TAG Heuer and Zenith Merger

Posted by: David Chalmers   |   17 January 2010   |   9 Comments  

TAG Heuer and Zenith- both owned by luxury good conglomerate LVMH, have announced the merger of the two houses under a new holding company. TAG Heuer and Zenith are now part of LVMH Swiss Manufactures SA, along with Cortech (the TAG Heuer-owned case manufacturer). TAG Heuer CEO Jean-Christophe Babin will head the new group.

The news comes in the same week that Bulgari announced that the Daniel Roth and Gerald Genta brands will cease to exist as independent brands and will instead be co-branded on Bulgari watches.

So what will change at TAG Heuer? In the short-term, not much, with the reorganisation being described as mainly a legal, financial, administrative and accounting restructure, and with each brand retaining their own operational management. Of course, there is already co-operation between the two groups, as TAG Heuer already uses the El Primero Zenith movement in some of its watches and Cortech is a major supplier of cases to Zenith.

The reasons driving the changes at TAG Heuer and Bulgari are not hard to see- the financial crisis has hit the Swiss watch companies hard and there is now the need to rationalise costs to off-set the declining revenues. The TAG Heuer and Zenith move effectively removes duplication of back-office costs without having  too much impact on the watches that the customers see- no-one really cares about whether Zenith has its own in-house legal team or shares legal resources with TAG Heuer.

However, the reality is that once companies start down the path of merging operations, there is inevitably a flow-on impact to other parts of the business over time- will we see Zenith watches sold in TAG Heuer boutiques? Not in the short-term, but longer term its a strong possibility. Certainly it also gives TAG Heuer even better access to the El Primero movements for its high-end watches.

For today at least, this merger is nothing for watch enthusiasts to get too excited about- however, it will be the interesting to see how independent the brands remain in the medium-term, especially if Swiss watch sales remain soft.

Release below:

TAG Heuer, Zenith and Cortech (watch case manufacturer) have merged!


In December 2009, the watch making companies TAG Heuer International and Zenith have amalgamated to give rise to LVMH Swiss Manufactures SA, located in Chaux-de-Fonds. The new company is chaired by Jean-Christophe Babin (CEO of TAG Heuer), assisted by Jean-Frederic Dufour (CEO of Zenith) and by Jean-Claude Femiot (CEO of watch case producer Cortech in Comol). “The operation is primarily of legal, financial, administrative and tax related character. Each brand keeps its own operational management”, says Jean-Christophe Babin.

At this point it is not clear whether the also will favorise “industrial synergies”. New machines to manufacture platinum for example would need to be adapted to the small volumes production of Zenith and to the high volumes of TAG Heuer. However, the three entities concerned already have strong relations. The main customer of cases manufactured by TAG Heuer is Zenith which also sourced from Cortech, while some of the Grand Carrera models from TAG Heuer are equipped with the Zenith El Primero movement. The merger will accelerate the industrial integration mainly at Zenith, an authentic manufacture, rather than at TAG Heuer (280 collaborators) which mainly buys its movements from specialised suppliers.

The regrouping will not have consequences on the manpower of the companies, reassures Jean-Christophe Babin. It is true that Zenith (150 employees) and Cortech (90) already reduced their workforces in 2009. Hublot, directed by Jean-Claude Biver, is at this point (still) is not concerned with the regrouping strategy of LVMH.

Source: Chronometrophilia Switzerland/ Via http://home.watchprosite.com/?show=forumpostf&fi=17π=3594861&ti=578221&s=0

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Photo: Watchismo

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  • mark rush

    Sounds like a smart move on the part of LVMH, it should make them a stronger competitor against Swatch.

  • Jean-Christophe Babi

    The merger indeed won't challenge each Brand identity and management. The goal is to foster synergies and efficiencies mostly in back offices and after sales as the skills required are very similar and the savings substantial. This is already an organisation in place in Subsidiaries and logically extended to HQs. Each CEO remains firmly in control of its Brand product, communication and industrial strategy.

  • DC

    Thanks Jean-Christophe- good to hear.

    As an aside, I have a good friend who works at one of the large luxury groups (not LVMH) and I was always surprised to hear how little the various houses within the parent group co-operated. In fact, the way she told it, the houses would almost go out of their way not to co-operate with each other, such was the fierce desire for asserting their independence. This seemed crazy..what's the point of having a group of brands if there are no synergies?

    Its a fine balance between allowing the houses to keep the spirit and independence that made them special in the first place, but at the same time making sensible decisions about centralising where possible to save costs- especially in today's economic environment.

  • Daniel

    Thanks for giving the square-case El Primero some exposure. I love mine!

    I hope this merger will help both companies re-discover their heritages and begin to make some classic timepieces like they used to.

  • Johan

    I wonder how Bulgari plan to do co-branding of DR and GG. Names such as Bulgari Daniel Roth Ellipsocurvex Papillon seems awfully long. I have been very disappointed in DR and GG and I am not surprised to read about this major change. I have owned one expensive watch of each brand and feel let down by poor service.

    TAG Heuer's service in Hong Kong, by an LVMH service centre which also does the service for Zenith and I believe Dior watches has been the direct opposite: professional, service minded and efficient. Let us hope the merger within the LVMH watch group will take further advantage of large scale efficiencies without muddling the brand identities.

  • http://www.monochrome.nl Frank

    This sounds like a good idea! Of course sharing overhead costs for two brands in the same group and in the same business will cut costs and make both brands more competitive.

    Besides this 'business argument' I hope to see more of the classic line TAG Heuer watches equipped with the calibre 36 El Primero movements.

    …and i surely hope the design disasters of Zenith belong to the past, after the exit of the previous CEO. Now let's hope the classy look Zenith once had and TAG Heuer still has (especially in the classic line) will be an inspiration.

    Regards,

    Frank

  • DC

    Agree Frank- the 40th anniversary El Primero models were great- I especially liked this one:

    <img src="http://2.bp.blogspot.com/_3J67iYJfiMw/ScWXOh9oFzI/AAAAAAAAA8M/1CcJEqFlER0/s320/NEW-RELEASE-40TH-ANNIVERSARY-ZENITH-The-Originals-1.jpg&quot; alt="" />

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