Frédéric Arnault’s TAG Heuer ‘Transformation’

Three years after being appointed chief government of the Swiss watch firm TAG Heuer, Frédéric Arnault stated the model had now “reached milestones in model transformation.”

In accordance with the 28-year-old son of Bernard Arnault, chairman and chief government of TAG Heuer’s mother or father firm LVMH, the principle goal of the transformation challenge was “model elevation” throughout merchandise, advertising and marketing and distribution.

In an unique interview with BoF, Arnault stated TAG Heuer has two years’ value of orders for the costliest watch it has ever produced, the half-million-dollar Carrera Plasma launched earlier this yr; that the corporate’s subsequent transfer could be a foray into “excessive horology” with extra difficult chronographs priced between $50,000 and $100,000; and that the model’s common value level has now risen above 3,000 Swiss francs ($3,320).

“We did a number of enhancements on the merchandise, on high quality, on design and on the iconicity of these merchandise,” stated Arnault, talking on the Monaco Grand Prix final weekend (TAG Heuer sponsors the Oracle Crimson Bull Racing staff). Final autumn, TAG Heuer’s square-cased Monaco received the Icon Prize on the Grand Prix d’Horlogerie de Genève.

Arnault stated TAG Heuer’s elevated common value level was a results of a technique begun by his predecessor, Stéphane Bianchi, now president of LVMH’s watches and jewelry division.

In 2018, when Bianchi started at TAG Heuer, the model’s common value level was considerably decrease at 2,200 Swiss francs, stated Arnault. He declined to expose what number of watches TAG Heuer produced yearly, or the corporate’s turnover, however stated that it was “greater” than the 729 million Swiss franc estimate printed in Morgan Stanley’s annual Swiss watch business report in March.

A transfer upmarket would put TAG Heuer in step with one of many clearest recent shifts within the Swiss watch business: decrease volumes, greater values. In 2018, annual exports by quantity of Swiss watches totalled 23.7 million items, in response to the Federation of the Swiss Watch Trade (FHS). Final yr, that determine had fallen to fifteen.8 million. However on the similar time, revenues have climbed, reaching a report 24.8 billion Swiss francs in 2022. The spike has been pushed by watches with a mean export worth (roughly half retail) above 3,000 Swiss francs, the very best worth class within the FHS’s breakdown.

Regardless of rising costs, Arnault insisted TAG Heuer was nonetheless a “first luxurious watch” model and that the corporate’s entry-price watches, sometimes Method 1 battery-powered fashions costing from round $1,500, remained its core enterprise. “There’s this perception that between 1k and 3k [dollars], volumes are taking place,” he stated. “Nevertheless it’s not what we’re seeing.”

Even so, he stated he had witnessed a change in his buyer base. “Ten years in the past, the core focus was the shopper who had one watch in his lifetime, possibly two,” he stated. “And sure, it’s true there’s much less of this buyer, however the collector buyer base profile is rising tremendously, and it’s grown loads prior to now 10 years. There are much more individuals accumulating watches and now that is taking a a lot greater share in our clients.”

He additionally stated he believed his customers had been not pushed by value. “The worth is just not the subject,” he stated, including that he felt multi-brand retailers had been too centered on promoting watches in response to funds. “It’s in regards to the story, the design and the model values.”

To that finish, Arnault has labored to rewire TAG Heuer’s advertising and marketing technique. Below Jean-Claude Biver, Bianchi’s predecessor as TAG Heuer chief government, TAG Heuer had entered elite soccer, turning into the official timekeeper of numerous the world’s skilled leagues, together with the Premier League. However Arnault exited the model from the game. “It took three years to cease all these offers they usually’ve now all gone,” he stated.

“After I joined, we determined to refocus on sports activities related to velocity and motorsports, which was a wager on the time, even when it’s not that way back. We had been listening to motorsports had been an outdated man’s sport that talked primarily to Europeans and to not girls or the youthful era. We had been additionally listening to there have been problems with sustainability.”

TAG Heuer’s continued funding in Method 1 and motorsport had paid off, although, he stated. “We believed it was so vital to the model, and we needed to make investments closely. It proved to be proper.” Arnault cited the impression of Method 1′s proprietor, the Nasdaq-listed American firm Liberty Media, on the game and what he referred to as its “disruptive communications technique,” powered by the hit Netflix sequence Drive to Survive.

Arnault stated he had no plans to observe Rolex’s lead and enter the fast-growing licensed pre-owned class, however that TAG Heuer would proceed to take a position closely in what he referred to as “content material and storytelling.” In April, the model launched the five-minute movie The Chase for Carrera directed by David Leitch, starring Ryan Gosling and Saturday Evening Reside’s Vanessa Bayer, and that includes TAG Heuer’s automotive companion Porsche, one other deal finished since Arnault’s arrival.

LVMH singled out TAG Heuer alongside Tiffany and Bulgari for its “sustained inventive momentum” in its 2022 annual report. Whereas the watchmaker’s revenues appeared to stay beneath pre-pandemic ranges final yr in response to analysts at Morgan Stanley, representatives for TAG Heuer disputed these estimates Thursday, saying the model had reported its best-ever yr in enterprise in 2022, with gross sales up 20 p.c over 2019. LVMH doesn’t escape gross sales for particular person manufacturers.

Arnault’s impression on the firm has already made his subsequent steps the topic of business hypothesis. Earlier this yr he attended a Louis Vuitton occasion in Zermatt and a Bulgari occasion in Venice. “I imagine the technique we’ve put in place [at TAG Heuer] will proceed, even the day I transfer to a different challenge,” stated Arnault. “However this isn’t quickly. I’m not going to Bulgari.”

Editor‘s Be aware: This story was up to date on Thursday, 1 June 2023 to incorporate LVMH’s response to Morgan Stanley’s estimates of TAG Heuer’s revenues.

Disclosure: LVMH is a part of a gaggle of traders who, collectively, maintain a minority curiosity in The Enterprise of Style. All traders have signed shareholder’s documentation guaranteeing BoF’s full editorial independence.