The Business of Watches [033] Guido Terreni (Chief Executive Officer, Parmigiani Fleurier)

0:00Welcome to the Business of Watches, the Houdinki podcast where we go behind the scenes to talk to the executives and the players who are making things tick. Today we are speaking to Guido Terreni, who is the CEO of Parmigiani Fleurier, one of the storied and great independent brands in the Swiss watchmaking industry. Guido, thank you for joining us. Good morning. How are you, sir? Good morning, Andy. It's a pleasure to be with you. Excellent. Excellent. So thanks for doing this. And so Parmigiani, you joined, I believe it was around, it was 2021. Let's talk about, you know, the vision that you had for this brand and its history and, you know, the kind of philosophy and design changes and, you know, basically overhauled the business since you've been here.

0:57Tell us the story.

0:58Guido Terreni:Well, it was a specific historical moment in which I joined the company. It was January 21. We were still stuck in the pandemic. And it was before transformational changes in luxury that happened, continued to happen after that historical moment. And it was extremely interesting because I felt that usually after a crisis, having lived the Lehman Brothers one 15 years before, there is always a recentering on the values that are core. And there is also a quest for reassurance in the audience. And this, I felt it before what people were talking now about quiet luxury and what we had to restate because we talk about private luxury, which is a bit more specific.

1:55Guido Terreni:We might enter into that distinction later because I think it's important. So the company asked me to clarify the positioning and to bring the brand to its prestige that it's known for. And this was the work that we did with a lot of discipline and with a lot of creativity and innovation. But the first thing that we did was really use that great exceptional moment that was the pandemic to do an introspective work. And I think it was the most well-invested time where you couldn't really do anything about such an important external factor. And it was a moment in which we asked ourselves, how do we get back to that client that made the brand so prestigious at its origins?

2:45Guido Terreni:And what does the brand need to stand for? And for sure, the values of Michel, of deep knowledge and understatement that comes from restoration, were the founding pillars of this trajectory. that had to be externalized through an offer on the product, which is a physical object that has to translate these values into reality, but also on the communication, on the distribution. And most of all, go back to interest that client that was a connoisseur, that was somebody who had discerning taste and was not following the flow that made the brand so interesting at the beginning of its trajectory. So this is what we worked on and was really fascinating.

3:31Yeah, I mean, it's really been quite a transformation. And, you know, we should talk, for those who aren't aware, of the history of Parmigiani, you know, founded and led originally by Michel Parmigiani, a great watchmaker who sort of honed his skills and came to be known for his restoration of vintage pieces. And let's talk about, I guess that was in the 90s when the brand was founded and has always been part of the Sandoz Foundation, the Sandoz family in terms of its backing. And it's quite interesting in that in some ways, you know, Parmigiani Fleurier is part of an integrated manufacturer. There are other watchmaking companies within the group who obviously supply components, movements, most specifically Voucher, the great movement manufacturer, which supplies many of the top brands in the industry.

4:32But yeah, talk about the structure of the company and Parmigiani, the watchmaker's role within it.

4:39Guido Terreni:Yeah, right. Michel is a living legend of restoration. Restoration is a very interesting art. And I think I synthesize restoration as the black belt of watchmaking. I mean, you're really talking to a knowledge which is extremely deep, not only technically, but also culturally speaking. So the different eras of watchmaking in the last 500 years has passed through the fingers of Michel. And when I say through the fingers, you really understand by what the great creators of our industry have left and you talk to them through their work. And I think that's very noble as an approach because before launching your brand, he understood the rules of watchmaking very deeply.

5:34Guido Terreni:And another thing that is exceptionally interesting from a human point of view is that this man started restoring watches in 1975. And it was the core crisis of the quartz where all this industry was thinking that mechanical watches were at risk and probably were not the future. Everybody was going quartz as the new technology to be accurate. And he felt that there was a cultural patrimony that was going to be lost. And he went the other way. And I think going the other way shows a great independence in the mindset of this person. So he looks at the reality with different eyes. He doesn't look with the eyes of the flow of the mainstream.

