The Business of Watches [017] Oliver Müller, The Man Behind The Numbers For The Morgan Stanley Swiss Watcher Report

30:06And those are Rolex, number one, Cartier, Patek Philippe, and Omega, which is number four in terms of market share, and number five in terms of sales. So only four brands are making more than 50 % of the whole sales of the Swiss watch industry. And then you have a group that we like to call the big four, which are made up of Rolex, Audemars Piguet, Patek Philippe, and Richard Mill. They captured together an aggregated 49%. And that's even more impressive because when we started the report with the 2017 figures, those four brands were capturing barely 37, 36.7, but let's say 37. And now they are almost at half the whole market value.

31:04So that's a very, very impressive polarization of the market. And as you already understood, this is in the high end. You have, as the four biggest capturers of market shares, you have Cartier and Omega, which are rather in the premium level, and those are quite exceptional. And what we already also have understood is that some brands are largely overperforming the market. And the one exception to the rule or the findings that we are making since 2018 saying that privately held brands are overperforming because they are long-term thinking, because it's family business. And when it's family business, you're very careful not to push too hard when things go well, etc.

31:57So the one exception being Cartier, owned by Richemont, a listed company. And Cartier does an extraordinary work at keeping everything in a balance, still an accessible price, etc., etc. But maybe we deep dive later on that. So polarization, a few brands are capturing a major part of the market. Very few brands manage to scale their business. That's another thing which is very important. And there are two exceptions to this, which are in our top 50, which are two privately held brands, François-Paul Journe and H. Moser. They managed to grow to above the 100 million Swiss sales threshold. They are at 36th and 37th position of our ranking.

32:53And kudos to them because they kept their values, especially not that I'm less full of praise for my friends at Moser, but François-Paul Journe. It's really incredible because it's a very niche positioning of a brand. And still that brand managed to go over 100 million. Yeah, it's an extraordinary achievement. And we see that sort of shift in the perception of François Porgeon, a watchmaker who's been around for a while and makes only about 900 mechanical watches a year, according to estimates. And then there's the elegant quartz section of that. But indeed, I mean, you know, what has been the differentiator for those, you know, privately held brands like Moser and FP Journe who have managed to sort of buck that trend and continue to gain sort of market share?

33:54What's made the difference for them, do you think? I'll answer your question. But first, I should have talked about Richard Mill because it's also privately held and it's the success story of the last 20-something years. This year, they will be having their 25th anniversary. It was launched in 2001. And before Richard Mill, I should have talked about Frank Muller. But let's go back to François-Paul and H. Moser. I think François-Paul Journe, unlike what some people think, they still look at him like an artisan watchmaker, which he is, of course, obviously, very strong personality, very rare in the media, etc., etc.

34:41But the whole brand was built up like a real brand, coherent with a narrative which fits the purpose with the color codes. All what I'm saying might sound, you know, like a little bit, yeah, so what? No, it's a real brand built up with the same values over time, still keeping a very strong community. One of the very strong points at Moser and François-Paul Journe is that those two brands have a very, very strong community. It's almost like, you know, a religion. If you like François-Paul Journe, you love him. And so his customers are very loyal. They are buying anything which comes up, etc. The prices on the secondary market are very high.

35:37So the value retention on an FP Journe is very good. It's a good investment besides being an extraordinary watch, a very attractive brand, etc., etc. The value retention on the long term is there. Moser, same thing on the community side. The two brothers, the two Melon brothers, Edouard in the first place as the CEO, does a tremendous job at entertaining people, etc. That means a lot of travels, a lot of time spent with the people. And that creates the magic bond. Great, that relationship, yeah. Yeah, it's a special relationship. And that's how it works. Why would you buy a Moser rather than a Patek Philippe where you get, you know, the status, the recognition, etc., etc.?

