It’s been quite a year at TAG Heuer. Hard to believe that it was almost exactly 12 months ago that the company called a late-year press conference to announce that industry veteran Jean-Claude Biver would lead its new management team into 2015 and beyond. There was talk of Smartwatches. There was talk of a distinctive new design language. There was talk of a new price positioning. And 12 months later we can now see that for all this talk, there has been a flurry of action and results delivered.
We wanted to speak with JC Biver not just to look back over the last 12 months, but to also get a sneak preview into the future, because while there has been an incredible amount of change under the hood at TAG Heuer, we have yet to see the revolution fully roll across the brand’s range of watches and chronographs. Normally we would publish an edited, or cut-down version of a long interview, but in this case we wanted to leave in all the detail, because every part of this interview tells the story of what has happened in 2015 and what will happen in 2016 and even further into 2017. As a regular reader of Calibre 11, JC Biver knows that our readers want the details, not just the headlines, so sit back and enjoy the behind the scenes story of the first 12 months.
The Year in Review
Calibre 11: You may not know this, but it’s almost exactly one year (16th December 2014) since you held a press conference to announce the new TAG Heuer management team and your vision for the brand. I thought it would be interesting to look back over that first 12 months.
Jean-Claude Biver: Yes. I am very pleased about the strategic decisions we took. And the strategic decisions were several.
First, we thought we would have to bring the brand back to its core business, which meant two things. Number one, develop additional collection in the price range from US$1,000 to US$5,000. Number two, reduce retail prices in the market that had gone up by 30 to 40 percent over the last three years. These decisions to bring a price reduction, and number two, to bring more models on the core range of US$1,000 to US$5,000 was a very important decision. It was a very instrumental decision because it has moved back TAG Heuer to where the brand belongs, and in the price segment where the brand is an incredible leader.
We have gained in total market shares already in one year. That proves to me that we were right. I could not expect to gain 20 to 25 percent market share market share in one year. But we did it because the brand helped us, because that’s where the brand is strong, in this price segment. That was action number one.
Action number two, we had, thank God, started a kind of vertical industrialisation of the brand, which means we have acquired a dial maker, a case maker and we have developed movements. All these things were done quite rapidly. It’s difficult in our industry today to recruit people in this team. Because it was difficult, because we have to do it quicker than the past, I decided that I would only work with the absolutely best people I could get. We made important changes in our operations, so important because we changed many people, that today I can proudly say that end of December we will show in all our subsidiaries- the case maker, the dial maker, and the movement maker- that we are in profit. Incredible!
And that is very, very important because it will help us to sell product at a very good price. If you are losing money in the industry, you cannot maintain a certain retail price. You have to increase it in order to compensate the losses. Today we can sell easily our product in the price range US$1,000 to US$5,000. That was step number two.
Step number three, I decided that the battle of the next five years, one important factor would be speed. I want in every aspect, in every department, in every decision, in every process I want speed. Speed is an important factor of the success. It has become a very important factor. Speed depends on people and organisation. If your organisation is too heavy, too complicated, too much structure, too much responsibility at many levels, your speed cannot be fast.
We have reorganised our internal chart, our internal responsibility hierarchical levels in order to enable the maximum possible speed, like a little start-up. My concept was I should never lose the speed, the flexibility of a start-up company.
Number three, I believe that we need people that would incorporate totally the strategy I wanted to give to TAG Heuer, and not people that could only understand it from a logical point of view, but we would need people that would really be the leaders of our culture. We have changed a few people, about 30 top managers in the world, including Switzerland. Now at each stage we have the right visionaries that can distribute and promote the new culture and new spirit and new message of the brand.
Those are the four big results that we have achieved which are industrial results, which are cultural results, and which are pricing results. All this has brought us today to believe that 2016 will be a better year than 2015. This is quite contrarian to the Swiss watch industry because the industry believes that 2016 might be more difficult than 2015. We have made budgets that are better in 2016 than they were in 2015. That’s the proof again that our policy works, and the brand has again an incredible speed, like the brand had in 2000 or 2010. Now we are back to the normal speed of TAG Heuer.