6:22Guido Terreni:He looks with the eyes of who is cultivated and who believes that there is worth in what watchmaking has brought to society. And it's an artistic patrimony. It's a cultural patrimony. But it also has always accompanied society in its evolution until the technology has transformed its meaning from a mere timekeeper to something else. And in 22, I think, or 21 or 22, I don't remember. exactly the year, UNESCO named this art as a human patrimony of the world. So without people like this, it probably would have been difficult. And then building his name through his restoration work, because he worked on the Patek Philippe Museum, accredited as a restorer of the ancient pieces.

7:15Guido Terreni:He worked with the Santos family collection, which is a beautiful private collection of ancient clocks, very, very beautiful and important. He made a name about himself and he understood what to do. And the family asked him if they wanted to do a brand together and they would have backed him up financially. And Michel in 1996 agreed and presented in the 29th of May of 1996 at the Baudrillage Hotel in Lausanne, 52 unique pieces, and stated a mission that was an educational mission before being a commercial one. Also, his intent was to, at the end of the course crisis, to restate what true traditional horology is about.

8:05Guido Terreni:And this before the relaunch of Breguet by Swatch Group or by Mr. Ajayek Senior, who understood this very quickly. and Michel was a lover of Breguet like can be Danny Roth like can be many other watchmakers who see in Breguet a mentor through his work but his work was not was never something to be replicated so Michel never looked at the past as something to duplicate and to copy he always looked at the past as a source of knowledge to innovate and do and bring forward the art of mechanic one of the most famous pieces might be the Bugatti watches, the first Bugatti that was transversely put on the wrist and played with the designing through the mechanics, putting transversely the movement as you would see in an ancient Bugatti of the 30s, the engine.

9:03Guido Terreni:Also, it was really a question of using the mechanical art to give emotions that are different, deep, and with a meaning, with a why. And like every watchmaker or restorer does, he wanted to master his craft. So Will started to work on his own movements, started to have his own cases, his own dials, up to the regulating orders with the assortment and the spirols. So there's a vertical integration that is incredible in the Sandos, Pulo Roger of the Sandos Foundation, that was impossible to keep alive through the capacity that was absorbed by the brand. So very quickly was decided to open it up to very prestigious brands that could profit from this extraordinary craft and also keep it alive because thanks to our partners, business partners, we are able to continue to have these beautiful know-how at the service of the brand and also of other brands.

10:08Exactly. And, you know, let's go over some of the partners that you have within the same ownership group. Voucher, the movement maker, certainly the most well-known. But basically, I mean, you know, Parmigiani timepieces are almost, you know, an in-house single manufacturer piece, which is kind of rare for the industry. But yeah, talk a bit more about that and how that's, you know, sort of part of the business.

10:41Guido Terreni:Well, Voshe is a spinoff of Parmigiani from the movement side. So early 2000, this company was created with the technical plans and sheets of the movements that Michel was developing. And a specialized company on high-end movements was born. And I must say that Voshe has a quality which is really incredible because from that imprinting that Michel gave, then the means and the evolution of the industrialization and the developments are really very, very, very important. So the quality of these movements is really extraordinary. And then a sister company that is specialized in subcomponents of movement like Atocalpa and Elwin that does décolletage.

11:33Guido Terreni:I don't know how to say décolletage in English, but where you do pivots, wheels, so you do all these components. And you also do the spirals and the escapements for the regulating organ, which is a strategic component for the whole industry, because there are very few companies that are able to provide this to third parties. And then with the Cadelance et Abillage, this is a dial maker, which is not very big, but very specialized in exceptional crafts. We do our Grenet Main, which is the Toric dials done by brush by hand that Michel taught, like it was done back in the days from the restoration work to give a sort of sophisticated finishing to our dress watch, which is the Toric.

