury brand, although close to volume.

8:01So there's a few options. And Frederic Constant is, of course, a serious option because they had the money for two complication. And Peter and Aletta were very happy to have the acquisition happened by citizen because value-wise, it's very similar. Although you can say it's much more volume than luxury, it's Japanese versus Swiss company. Keep in mind that the Japanese and the Dutch culture are very conflictual. Japanese are not direct. Dutch are very direct. So it has been a marriage, I would say, a bit complicated in the beginning. But the strength of citizen has been industrialization. They purchased Le Jouperet.

8:40Yes. a Swiss manufacturer in the center of Switzerland, La Chotte Fon. They have massive affiliates in the world where America is basically Citizen. You could say Citizen is the number two watch brand in the US, Rolex. Yeah. So what is an achievement? The team there has done a remarkable job. And we had difficulties to build distribution, in particular, the countries where Citizen was strong. And from day one, that has been a strong focus. How can we merge the brand into those affiliates? UK, Italy, Japan, China, US, Canada, Mexico, all strong companies, strong countries. Mexico, think about Mexico, how potential it is.

9:28US, huge potential. UK, Italy, one of the leading markets from Europe. So we really had the entry there on strong distribution. So, Citizen owns many other brands, many other manufacturers. You know, they own La Joupere here now. What interaction is there? Is there any connection with what La Joupere is doing and what Frédéric Constant is doing here in Switzerland? Yeah, absolutely. I think La Joupere has been a raw diamond tool in the past years and shown that they have capabilities of strong, innovative drive. So, they have brought their G100 movement. They have their L100 movement. They do all the modifications on movements.

10:10They do tourbillon. They do finishing. They work with all the big brands. On top of that, they really decided strategically to build together in that time with the LVMH group and solar quartz movement. Right. And recently, we have been able to launch it also in our brands. So Opina is the first one where we have access to that caliber. And for us, that's exactly what we needed. a volume-driven, sustainable movement that is, of course, with the heritage of citizen, a Swiss-made movement with that know-how in Swiss-made has been, for us, a strategic move. Interesting. And do we see, you know, there we see it with the new solar quartz movement, and you're using that in Alpina.

10:55Do we see La Jusperet movements in Frédéric Constant? Do we see, you know... Yeah, so definitely the G100 is one of their, let's say, in between a base caliber we have automatic, where we still work also with Sellita, for instance, that we do large volumes in, let's say, 995, 1295, 1495 range. And Le Jouperet, the G100 is more in a luxury, I would say, the premier collection. It's just below 2000 euro, US slightly above, but highly finished. It's a very qualitative movement, 68-hour power reserve, nicely decorated. And you can see that it's really a competitive move and a competitive movement.

11:39So definitely you will see more to come in the future. And, you know, when I first met you was probably back in 2022, and I was at Bloomberg, and you were here, and it was a different time for the watch industry. And you were talking a lot about, you know, moving up in price and moving up in complications and the kind of watches that Frédéric Constant can do and can make and can compete in with the rest of the market. You know, it's a different time now. Where are we in the strategy and in the watches that you're focusing on for your customers at this point? So I can bring you over a bit of range what we are doing, but I think it's more important to understand that how our collection is built.

12:25Number one is money for two collection. Starting price around three, three and a half thousand US dollar. And then you go to the classics, 60 to 70 % of our business. And then you have High Life. High Life is integrated bracelets, a little bit more sport chic. It was a collection that we created back in 2019 to launch in 20 because we were very classical as a brand and the trend in that time was less classic. Right. And we missed opportunity to engage with a new audience. So High Life was definitely a new audience for us. And it nicely integrated into the collection. The biggest storytelling we do is Manufacture.

13:05Although it's 7 % of the volume, it's 20 to 25 % of the value we are doing. And it's 50 to 60 % of the storytelling. Right. I do. Then if you go to movements, we start the collection of 795 euro. Let's say 850 US dollar. I don't know exactly the rates, but let's say 850. That's quartz. Then you go above 1000, you go to solar quartz now. Then around 1000, you have a base Sellita movement that goes all the way up with Le Jouperet to 2 ,500 euro. We have Grono, Sellita, or Le Jouperet around 3 ,500 euro. and that's where the money for store collection starts. I see. And the money for store collection has always been unique for us because we do it industrialization on the money for store calibers and we are the only one who's capable of doing it in our price range.

13:56There is no competition who's able to do what we are doing in that price range. You can debate that certain brands are doing small batches themselves. Multiple brands are doing it external. We really do it internal. So we have CNC machines, T0, we have T1, where the assembling of movements takes place. Of course, now with Le Joult-Pareil, it's an interesting move because we can collaborate much more with each other. How can we optimize even? How can we bring efficiency in there? But Manufacture has been for us a strong innovative push to tell the story and to differentiate compared to the competition.