36:28Because there is maybe something more special. It's rare. It's below 4 ,000 watches a year. Patek Philippe is now at 72 ,000 watches. And if we jump back to Richard Mill, same thing. Mr. Mill himself was now he's retired, happy, retired and wealthy. But before that, he was traveling around and he's such a good storyteller. I remember hearing what he was saying in 2007 when he was opening up a boutique in Malaysia. My wife told me, go and listen to Mr. Mill because he's one of the best storytellers in your industry. And I went there, I sat down and I listened to Mr. Mill. I said, this guy is good.

37:16Another one who is very good and also in our top 50 and also a niche brand, but managing to grow year after year is MB &F with Max Booster, another extraordinary storyteller. Great product, great brand concept. He always told me at the beginning that it was not a brand, MB &F, it was a lab. But after three, four years, I called him and I said, Max, now you became a brand, isn't it? And he said, yes, I have to admit that now we are here for the long term. And also, I'm very full of praise for them. Indeed. It's quite interesting. As you say, H. Moser, F. P. Journe, around 105 million Swiss francs per year.

38:05And then we have, you know, also a relatively young brand like Richard Mill at$1.7 billion. They are part of that billionaires club that you talked about and that you've often highlighted in the report. And then, obviously, we saw Longines drop out of that billionaires club this year. And indeed, there are, you know, while the overarching theme is that polarization, that bifurcation, that move upscale, there are some brands in the approachably priced segment or the smaller production segment that seem to be doing OK. I mean, we see Raymond Weill on the list at about 79 million Swiss francs in revenue, making about 80 ,000 watches per year.

38:54You estimate that they were up this year in terms of revenue. And so, you know, does this show that there are some brands in that lower price segment that can still do well in this challenging environment where everything seems to be moving upscale? Absolutely. It's a good point you're bringing up. Raymond Veil, Frédéric Constant, Christopher Ward, they joined the ranking this year. It's the proof that there is still a market out there. Everybody wants to move up. Everyone tells you, you know, there is only a living up there in the skies where you sell watches at more than 50 or 100 ,000. No, there are buyers.

39:43And even for institutional brands in those market segments, there are some performing quite well. Raymond Vail had a great time until 15, 20 years ago. And then the brand disappeared a little bit from the radar. And a few years ago, they came back with a good concept of products based on neo vintage, where you have inspiration of watches from the 1940s to the 1960s. For the millésime. Yeah, the millésime, exactly. Yeah, that's a very, very attractive product at an accessible price. And the extraordinary thing, and I was proven wrong once more 10 years ago, or a little bit more, the smartwatches came up, etc.

40:35And I had strong doubts that conventional watches would ever survive against this competition. And of course, it inflicted quite some damages on the entry level and lower mid-price segment when Apple came in and launched their watch. But guess what? We are back to conventional watches. Gen Z is finding this extremely cool to have mechanical watches, even more so if you have to wind up your movement every day. They have two sons, 17 and 21. They are wearing mechanical watches. Of course, we are not quite objective with the dad. They can't wear any Apple watch. But overall, there is an interest coming up for watches which are taking the codes of serious watchmaking and putting them at an accessible level.

41:38And that opens up the door for brands like Raymond Veil, for Frédéric Constant, for Christopher Ward, and others not appearing on that top 50, which are rather micro brands. And they do an extraordinary work at recruiting the clients of tomorrow, the Gen Z and others. Yes, it's a competitive space and it's a space that's certainly under pressure. But I think the list shows, and in terms of those increases, it shows that some can thrive and do well as long as they have the right products and make those connections with customers. There's another interesting sort of standout or anomaly on the list, which was Jacob & Co., which is a kind of a polarizing brand.

42:29But it was among those that grew the fastest in terms of revenue and sales for this year. Talk about Jacob & Co. and what happened there with that brand. It's funny that you're using the term polarizing. I think it's the most appropriate term, not only for the brand, but for the person making the brand. Mr. Jacob is a larger than life figure, but I love what he does. Why? Because it's a brand which really invented a brand territory. Jacob, at one point, he was at La Fabrique du Temps. He was a client of La Fabrique du Temps. Those guys, R &D, atelier making movements for third parties. And now they are owned by Louis Vuitton.