12:21Guido Terreni:And then you have the Lab, which is Les Artisans Boitiers, which is doing cases. So I think the strategic components are uncovered. This doesn't mean that 100 % of the production is done in-house. We use also partners that are best in class, certain times for finishings that are, how to say, not worthwhile to introduce internally because you cannot verticalize at 100 % of your work. It's better for a phase, you can use something externally in a dial or in the movement. Sometimes you use external support to do certain functions. But at the end, it's a cultural and industrial power that is backing up the brand for sure.

13:13Yeah. And to be clear, your role as the CEO of Parmigiani Fleurier. So, you know, obviously you're in charge of the brand and all that comes with that. And then those components makers, suppliers that are all under the same ownership structure, they're operated separately? Or should we think, do you have any management or executive role with those entities as well?

13:40Guido Terreni:No, no. We are companies that are managed as a pool, as a group, but we are organized as independent companies that serve each other, but we are part of the group. And so let's talk about, you know, when you joined and your vision for Parmigiani. I mean, you quite quickly had an impact. It's around the time when I started covering the watch industry. And, you know, you were sort of the great turnaround success story, had really done something, you know, with the brand and changed its product and changed its trajectory. Talk about what you did in terms of, you know, sort of really focusing on certain models.

14:24I guess the Tonda was sort of first, and now we have the Torek models as well on the dressier side. But yeah, talk about your sort of, you know, vision and focus in terms of, you know, the brand and since you've been leading it.

14:41Guido Terreni:Well, it was clear that the offer was the first thing to tackle because we needed a star product, a product that we were recognizable for. And the predecessor of the Tonda PF, that was the Tonda GT that had been launched earlier in 2020, had shown signs of traction on the appeal of a clientele that was coming back to the brand. and we evolved it into a high watchmaking content and less sporty but more sport-chic integrated bracelet segment which was really the first watch that we wanted to tackle because it's more versatile, it's more easier to wear and it's a master and it was ready to be evolved.

15:30Guido Terreni:So I think what was extraordinary in that historical moment was, first of all, that we had the clarity of what to do, because from a design point, I really pushed my design team and the people in the company to have clear the aesthetic codes that we wanted to work on, that were in the band. So we did this introspective work based on how can we externalize a refined, elegant, contemporary style, extremely pure because we're not an ostentatious, serving ostentatious client. We're serving a client which is knowledgeable and has already done that, let's say, evolution in this maturity of buying luxury, which is not following what society is obliging you to buy, but is already into that pleasing himself.

16:28Guido Terreni:So Parmigian is for the owners, not for the others. So from that philosophy, you start working on the branding, the logo, PF logo without the writing was the first most evident element that talks about private luxury. But all the elements that are in the Tonde of PF were in the brand before. So the Grand Orge, the Corlebeille motif of the guilloché on the dial, which is done by hand, is something that was in the brand. But the guilloché is a technique which is quite old-fashioned. It brings you back to a classicism that on a sport chic watch wasn't suited for. So we wanted to go to minimalizing it in the size up to almost become invisible.

17:12Guido Terreni:But you can mistake it as a clean dial from distance. But in reality, when you look at it, when you have it on your wrist, you see that richness of the finishing, which is not invasive to the reading. the knuddle bezel in platinum, the comfort of this watch, the finishing that it has, are making it an experience which is extremely high and luxury and was appealing to a client who knew the brand, its prestige, and when he saw a product so well made and so in line with today's need for such a collection, the purchase was without any issue. It was really, it took us by surprise. And then I didn't want that the relaunch was just a style relaunch.