14:34You make a perpetual calendar that last time I checked was around 10 ,000 francs, around$10 ,000. I mean, that was a real achievement, I think, for the brand. And talk about the process to develop that and to make that happen. And then what you're doing now to keep that price there, because it's not easy. That's not an easy one. I have to say it's also not an easy one to protect those prices against my shareholding company, because of course they want to see profit and they want to see margin but on the other hand we also want to stay true to our dna and that's let more people enjoy luxury that's the mission we have 2016 we launched for the first time by your calendar three years of development and the beautiful part of that is it has been designed based on a 42 millimeter case design in that time where the dial is quite spread.

15:28Where the competition, you had multiple brands who were doing a perpetual calendar, but they were very narrowed designed. So the counters were very close to the center. And we designed first the dial, the watch. And based on this, we designed the movement. In that time, the caliber was launched for 8 ,000 euro. 7 ,995. It was a hit. So all the years after, we have been working with different movements, upgrading movements. And two years ago, we started with an upgrade of power reserve. Because the base we have of Manufacture has 38 to 42 hour power reserve. And we really wanted to go to a weekender.

16:09We call that a weekender. You put it away, your dress watch on Friday, you pick it up on Monday, it still runs. So 72 hour power reserve needs to be in place. So that update took place. Two years ago, we launched last year in the base of our manufacturer caliber, point of date, moon phase. And this year, we launched it at a perpetual calendar. But I wanted no longer a 42 millimeter case. I wanted a 40 millimeter case. So 96 to 97 % of the components of the movements are the same. So also after sales, quality, it's all important to stay close to that. But we didn't want to go over 10 ,000 euro.

16:48The problem was, if you only look in 10 years' time on the index of the value of money, it would have been already going over 10 ,000. Yes, so you've had to work. We had to work on it. We also had to accept less margin. But I want to keep it accessible. Especially in the time we're living, where all the brands have been going up with price aggressively. In some extent, even price themselves completely outside their DNA. what is very dangerous because the customers one day is noticing it and they don't appreciate it anymore so we felt it's the right moment to make a punch to the competition but also to the consumer to give them really value for the money interesting and that's where we positioned it below the 10 ,000 euro yes and and what is the biggest well i presume for the u.s market tariffs are now certainly the pressure point there.

17:42But yeah, what is the major pressure point for keeping it? Or is it simply a matter of reducing your margin? To keep it very simple is mostly reducing margins because supply has been going up, labor cost has been going up. You need to think about the industrialization we have in place for QP. It's less industrialized, although it needs to be qualified for us for industrialization. but we don't produce thousands of pieces. It's around, I would say, we blocked it in the production capacity to 750 pieces per year that are sold out, by the way. That's just to give you a visualization. But it's really taking less margin on this piece.

18:25And I think Morgan Stanley estimates you make about 60 ,000 watches per year and your revenue is around a little more than 100 million. I mean, what should we think of that estimate? So, they're quite accurate in the variations of it, but I cannot disclose numbers, but they're very low at the volume. Understood. They're very low at the volume. Okay. Significant low. When we think about distribution and how people find your watches and buy your watches, what's been the evolution of that? We see Frédéric Constant a lot at retailers. how has that changed and what kind of retailers are you working with these days?

19:08It depends a bit. In the US for instance, there, the US is a continent, correct? It's no longer a country considered for me. It's so big. It's the size of Europe. And if you look at Europe, only Europe we have close to a thousand retailers. Right. So, and I think the US has around 400 retail. knowing that the machine we have running there with citizen behind it they have so much manpower we can easily go to five six hundred retail there i would say but there's much more the approach of segmentation so not all retail is willing to sell a wheel timer or is willing to sell a qp they don't have the brand environment so are we going to say no with our volume to retail that can sell volume no i would say no you should reward them because today for retail it's very difficult to get brands and we are a perfect example where it can fit into both worlds so it has always been this way but we are more focused on the volume i would say when i think of direct to consumer i mean how much has that become part of your business or or you know i presume it's well the consumer has become very important i think many brands they made mistakes in the past years where they were just deciding what to do hoping that the retail or the consumer will pick it up in today's world if you don't listen to your consumer or your retail you lose it because they're so knowledgeable they are the ones who need to follow your brand or not they are the ones who are buying your product or not so if you think you can just produce whatever you produce and they will pick it up you're wrong so for me it has been very important to create that customer experience but also have a lot of let's say video content and i'm always reading myself feedback about what we launch and we have a solution where we can see every watch is sold today data is the new the new money in a way and it's for me very important to follow by reporting what kind of profile today is buying our watch and that we can see via densu solution where we have instant insight about where the watch is sold what store and what kind of profile and that's very important and what i can see in this because that's probably your next question is that we became attracted for more women than expected and younger audience so the two and that's exactly what we wanted younger audience was really one of the aims we had six seven years ago and women has become a major opportunity for the brand because there are many brands who are producing woman watches or female feminine watches, but it's not about the diamonds.