43:24But back in those days when they were independent, Mr. Jacob was standing there and he was telling my two friends, Michel Navas and Enrico Barbosini, basically, I want to make choo-choo trains for the handrest. And they looked at him and they thought, ooh, this is quite a special guy. But he was right. Mr. Jacob, he created his very own, very recognizable design language and concept of movements, you know, with extraordinary complications. And that's why he's so successful. The prices are tremendously high, just like at Richard Mill. but he manages to recruit new customers every day. Today, the watch part, the watch business unit is making more sales than the jewelry.

44:21Because in the first place, Mr. Jacob was coming from the jewelry business. Jacob the jeweler. Jacob the jeweler, exactly. And Jacob managed to create an own brand territory. As you may know, apart when I'm writing the Morgan Stanley report, I do a little bit of consulting, creating brands and creating products, et cetera, et cetera. And I always tell my clients, you have somewhere, you have to stand out, you have to create your own world. Not only, you know, copy paste the narrative of an institutional brand and trying to be compared with whomever. Here, it's very strong what Jacob does because he's in his own league.

45:07He does things with the Bugatti watch, which is just incredible. Then he does a watch for$20 million, et cetera, et cetera. And yes, his person in the brand's narrative is very important. But as you rightfully said, it's also polarizing. But when you are in that market segment, you don't need to sell 100 ,000 watches a year. So you don't need to please everyone. So that's, yes, that's an outlier. It was the second biggest growing, but let's say the fastest growing from last year's ranking. So they were at plus 14 % year on year. The fastest growing was Christopher Ward, which joined this year.

45:53they managed to produce quite an impressive growth, but they just joined. So yes, Jacob and Anomaly, that's a good word to qualify what the brand is about. It's interesting, though. Those two brands are very different. Christopher Ward and Jacob & Co., they couldn't be more different in many ways. Yeah, talk a bit about Christopher Ward, obviously a British-based brand that makes Swiss-made watches in Bien. And yeah, they've entered the chat, as it were, at number 48, around 51 million, if it's translated to Swiss francs, in sales per year. I mean, what has that brand done from your perspective in order to have increased sales this year and be among the top 50?

46:46Christopher Ward is very interesting because I'll be a little bit critical on one part and then full of praise for the other part. Critical because the narrative of the brand is not very outstanding, to say the least. But the product is. The product is very interesting. Very nice product at a very accessible price. And the other magic trick, they do 100 % D2C, direct to consumer. So the team of Christopher Ward is traveling all the time, going to get-togethers, meeting their clients, explaining why this, why that, etc. That's the magic trick. And again, if I were to predict 10 years ago what would happen with those get-togethers, I would probably have told you, you know, those exhibitions and get-togethers, it's old stuff.

47:41The young guys go digital and then they show digitally and they exchange and one day you're being sent the watch to your home. But no, nothing changed. It's just like 40 years ago, people want to meet. They meet with Christopher Ward, with the people. And obviously, they are doing a great job at explaining what they do, why they do it, etc., etc. And they managed to sell, as of today, 100 % of their watches direct to consumer, which allows you, of course, to capture the whole margin. But on the other hand, you have to invest a lot of time to go to those small exhibitions around the world, etc.

48:25But they are successful for that. And that's another proof that you can be successful on those price levels, but you have to come up with something which differentiates you on the product that Christopher Ward. I know some people are a little bit critical, but the product is strong. It's a good value for money proposition. For sure. And I wanted to ask you specifically about Tudor. We saw Tudor move up a bit in the rankings and I guess sales increased by I think about 2%, you're saying, in 2025. But I believe that – did you revise the results from 2024? Just talk a bit about that. And yeah, they're number 17 now, gaining I think 30 basis points of market share.

