Observations from the Swiss Watch Industry Report for 2021
Including exclusive ranking of top CEOs behind the stellar performance
The annual report on the Swiss Watch Industry by Morgan Stanley and LuxeConsult has become a must read for industry professionals and avid collectors. This year’s report, the 5th edition so far, was published earlier this month during perhaps the best time for the Swiss watch industry, with worldwide interest in mechanical timepieces at an all-time high. A number of media articles have released eye-catching headlines by focusing on the key findings of the report, such as Rolex continuing to be the King, the Cartier moving to the 2nd place by overtaking Omega, and Audemars Piguet surpassing Patek Philippe in annual turnover for the first time.
The in-depth report comes with a tremendous amount of data and useful insights. We may draw many additional conclusions that are of interest to watch enthusiasts and collectors. Just like what I posted in this newsletter last March when the last report came out, here are the observations I derived from this year’s report. There is also an exclusive ranking of the best CEOs at the helm of those brands who were the clear winners in 2021.
Brands gaining market share in 2021 (retail value)
The Morgan Stanley report estimated the brand market shares in a 2-step process. First, the number of watches sold and the turnover at each of the top 65 brands were estimated. In the second step, the breakdown of wholesale volume and the sale at brand directly operated stores was obtained. An implied retail value for each brand was estimated next. The implied retail market share may then be calculated for the top 50 brands.
Due to the difference in distribution models, the brand with a wholesale focus who has a lower turnover may turn out to have a higher implied retail value than a brand with a direct sale model. This is the case for Patek Philippe and Audemars Piguet, which may seem confusing at the first glance (PP was ahead in market share while AP was ahead in turnover). Nevertheless, this is a more accurate way to estimate the market shares based on retail values.
Examining the retail market share percentages of each brand for 2021 and 2020 respectively, we may determine the brands who have gained, maintained, and lost market shares in 2021. As the industry as a whole had recovered greatly in 2021 from the negative impacts of the pandemic, to gain market share means one had to grow even faster than the industry average. This analysis allows us to see the true winners in this rising market.
First of all, the privately owned brands continued to outperform, a trend we have witnessed in recent years. The surprise was that the rest of the winners here were all from the Richemont Group. No wonder that the Morgan Stanley report has the Richemont stock as a top pick with a target price of CHF 165. Another interesting observation here is that the jewelry and watch brands were doing extremely well in this environment. Look at the names, Cartier, Van Cleef & Arpels, Chopard and Hermes. The continued investment in high end watchmaking and innovations in watch designs by these jewelry brands had certainly paid off. The strong interest from the lady watch buyers might be another reason.
Brands maintaining market share in 2021 (retail value)
Maintaining share in a fastly recovering market is not an easy feat. There was the challenging supply chain issue too. It is like rowing the boat against the current, if one doesn’t move forward fast enough, one will get left behind. Audemars Piguet has done an amazing job here moving up the turnover ranking from 6 to 4. FP Journe was doing very well with watches allocated long before they were made. With the major price increases in early 2022, we may expect Journe to move up in the market share for 2022.
Brands losing market share in 2021 (retail value)
Patek Philippe and Omega were doing just fine, despite losing market share relatively speaking in the sense of “implied retail market values”. The waitlists for many of their hot models are very long. Maybe the drops in market share were due to not being able to ramp up production as quickly as the market share winners (or simply didn’t want to do that).
For Longines and Swatch who offer watches at much lower price ranges, the decrease in market shares was an ominous sign. The success of Apple watches was putting a dent in their performance. However, based on the crazy scenes reported at the Omega x Swatch Moonswatch launch on March 26, they may have found a hit that will boost the 2022 results.
Production volumes bounced back to the pre-Covid levels
This is really excellent news for the brands and the collector community. Fingers crossed that this trend will continue in 2022 and beyond.
Top 10 Brands by average retail price in 2021
The data in recent years showed that the high-end segment of the Swiss watch market had fared much better than the low-end segment. Furthermore, collectible high-end watches have become an investment category, especially in the current high inflation environment. It is useful to look at the most expensive brands measured by average retail prices per watch.
Richard Mille is at the #1 position with an average price per watch of a staggering CHF 226K. Such price range is usually reserved for a few top independent watchmakers with very high complications and very low yearly outputs. But doing so at the 5000 pieces one year is simply mind-boggling. It was such an incredible feat that Richard Mille is really in a league by itself.
Van Cleef & Arpels has moved up from #5 last year to #2, indicating the strong pricing power of combining luxury jewelry with high-end timepieces. The volume of 9000 is quite impressive at this price level.
F.P. Journe is the only independent watch brand making into the top 50 list for the second time. The average retail price is expected to go up further due to the strong demands and sky-high secondary market prices. We do hope that the watchmakers may benefit from the higher prices rather than the flippers.
A. Lange & Söhne is the clear high-end watchmaker among the many brands under the Richemont Group. The brand is steadily becoming better known and more desirable, especially after the introduction of the highly sought-after Odysseus sporty models.
Last but not least, the three Holy Trinity brands certainly belong in this prestigious list with their hot models and high complication collections. These historical brands continue to innovate and produce mechanical wonders that delight the collectors.
Top CEOs at the Swiss Watch Companies for 2021
The stellar performance at these winning brands even under the shadow of Covid-19 spoke volumes about the high-performing teams behind the brands. Guiding the flawless executions by a top-notch team is usually a determined CEO making all the right moves. Based on the annual report by Morgan Stanley and LuxeConsult, here is an exclusive ranking of the top CEOs at the Swiss Watch companies compiled by the author. The criteria are the performance of the brands including recent turn-arounds.
The first observation is that all the CEOs have been in the current driving seats for many years. Mr. Richard Mille and Mr. FP Journe are the founders at their respective companies from the beginning. Mr. Thierry Stern has been with the family business since a very young age. Other CEOs all have long and impressive experience in the watch, auto or luxury fashion industry.
Mr. Jean-Frédéric Dufour is perhaps the most low profile and even mysterious CEO among all the executives in the Swiss watch industry. There are simple no media interviews of him that we may find as the CEO of Rolex. He obviously prefers to let Rolex’s brand ambassadors and the nice watches be the “spokespersons” for the brand. I was very happy to learn that he was once a product manager at Blancpain, being a product manager myself.
Mr. Richard Mille founded the company when he was 50 year old and is now ready to pass the torch to his business partner and children after 20 years. He is really an inspiration for everyone who has a dream to pursue one’s passion and achieve the unthinkable.
Lastly, there is very intriguing observation that among the nine top CEOs of the Swiss brands, five of them are in fact French! Two are Germans and only two are Swiss. Mr. Richard Mille attributed the “cross cultural exchanges” as one reason why his French background served him well in a normally conservative Swiss watch industry in this excellent interview with Hodinkee. He stated that “when these opposites are put side by side, working together, they can initiate powerful synergies that would never have happened were it not for the exposure to each other’s strengths and abilities.”
The state of the Swiss industry is strong and vibrant, judging by this insightful industry report. It is indeed wonderful news for watch lovers and collectors who enjoy the hobby so much. Let the good time roll.
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Tons of ingiths. Thanks for sharing!