21:56It's not about a pink watch. There's much more to do for women. And I find that women are cornered a bit. They're almost forced to buy masculine watches to be fulfilled with what they want. So it's a lot of attention and I would say a lot of eye for detail to jump in that segment and to penetrate the market. But we are absolutely doing very well there. Interesting. Can you talk about any way to quantify how big your customer base of women is, how much it's grown? I can tell you a bit of a direction that I've been seeing in the US. It's almost 50-50. It's very big. Interesting. And the latest launch we have been doing that came to birth last year, it was really based on vintage look.

22:42we were looking with the team what is now attracted by women and you could see in that time the trend of that bracelet design of watch that was very popular and if you then look at that who is doing it now accessible there was zero so for us we just looked at the archives we had 20 years ago we had like a bracelet design watch the manchette and we just redone it completely in a modern way with stone dials but also with diamond setting and it's a huge hit in the past 13 years i've never seen such a hit for women collection because women watches are very complicated so this watch you're talking about i mean it's basically you know a tank style no it's not a tank style it's really one bracelet oh like a cuff like a cuff yeah okay yeah right it's like a bracelet with a watch in it integrated and it really is a perfect match and it sells very easily and you know you talked in this case you were able to access a sort of heritage design and heritage for uh for such a young man which is interesting um i mean even you can are able at this point to go back to your archives but how nimble can you be i mean would you agree a few years ago everybody was talking about sports watches and so you created the highlife line but would you agree we've moved you know back towards smaller watches more uh shaped kind of watches classic watches and and how nimble can you be in terms of your product and design for us the strength of my company and and my team has been the speed of working it has been on the pressure because we became very corporate also we are part of a big group you have to report you have to discuss on strategy you have to engage on product development so it brought down a bit the speed but in some extent I would say the Japanese company are keeping us very independent so they know that the advantage is speed and I think it's very important for watch brand the moment you feel you miss something and there's a trend that follows your DNA you need to go quick and that's specifically also that bracelet design We have caray watches that are popular.

24:59You have to develop. You have to be quick with development. And you should not leave it down for 16 months. You should really narrow it down to 9 to 12 months. Well, it's not easy. It's a big pressure for the team, I can tell you. Yeah, it's very difficult to be reactive and quick in watchmaking simply because of the manufacturing process. I mean, how involved is a corporate parent citizen in terms of design, strategic direction? They've been the owner for a while, but yeah, I mean, how involved are they? I would say they're heavily involved. I would say five years ago, it was less. But if you really want to make a difference in the industry, you need to collaborate stronger with a big group behind you, especially after the difficult times we have been going through.

25:46but also key markets like the u.s you should really have an engagement with them the big mistakes that many swiss brands are doing is that they just put a swiss guy in the u.s and they believe he will run the show there now forget it it's never been successful look at many brands big groups who did that you really need someone who would know he comes from there from the u.s who knows the language and i'm speaking not speaking about language but really understanding and knows how to penetrate the market. And definitely we have a team there that knows everything. So they're very capable. But by collaborating together, listening to what they need, answering and strategize that together with the model company, that's the strength.

26:32And then the moment you have an agreement and an engagement with all together, you go. And that execution can go quick. Interesting. Yeah, no, I mean, it is now the biggest single country watch marketer in the world and it is incredibly important. It's also incredibly challenging right now. Can you talk a bit about how your regional distribution or your regional sort of markets have changed over the years? Because indeed, I mean, you know, Europe has long been sort of a key market for Frédéric Constant. But yeah, how has that evolved? Europe is continuing to go strong. less growth so you cannot expect double digit growth every year because it's a really major market but it still goes strong and i would say we have always been very european driven as a brand that's where i think with the us so if you look at europe strong continuing to be strong that's the trick with the us if you stay too strong in your european dna you miss the boat and that's where the collaboration is important they need to have input what do you need for the us where is the need of the consumer and what do they like and what do we need to answer that has been very important and we did that in the past years together with the help of the us team and we have seen a major growth happening and we are just in the beginning of this i can tell you so tariff or no tariff i'm not concerned about that we will find solutions i also found find that many brands are super nervous and anxious about it kind of agree with that but you cannot control.