49:17Yes, Tudor. That's also in our methodology that we explain that we can revise figures year on year. That's why I don't like journalists to take all the prints of the report because we do it, but we don't republish it. So if we have good intel or good motivation to think that I was wrong, because if there is anything wrong in the numbers, it's me. I am the person to blame. And Tudor, my estimations were too low for 2024, but they were still, it's my estimate again, they were 17 % down. They came back this year with growth. what from my information tudor performs very well for example in the u.s and we all know that for the last few years most important market market bringing the growth for the luxury industry overall and for the swiss watch industry and tudor is strong there they are in a very competitive environment do they take advantage because they are owned by rolex yes of course it's helpful Of course, it's helpful.

50:32If you go to third party retailers and you're a Tudor and your dad comes, which is Rolex and says, you know, we also appreciate a lot that you carry a Tudor. Then you have a hard time telling the guy, I keep Rolex, but I don't take Tudor. That's, of course, helping a lot. But apart from that, they were very China-dependent, very, very much. 20 years ago, they would sell about 90 % of their watches to China, and the product collection was reflecting that. Now they came up with the Black Bay, the Pelagos, etc., which are much more attractive for young buyers. And if you look at the overall collection of Trudor, you see that they have substantially reduced the other product lines and they are slowly but surely focusing on Pelagos, Black Bay.

51:29And yeah, it's a good product. It's very well-priced. In the mid-priced segment, they are competing against people like Breitling, like Tag Heuer, but also Omega. And they do a good job. Yes, I believe that they will further gain market shares in the coming years. Yeah, no, it's interesting. Yeah, I mean, you know, basically reducing some of that exposure to China, which has been obviously a very challenging market for all the Swiss brands. And indeed, interesting that the report will revise previous numbers to update your more accurate understanding of the situation. Now, obviously, yeah, we're focusing on these independent, either family-owned or otherwise brands that are not part of the big groups, Richemont, Swatch, and LVMH.

52:27But there have been, you know, we talked about Cartier, which has obviously continued to gain market share and is now the second biggest brand in terms of, you know, the watch brand in terms of revenue and sales. But there's been, you know, some other marks within Richemont have managed to grow sales last year as well. IWC, Ingegère, Le Coutre. And that sort of goes against the overarching narrative of brands within the big groups struggling. What do you think they did to stand out and to grow sales? Yeah, IWC declined year after year after year until obviously now they have reversed that negative trend.

53:13And finally, 2025, they got back into growth. I think at IWC, they have refocused their product collection. They are maybe a little bit more careful about the prices, etc., because that was also an issue when you're competing against such strong brands as Breitling and Omega. You have to be very careful. Gégère Le Coulte, it's a little bit another story. One of my favorite brands, by the way, because it's an extraordinary product and a verticalized manufacturer since ever. One of the most iconic products, the Reversal. A new CEO, Jérôme Lambert, who knew the brand inside out because… He does the brand pretty well, yeah?

54:00Yeah, pretty well. Yeah, yeah, indeed. and Jérôme Lambert, you could also see that the latest product launches were very well positioned in terms of prices. Because the issue there, again, the people before Mr. Lambert, they thought, I don't know why, all of a sudden they could just, you know, a little bit increase and increase to catch up the downturn on volumes. They would increase the prices, et cetera. and all of a sudden they were pushed out of the markets. And to start with, by Cartier, I dare to say if you go into a shop and you have two ladies' watches on one side, you have the magic of Cartier and on the other one, the Gégère Le Coulte, one watch is at 3 ,000-something Swiss and the other is at 6 ,000 Swiss, the one from Gégère.

