Geneva-based Frederique Constant has been offering attractive mechanical timepieces at an unmatched price-value point. At the Watches and Wonders we talked about their business model, challenges and of course the new 35-year anniversary Classic Tourbillon Manufacture piece with CEO Niels Eggerding.
What’s your opinion about the Watches and Wonders fair and why are Frederique Constant and Alpina here?
I’ve always believed in one united show. Baselworld’s end but more importantly Covid created a little bit of an issue, as it forced us to do creative digital launches and different local shows. The local shows today are pretty competitive – look at Dubai Watch Week for instance, which is very vibrant and people like to travel there. Yet, I think that one main show where most of the industry is present and brands are showcasing their yearly collections is still extremely important. It is for the maisons, journalists, retail and basically everyone to engage in conversations about the novelties but also where industry is heading.
Have interim releases throughout the year diminished the meaning of single annual launches?
Yes, but this is more expensive for the brands. We used to do only Baselworld, replaced by Watches and Wonders. Now we also do Geneva Watch Days, Dubai Watch Week and so on. And what this means is that we prepare our entire product line and production around these events. You just need to accept that there’s no longer one big show. Yet, I think both for the industry and for the brands it is vital to be right in the middle of the most important show of the year, Watches and Wonders.
For our company it is fundamental. If you look at 2019, we had a very strong year, but 2020 was bad and in 2021 we hoped to recover and we didn’t. The premium segment fully recovered in 2021, but for the midrange segment it took longer. Early in 2022, I saw all the orders coming in. By the end of the year we overachieved the 2019 sales, although the continuing decline in our price segment was still visible in 2022. The FH report showed a 25% decline, yet we were already growing by 26%. So somewhere there was a huge hit. That year we sold 4,000 Worldtimers. With its EUR 4,000 price is not extremely expensive, but it meant a lot for us. After having looked at and analysed the data very carefully, I decided that for our 2023-2025 product portfolio we would prepare 6-8 strong new in-house calibres. With such an investment in new calibres, we had to rethink the retailer network that is interested in this collection. We present these to customers, but we will need A+ retailers that we must target – and because they come to Watches and Wonders we must be here too.
What is the role of digital for Frederique Constant and Alpina?
Currently less than 5% of sales happen online. However, these channels are extremely important for product discovery. People like to gather information online and then visit one of our retailers to gain hands-on experience with the watches and get specific questions answered.
We have also been changing a little. During Covid we heavily invested in our online presence and the ratio of online sales increased greatly. Of course, higher complications are more difficult to sell online, and let’s not forget that due to the continuous lockdowns stores had a very difficult time. Therefore, we have increasingly started to use digital channels as educational tools with an intention to raise end-customer interest and direct traffic to retailers.
Would the investment in the in-house portfolio trigger a change in the retail network?
Yes. We have always had manufacture calibres but as we grow this portfolio, we need retailers with the ability to sell these and have connections to clients, of course. Currently we have 2,500 retailers worldwide. We will keep our volume portfolio (between EUR 800-3000 products) and bring in new, more complex pieces at a very attractive price-point. For example, we’ll have a tourbillon at EUR 15,000, we’ll have another Perpetual Calendar Tourbillon, and we’ll upgrade power reserve in the years to come. The additional content will allow us to increase the price slightly in this premium segment. However, our volume collection will remain our main source of income, as it gives us the ability to invest, and very importantly, it also to smoothes out the economic turbulence.
What it will allow us is to offer retailers, who have been struggling to keep brands (with LVMH, Swatch Group and Richemont pulling out to create their own mono-brand boutiques), and desirable models in both price segments: the entry level EUR 800-3000 range and above with a unique value proposition.
For these ambitions you need the best talent. How do you see the current market for talent in the watchmaking sector?
You may have vision, but keeping and attracting talent is a challenge and it requires a fair bit of focus. We have 150 colleagues at our company, the average age is between 25 and 35. With my 45 years, I’m the oldest. I have an old fashioned, hard working mentality with no capability to read the crystal ball but with a strong desire to react to changes swiftly. Covid gave us a lesson in how to be really agile. It made our business rebound very well, but it made people perhaps a little impatient too. Our management team has worked together very hard to redefine our purpose, to look at our values again and accept a certain flexibility and work with the teams to embrace these. But it is a long process and we must address it every day.
I also see this is not unique to us. At the beginning of Covid there were delays in the supply chain for obvious reasons. Then deliveries were on time, but not to our quality standards. There has been much movement of human capital in the industry, which impacted the production processes, and in some cases meant the loss of know-how too.
Citizen Group acquired Frederique Constant Holding SA (brands Frederique Constant, Alpina, and DeMonaco) in 2016. To what extent are you building and executing your strategy independently within the Citizen Group? Are there any synergies you can exploit?
Originally, I was expecting much more direct involvement, however they trust us to know our market here in Switzerland. The Group is much more involved in its home market in Japan, however they are confident in our know-how and experience, as such they keep us very independent. Still, I present a bi-annual plan, which they validate and then we execute. But it is our plan.
In terms of synergies, there are quite a few. Citizen Group (Citizen Americas) has 4,000 point-of-sales with 500 employees in the US. This infrastructure helps us address the US market and it will be our fastest growing area, for sure. US sales are currently 15% of our turnover, which is expected to increase. We have also been using movements from La Joux-Perret, who is also owned by Citizen Group. The Frederique Constant Highlife Chronograph Automatic is based on an upgraded La Joux-Perret movement (the FC-391) with a column wheel link and 60 hours power reserve. But let me highlight that there’s no push for collaboration or any kind of strategy from top-down – these are meaningful co-operations initiated at the company level.
This year you are celebrating the 35th anniversary of Frederique Constant. Tell us a little about the anniversary model.
The tourbillon has always been a very attractive complication. We have been a little rebellious in the sense that if we create a calibre, we would make it much more accessible than any other company. And when we considered our anniversary piece, we thought, what could be nicer than to bring out a beautiful classical tourbillon in solid 18k rose gold under EUR 26,000? There’s simply no competition in this range, the nearest being sporty models by Tag Heuer over EUR 20,000 and anything else well beyond EUR 30,000. Additionally, we looked at the competition and a 39mm diameter classical piece doesn’t really exist – they’re all around 40-42mm. The case and dial of the Classic Tourbillon Manufacture are newly designed and inside you’ll find the FC-980 in-house calibre we developed in 2008. As we’re celebrating throughout the year, we will have another surprise along these lines later on.
The Highlife collection is your baby. How does it perform compared to other collections?
I started it in 2019. Peter Stas (co-founder and former CEO) said I should not pursue it. I said that I had been travelling the world and I saw the demand. In 2018, 80% of the Swiss watch exports over EUR 3,000 were timepieces with integrated bracelets and there was no affordable alternative to these. He was against it, but I was in charge, therefore I decided to go for it. I said to him that I analysed the market and I expect 25-40% market share in 3-5 years and it could be 25-40% of our business. In 2022, it reached 40% of our business, so this has been a game changer for us. And that was my luck, that we came out with a very nice watch and it became successful. Sometimes you need a little bit of luck.
Photo credits: Frederique Constant. Watches and Wonders.
All registered trademarks are property of their respective owners.
All rights reserved.