28:11So we can debate for hours about it but we just have to manage what we can do. So everything you cannot control, you should not at least get nervous about that. Now I know that next month the authorities are in the US. They didn't sign anything yet. That's why the US put the tariff on it and they will settle a deal. They will have to like all the other countries. So yeah, just to be clear, we're in September, near the end of September but you think there may be something in October. You're certainly not the only person. No, no, I've been speaking with a few people that are very close to this kind of deals and I have a close source that tells me that 80 % they will make a deal.

28:56Now, it remains a crystal ball, so I don't know. And I think LVMH was informed by Trump that there was not happening anything about tariff and they had a tariff impact. So you never know. And Trump is also very unpredictable, of course. But he's right in the part also. I mean, if you look at all the business going around from the US and to Europe, I think somehow there is a truth in the middle about taxes and import duties. So we just need to settle it. That's it. And that we have to pay something, I think it's clear. Indeed. So the US is a big focus for you. It is an incredibly important market.

29:37and it has a different demand and taste profile than some other markets. Where does the U.S. sit for you in terms of your distribution and your sales, and what are you doing to make more inroads in that market? Obviously, as you say, design and the kind of product you're bringing is really important. Yeah, it's always dangerous to mention this, because then I've learned if you speak too long and too detailed about your strategy, then the competition will wake up, correct? So I will not disclose too much, but definitely pricing is key. I think choose the price range where you're strong as a brand.

30:18Don't get overwhelmed or don't feel too confident that you can increase because that's a dangerous move. And definitely product. And I would say the third one is for me, the women development. They are pushing us already for multiple years in a row. We have been able to answer it. We have been able to find unique launches also. But that's where the trick will take place. Have the right watch for that market. And that's where we are working on. For sure. What have you done? And distribution, of course. I mean, the power of having the right distribution. And answering the demand, very important too.

30:58Do you think the traditional way of selling watches, though, has changed dramatically? I mean, do your customers buy watches in different ways now? I think where the challenge is, is much more retail. So, and the US is not the right example because I think the US has always been that commercial drive. They always had that commercial drive. Much more than, for instance, the European retail has. Where I do see a problem, and I visit regularly retail myself, if you visit a retailer and we just delivered the QP, an exclusive piece, and I will ask him, hey, did you already get some traction there? No, a few people came in.

31:37I said, okay, interesting. Then I'm asking, how many people do you have in your database? 10 ,000 people. Okay. How many people out of the 10 ,000 people would buy a watch around 10 ,000 euro? Niels, that's maybe 2 ,000. Okay. How many people have an interest about something special? Maybe 1 ,000. okay why don't you take 10 % of those thousand pieces and you just write an email or maybe you take 1 % and you call them you say i have something special in my in my room i want you to offer it i want you to see it first come first serve see how it reacts and they look at me if they see water burning and this is the problem for me because the time that someone comes in and they want to buy something as a Daytona or a Submariner, we all know that's over.

32:31You need to be super proactive. Retail is reshaping and you need to be super proactive to gain margin again and to gain your customer because your customer became very knowledgeable what he wants and where he wants to buy. So if you don't offer him the way, you will never get it. I mean, it's been a volatile year on a lot of fronts and you talked about other brands. Obviously, the trend we've seen, especially with some of the higher end brands, is to be raising prices and taking price quite aggressively over the past few years. What have you done with pricing and considering that you've got these new pressures like tariffs in the US, but also that you are a value-driven brand and in that approachable category?

33:17What have you done? Yeah, so we didn't have that much aggressive price increase done. So we have been very careful. And I have to say it has been a huge discussion every six months with my shareholding company because supply has been going up and cost has been going up and your margin didn't go that much up. So that means your profit is under pressure. But for me, it was very important to discuss with them, guys, we are penetrating markets. We gain market share. Of course, there's a time of profit, but there's also a time of waiting and see what competition is doing and see what the market is doing.

33:55It fluctuates heavily. I think now it's the best time to say how many percentage the competition went up. And some brands went up to 40 % of their prices. Yep. And they struggle, I can tell you. It's confirmed. They struggle with sellout. so we have been doing price increases but much less aggressive what positioned the brand differently than it was before before we had much more competition today we are quite lonely in a certain price range with a massive strategy behind well distribution well prepared distribution worldwide so for me yeah i see a huge opportunity now do we can we manage prices that we have to day no we also have to do of course price increase and if the tariff is going to be applied or settled we have to see how to handle it anyhow if there's a tariff imposed we have to do an increase somewhere and all the brands are waiting because of course they have been so aggressive in pricing now they don't dare to move anymore but you have to move because if there's 20 degrees anyhow we have to do something we cannot take the hit well yeah i mean we've seen initial round of increases from some of the big brands, but not too heavy.