54:52I dare to predict that probably 99 % of the cases, the person will walk out of the shop with the Cartier watch. So that was an issue that Mr. Lambert is slowly but surely addressing. They have to rework. They have the Reversal, which is the most iconic, one of the most iconic products overall in our industry. And on the other hand, they have the Masterline, which they need to regenerate, make it more attractive for younger people. I love those watches, but I'm an old guy, so I shouldn't be the focus. No, no, no, indeed. But certainly, yeah, I mean, you know, things are shifting at both those brands, and it's interesting to see them doing well within that corporate structure within Richemont and proving that they can do so.

55:46I mean, you know, but we still do see such a situation of have and have not. I mean, you talk about the, you know, the industry profit pool, basically, for the Swiss watch industry, 7.9 billion, almost 8 billion francs. But the top four brands are capturing about 76 % of that. You know, where, you know, and that's being Rolex, Patek Philippe, Audemars Piguet and Richard Mill. You know, where is this all going? How is this going to shake out, do you think, over the next few years? What are we going to see in terms of what these numbers tell us about what this industry is going to look like in a few years, do we think?

56:33So there is a virtuous dynamic, and that's very basic, what I'm going to say. But the better you perform, the more margin you get, the more profitable you are, the more money you can reinvest in your branding, and so on and so on. We have seen it with Audemars Piguet. We see it with Rolex for a decade. my prediction is that those brands will get stronger and stronger and it seems to be after nine morgan stanley reports that those trends are unchanged there are too many brands out there i know i shock people when i'm saying this every time people tell me yeah but mr muller it's extraordinary all those new micro brands coming up etc etc no there are too way too many brands out there.

57:29Some are meaningful, some are not. And so the long term will be a concentration on less brands, just as it happened in other industries, in the car industry to start with. When I was a small kid, there were still brands around which today have disappeared or have been integrated into others. And sometimes, just like as in the car industry, in the watch industry, you have a Richard Mille coming up and finding its place within the industry. So a lot less brands, stronger brands, brands overperforming. And around those blockbusters brands, you will have those niche positioning with artisan watchmakers, with micro brands at the more accessible level.

58:21We talked about Christopher Ward or Raymond Vell or Frédéric Constant. They have their place in there because they serve a purpose. And obviously, they managed to get the differentiation. But the main trends will remain on the people overperforming the market. And you have named them. And apart from them, we have the others' exceptions as the Cartiers. We should mention also Vacheron Constantin, which is a little bit less performing the last two years, but still an extraordinary brand, which will go back to growth probably in the near future. So interesting. And yeah, and I mean, obviously, we've we've seen, you know, what may be the first of more to come in Richemont deciding to strike a deal to sell Beaumont Mercier.

59:17And you and I talked about that when it happened. From your perspective, do we think we're going to see more brands being reshuffled or leaving corporate groups as part of this shakeout? Definitely. I'm not going to say that I can look into the future, but I was expecting Beaumet Mercier to be deconsolidated, sold by Richemont. I think it's a good decision. It's not because Beaumet Mercier is not a good brand. It's an excellent brand. But it was, you know, a misfit with the overall brand's portfolio at Richemont of a group which is focused on luxury. Beaumet Mercier, it's mid-range. And I think it will do a lot better with the new owners.

1:00:05I wish it does at least. And then we have other brands within the Richemont brand portfolio, what they call the specialist watchmakers. There were eight. Now there are seven left. because Beaumet Mercier will leave. I think Roger Dubuis is definitely not fitting. It's not a brand. That's my personal opinion. It's not a brand which has the potential to grow substantially. It would be well off with a private owner that can be a private equity fund or private owners. They will do a much better job. And then we can talk about Panerai. Panerai doesn't perform as it should, and so on. So, yes, the only one I don't agree with, I know this is a rumor which came up strongly the last few weeks, which is Gégère LeCoultre.

1:01:03I don't think that would be a good decision, and I think it's not more than a rumor, because Gégère LeCoultre is an integrated manufacturer. It's an important part of the whole watch strategy. Okay, the brand is not performing like it should, but Mr. Lambert is addressing currently that part, and I don't think they will get rid of that. And would other competing groups be well advised to do the same thing? Of course, and you can figure out at whom I'm looking right now. Swatch Group would be well advised with 16 brands to maybe consider selling a few of them and refocusing the whole thing. At LVMH, we could think also of maybe one brand which doesn't make sense in their long-term strategy.

