Where Breitling’s CEO Is Placing His Bets

GRENCHEN, Switzerland — In a downturn, enterprise leaders usually speak of continued investments in innovation as keys to unlocking future progress. However as the posh watch trade’s slowdown continues, Breitling’s chief govt is closing the door on that concept. “We’re going to do extra of the identical,” says Georges Kern, who has run the private-equity-backed Swiss watchmaker since 2017.

“It doesn’t sound very thrilling, however we’ve a confirmed idea,” he continues. “Over the past 5 – 6 years, the objective was to develop into related as a result of the model wasn’t related anymore. We’ve develop into a generalist model that’s cool and related and we’ve been rising tremendously.”

Like most Swiss watch corporations, Breitling doesn’t publish its outcomes, however in response to Morgan Stanley estimates, the corporate has greater than doubled its turnover since Kern’s appointment, rising revenues to 870 million Swiss francs ($976 million) final yr. Kern received’t affirm these figures, however factors to Morgan Stanley’s report when requested about his firm’s efficiency.

Progress within the Swiss watch sector, nonetheless, has since slowed. In 2023, export values reached an all-time excessive of 26.7 billion Swiss francs, however in response to the Federation of the Swiss Watch Trade, values have fallen 2.6 p.c and volumes 8.7 p.c year-on-year to the tip of April.

Kern urges perspective. “After all, turnover slowed down versus post-Covid,” he says. “But it surely’s nonetheless a lot, a lot increased than pre-Covid. Revenge spending after Covid was completely irregular, not just for the watch trade however for the entire luxurious trade. What are we complaining about? We ought to be very completely happy about what we’ve.”

The following step for Breitling, he says, is to construct what he calls “esteem” by specializing in the corporate’s historical past and its manufacturing capabilities, which he says he’s planning to broaden. “These parts give reassurance to the patron, who is aware of we’re a cool model however perhaps isn’t conscious of our manufacturing,” he says.

Kern’s appointment seven years in the past shocked the watch trade. He had simply been promoted to Richemont’s head of watchmaking, advertising and digital after a profitable 15-year stint as IWC’s chief govt and was as a result of stand for election to the group’s board however was lured away by personal fairness agency CVC Capital Companions to move up Breitling. Companions Group is now the 140-year-old watchmaker’s largest shareholder.

Breitling, says Kern, had develop into caught in a rut, too centered on aviation and pilot’s watches that have been pitched with outdated, often borderline misogynistic messaging. Within the years that adopted, Breitling invested closely in a rebrand that positioned it as what Kern calls “an informal, inclusive and sustainable” luxurious firm, and launched an promoting marketing campaign that featured Hollywood A-listers Brad Pitt, Charlize Theron and Adam Driver. Solely Theron stays.

“Brad Pitt helped us so much in altering perceptions of the model and giving it a extra trendy contact,” explains Kern. “However after some time the model had that progress and also you don’t want that [Pitt] anymore. With maturity you costume another way.”

Kern says a whole lot of his promoting funding is now in retail following an aggressive boutique opening programme. “That is the most important advertising instrument you’ll be able to think about,” he affords. Breitling now has a world community of round 300 monobrand boutiques, a lot of them franchised, a rise from round 50 seven years in the past. Worker numbers have spiked too, rising from 750 workers in 2017 to 1,900 in 2024.

“Individuals need a bodily expertise,” says Kern. “They’ll purchase sneakers on-line as a result of they know their dimension.”

Regardless of the trade wobble, Breitling remains to be rising, Kern insists. The pinch, he says, is affecting smaller Swiss watch corporations. “Some [smaller] manufacturers loved progress after Covid as a result of there was no inventory,” he says, referring to the provision and demand imbalance created by the pandemic, notably at Rolex. “However now there may be inventory accessible, and these smaller manufacturers are struggling way more than the larger manufacturers. The slowdown is especially for the smaller and fewer strong manufacturers.”

The FHS’ figures help the idea. In its most up-to-date report revealed on the finish of Could, it indicated that watches with an export worth (roughly half retail) of between 500 and three,000 Swiss francs fell by 10 p.c in April, whereas watches with an export worth above 3,000 francs, the place many of the large gamers function, elevated by 7.8 p.c. Kern says many of the watches he sells are within the “candy spot” between 5,000 and 15,000 Swiss francs.

Breitling has been reliant on a powerful US economic system for years, and Kern says that 20 p.c of his gross sales at present are finished stateside, making it the corporate’s primary territory. Even with the uncertainty of the presidential election in November, he says he’s assured the US will proceed to prop up Breitling’s enterprise. “Analysts have been speaking a few recession within the US for years, however it by no means occurs,” he says. “It’s a really resilient, entrepreneurial, dynamic economic system.”

He identifies China as a progress territory for Breitling, and says that, whereas lower than 10 p.c of the corporate’s gross sales are within the nation at present, he believes the determine ought to be 10 to fifteen occasions increased earlier than they “attain our fair proportion of market.”

Beforehand, Kern has commented on the trade’s must spend money on the entry-level watch class, starting round 2,000 Swiss francs, the place first-time watch patrons as soon as discovered family title manufacturers, equivalent to Omega and TAG Heuer, in addition to Breitling. However effectively documented worth hikes have lifted Breitling out of this bracket, leaving a big-name model vacuum.

Kern admits Breitling’s common worth level has climbed considerably since his arrival, rising from $5,000 to $7,000. The rise, he says, is right down to changing off-the-shelf third-party mechanical actions with in-house calibres that provide increased efficiency, the persevering with power of the Swiss franc and inflation. However he concedes that the trade has been responsible of inflating costs.

“I do know manufacturers within the watch trade which were rising costs dramatically for a similar product, and that’s an issue,” he says, with out including a reputation.

He alludes once more to a venture that can come to fruition subsequent yr and that can give him leverage in a cheaper price class he believes remains to be vital to the long run success of Swiss watchmaking. “Individuals say all of the manufacturers are shifting up and there’s no enterprise within the cheaper price factors,” he says. “However I don’t imagine on this.”

He factors to India’s inhabitants of 1.4 billion individuals. “Earnings ranges will develop steadily and many individuals, earlier than changing into wealthy, can be first center class,” he says. “There can be increasingly center class on this planet, all over the place. These individuals would possibly need to purchase an analogue watch and never an Apple Watch, however they are going to begin with 2,000 Swiss francs.”

He received’t be drawn on what form the venture will take however says that regardless of Breitling’s acquisition of the heritage dial title Common Genève final yr, the corporate’s buyers — of which he’s one — “don’t have that ambition to develop into a bunch.” As an alternative, they are going to look to IPO or promote.

As for Kern himself, he says Breitling’s tailwind means he has no intention of hanging up his wings simply but. “Seven years in the past, there was no expectation on Breitling and other people mentioned I used to be going to drive it right into a wall,” he says. “However what we’ve from Breitling at present is just 20 p.c of what I imagined seven years in the past.”