18:00Guido Terreni:It had to be also leveraging on our innovation capacity to respect the philosophy of Michel that I told you before. So we started working on functions that are important in the industry, but reinterpreting in a way that they were never done before. So when you are doing something that is unprecedented in a history of 500 years, it's already exceptional. And you have to do it in link with this philosophy of restraint style, which is not a way to fade or to be mimetizing yourself in society. On the contrary, who is understated, who is not sure he has a bold choice of going his own path. So it's really pleasing people who are independent in their mind, like Michel is.

18:48Guido Terreni:And this happened with the GMT Rattrapante, which was the first innovation that we did in 2022, which really took us by surprise. I mean, it really is. And then obviously the latest iteration is the chronograph mysterieux of this sort of philosophy and idea. But, you know, talk about that GMT Rattropan, which was, you know, really did have an impact in terms of, you know, enthusiasts and collectors in terms of waking up and taking another look at the brand and the offering. You know, it was a new way to do a GMT. I mean, you know, talk about that whole sort of aesthetic and philosophy that we've seen with the pieces and I guess right through to the chronograph, Mr.

19:33Celia.

19:34Guido Terreni:Well, that to me, the Jimtira Trapante holds in him the essence of the philosophy of private luxury that we are applying to the brand. Because everything is taught for a reason and is there to give a flawless experience. First of all, you start from the client. Not having an ostentatious client where the ultimate status is not to show your status. You are giving to a person something that is only he knows what he has. So you're not a client who when he's not traveling needs to brag that he's a traveler. Or needs to brag that he has an international life ruling all the time zones of the world. So when you're at home, we wanted to provide a beautiful two-hander.

20:19Guido Terreni:But when you are traveling, you want a flawless experience. So a pusher moving the hour hand was a must because the minute hand should move when you're changing a time zone. And then just by saying in the brainstorming that we had at the third day of my arrival in the company, I wanted to watch post-COVID, so everybody wanted to go back to traveling and do it in a way that was never done before, extremely refined and discreet like the brand is. And by saying the sentence, I want to go back, when I'm traveling, I want to go back as quickly as possible because I want to be reunited with home. In French, reunited to say rattraper, it means to catch up.

21:02Guido Terreni:And this gave the idea of doing, well, why don't we use a rattrapante function to the traveler hand? And it seems this intuition is very powerful, but it's an intuition that is breaking the rules of 195 years of history. because the patent of a split-second function was patented in the late 1820s, and it took almost 200 years to the industry to apply to another hand of the movement instead of the second half of the chrono to a travel hour hand. Now, this gives you also the rigidity of our industry. It's quite conservative. It's quite, you know, thinking out of the box is not always frequent. And this gave a beautiful sensation to the owner because the owner, first of all, has something interesting on his wrist and something playful, something that has a magic moment where in the blink of an eye that hand reunites with your home time.

21:59Guido Terreni:And it's done the shorter way because when you are beyond seven hours, it goes back clockwise. When you go under seven hours, it goes back anticlockwise. clockwise so and that's due to the mechanic of the latrapante function which has an iconic component which is a sort of heart component that makes the the lever switch back from the shortest way and this this is always beautiful to see how wheels pivots levers mechanics at the end are able to transfer an emotion to to a client which is perfectly in line with with what he wants to show So it's something for him. It's not something to show off.

22:39Guido Terreni:But when you're having it, it's exciting. It's something that you are proud of. But everything is under the hood and nothing is in your face. And that is, you know, it's sort of that thought philosophy is at the heart of this, you know, sort of slogan or idea that you talk about, which is private luxury. And this as opposed to, you know, quiet luxury, which is an idea and a sort of style that certainly has come about in the past few years. I mean, you know, talk more about what exactly private luxury is and how it is expressed in the offering and the product at Parmigiani. The difference between quiet luxury and private luxury is that quiet luxury has become a trend.

23:28Guido Terreni:And when a trend is in fashion, it is the opposite of being quiet. So people who are quiet today because it is fashionable to be quiet are basically the opposite values of what quiet is about. So we had to rename it into private luxury because private luxury has always been there and will always be there. And it interests a client who is not following the flow, is not following what a designer is obliging you to wear, is not somebody who is building his own way of consuming whatever it is consuming. I mean, because it can be luxury, it can be the restaurant you choose to go to, it can be how you live in society.