1:02:02I know it's not nice to say because, again, it's a nice brand called Zenith. But does Genes has all it takes to come back to the position that people dream of? Because, you know, because projecting a brand where it never was is a collector's thing. But when you are back into business life, you have to look at figures and you have to look at market shares and to figure out, does it make any sense that LVMH keeps investing money on that brand? I'm not so sure. Yes, indeed. And LVMH has said very publicly, as had Zenith, that they are not for sale. And obviously, you know, there's been a bit of a shift in strategy at Zenith, whereas obviously to continue to enhance and produce the brand, but they're also producing more movements for other brands within the LVMH group.

1:03:02So let's end it with Rolex breaking the 11 billion franc sales figure for the first time this year. Basically a third market share. Is Rolex getting too big, too dominant? Do they play too much of a leading position in the industry? Is this a risk for them as we see the industry, you know, that profit pool, as we talked about, becoming more and more concentrated? Basically, Rolex is just playing the perfect book, playbook of what they need to do in that market positioning at the price level they are. They have done the last decades, they have done just a perfect job. you like or dislike the brand, the products, etc.

1:03:54but the results are there. Is it a systemic problem or issue for the rest of the watch industry? I wouldn't subscribe to that. My point is Rolex is so over-dominant because as I said, it's a virtuous dynamic and the stronger you become, the more muscle you make up. and the stronger you are. That's very simple. I said a few years ago that one day they will capture their own retail. Everyone was telling me, everyone was telling me, Mr. Mueller, you are wrong. They will never do that because of blah, blah, blah, blah. And one day they bought Bushirer, which are about now 8 % of their worldwide sales.

1:04:44And I dare to forecast that they won't stop there. There was one CEO of a competing brand, which one day told me Rolex is becoming a normalized brand. And I asked him, what do you mean with that? He said, basically, Rolex is now competing again. For decades, you know, they were a little bit above everyone else and saying, we are Rolex. We are not watchmakers. Those were the words of a predecessor of Mr. Dufour, the CEO. He said, not Mr. DuForest, his predecessor said, we are not a watch brand. We are Rolex. But I can tell you that's really their brand DNA. And they do such a great last year, the Land Dweller with the Dyna Pulse oscillator escapement.

1:05:36I mean, this is so outstanding in terms of industrial excellence and the rest. You know, all the things they do is just perfect. Is it becoming a problem? No, it's a problem for the other brands to figure out how they can compete. Cartier does it. Audemars Piguet, Patek, Richard Mill, they are there. And just to finally conclude, one very quick anecdote. in 1971, I was a small boy living in a town called Bien, and my father was working for the ancestor of the Swatch Group in the financial department. And opposite our house, there was an old factory. And on top of that factory, there was the sign of the brand, and that read Rolex.

1:06:33My parents didn't know what Rolex was. That was 1971. With this, I just want to say that people are looking at Rolex like it would have been the number one of watchmaking since a century, and it's not. They have done their revolution. They were very smart at getting out of the quartz crisis, which ended mid-80s, which started mid-70s. They were very clever at getting out there, and all their branding is just perfect. There is no other word. Oliver Mueller, the founder and principal at Lux Consult. We'll leave it there. Thank you so much for joining us and helping give us insights on the critical Swiss Watcher annual report with Morgan Stanley.

1:07:28Thank you, sir. Thank you very much, Andy. It was nice talking to you.

1:07:36And that's the business of watches for this episode. We hope you enjoyed. please head on over to hodinky.com where you can join the discussion and leave any comments or questions about this episode or the business of watches in general. Who knows? We might even answer your question on a future episode. Thanks for listening and see you next time.

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