24:17Guido Terreni:If you're looking for more deep relationships and less superficial ones, you get, no, it's a way of behaving before of purchasing. So it usually comes with education and you can be private at 20 years old and you can never get to private luxury if you are driven by other values. And for sure, it's taking the luxury experience to a next level or a different level of the first degree, because first degree is given you by the wealth that you have built, which is beautiful to have built a successful wealth during your life. And it's meritocratic, it's beautiful. But usually, if you think that luxury is an expression that shows your wealth, you have not understood what luxury is about.

25:06Guido Terreni:Luxury is much more than that. So the first floor is the access that is given to you by wealth. And then especially when the access to wealth has been more and more accessible in society, because unfortunately society is going to a polarization, many more rich people, and probably less average or the medium class. Income inequality. Exactly. If you think of my father's generation, everybody could buy a luxury watch once in a lifetime. Now today, not everybody can do that. So luxury has moved up into the price, but also into the offer. And if money is the differentiation point to be expressing luxury to who doesn't have access to that, that is the first degree.

26:00Guido Terreni:But within the community of luxury experience, money is the floor. What private luxury is about is differentiating yourself with other things, which is education, refinement, discernment, making choices that are, you can be much more cool at 50 ,000 rather than a million, depends how you're spending your money. So it's much more important to an educated and, let's say, private luxury kind of experience what you do with the money that you have and not how much money you're spending. And this is very important to me. Is it just simply taste, though? Or, I mean, you know, refinement, taste? It's more than that.

26:43Guido Terreni:It's discernment. It's knowledge. But not knowledge as a geek, you know, what levers goes in a movement. No, that's nomenclatura. I don't know how to say it. It's not sufficiently. It's what you are conveying. You understand what you're conveying. Certain watch. It's probably, I can summarize it in the opposite of hype. How well hype is what society, a watch can be hype and can be bought very expensively beyond the price list because of its scarcity that is artificially stated or because of the desire, which is a fashion victim approach if you want to luxury. And if clients get to that behavior where they accept to do purchase journeys before getting to the watch that you really want, I mean, they are responsible also for this kind of behavior that luxury is having to certain customers.

27:45Guido Terreni:but private luxury customers usually are pulled off by these dynamics and they start to be looking elsewhere because they don't want to play the game and they prefer to differentiate themselves what everybody wants by going to things that are in the know-to-know so it's less awareness but those who know are part of a more interesting community. If people don't recognize that you have a parmesan on your wrist, the owner doesn't care. But the reward, the social reward is if you have somebody who compliments you or what a beautiful watch you have, you start talking watchmaking like buddies immediately because you know you have somebody in front of you who has a superior knowledge of the industry and is not just looking at what is obvious.

28:32Guido Terreni:So this private luxury is about going beyond the first degree of understanding aesthetics, brand heritage, watchmaking content that you have on the watch's style that you're conveying through your choices because at the end there are people who understand that a watch does not define you. A watch is an accessory. It is a part of you. It is something that is saying much about you because it's an intimate choice, but you're not the watch that you carry. And this is part of a more sophisticated audience that is looking at consuming whatever, luxury or holidays or cars or whatever you want, in a way which is thoughtful, which is personal, which is knowledgeable and confident, because at the end, you're not following a dogma that is imposed to you.

29:26Yeah, no, that is incredibly well articulated. And I think it makes clear the sort of distinct nature of this idea. How does creating products in the vein of private luxury, how does that work as a business, though? I mean, you know, I think early on you had great success in terms of, I think, tripling sales with the brand. Yeah, I mean, you know, where are you now in terms of average price? and talk about those kind of metrics if you can and how that has been achieved through this vision of private luxury.