C11: I guess the evidence of what you’re talking about is the development of the new Heuer-02 Tourbillon at the price at which you’re proposing to offer it. Many people in the media said it’s impossible to put out a Swiss-made Tourbillon at this price. The parts must be imported from China. I guess it’s the efficiencies that you’re talking about with the vertical integration that allows such a watch to be produced at that price.
JCB: Yes. I’m ready to show numbers, prices, but then it will hurt the whole industry when you start to show prices! The industry has no other way to fight and find excuses than saying some parts are made in China, which is totally stupid. Nothing is made in China on the movement, of course not. The movement is 100 percent made in our own company. It’s just that we have an organisation, people, an internal productivity that enables us with a normal margin — the usual margins we take on the Formula 1 or the margins we take on the Carrera, the same margins are applied to the cost of the Tourbillon. And the result, if we do the multiplications, we end up at 14,900 Swiss Francs retail.
I know a few brands take additional margins because it’s a Tourbillon and they might take some provisions for after sales service, etc. But we have taken the same margins, not the special margin. We have taken the same margin as a normal Carrera and we have applied this margin to the Tourbillon cost. It ends up at 14,900. What can I tell you? We could also have said no, let’s make additional margin, let’s make a lot of profit, and let’s sell at 30,000. No, I said there is no reason.
If we have a Formula 1 at 1,000 dollars, this watch must look and must perform like if it would cost 2,000. If we have a Carrera that we sell at 4,000 it must look and perform like it would cost 6,000. If we have a Carrera Heuer-01 that looks like a 10,000 watch Swiss francs retail, it must retail at 5,000. It’s the same for the Tourbillon.
In every aspect, wherever you look at our new collection, we always have very interesting prices without any subsidising because we are profitable in each department. We are capable today to come out with incredible great prices.
C11: The Heuer-02 movement is of course based on the CH80 Calibre. It that Calibre likely to be sold to any other LVMH brand?
JCB: The CH80 is a 100% TAG Heuer movement. We had already produced 5,000 “test” movements in order to optimise the cost and production organisation. The first 5,000 have been produced and so for the Heuer-02 Tourbillon we have taken out 1,000 pieces from that pre-production series.
In future, you will see the CH80 on other TAG Heuer watches than the Tourbillon. But we are not expecting to sell it to anybody else in the group, and we are not expecting to sell it to anybody else outside the group.
It is a pure TAG Heuer movement, which for the moment is appearing only on the Tourbillon collection. But I can already say, and I promise you and commit that this movement will appear in the coming years on other TAG Heuer collections. It’s something, a movement we are very proud of. It’s a brilliant movement, a fantastic chronograph. It performs fantastically well. It’s a really great chronograph movement of which I am very, very proud. It will come on other products very soon.
The 2016 Collection
C11: Taking about the future, let’s talk about 2016. I guess 2016 is probably the first full collection under your guidance at Tag Heuer with the new philosophies that you talk about. What are some key themes of this new collection?
JCB: The collection in 2016 will not be complete because we cannot at the same time work the ladies’ collection, the Formula 1 collection, the Carrera collection, the Aquaracer collection. I would say 2016 will be marked at the Basel fair by the Connected watch, which really developed in other materials, and become a collection not just one watch. It is due to grow and it is due to get evolutions and it is due to become a real collection with different colours, with different sizes, with different functions, with different materials. The Connected is a real collection. That’s one.
Then we will see the extension of the Heuer-01. The Heuer-01 was the first shot in Basel, but the Heuer-01 has legs too. It will be some additional materials. There will be some additional bracelets. There will be some additional sizes, and there will be some additional colours. So there is a full development of the Heuer-01.
The Aquaracer range will also be redeveloped with new materials, with new colours, with new sizes, with new bracelets. There will be a complete Aquaracer also. And Carrera I said already with the Heuer-01, and that’s it.
You see, it’s only one part of the collection because what is missing now is the Link collection which we have not yet restructured. We’re working on it. And the Formula 1 collection, which will not show any particular spectacular development in 2016, but it will come in 2017. I think the first real collection where we can say 100 percent is new will be in 2017.
The Heritage Collection
C11: One of the amazing things this year has been the increase in value of some of the vintage models like the Autavia. Have you thought about bringing back the Autavia, given its popularity on the market?
JCB: Yes. Autavia will be back in 2017. We are doing a new Autavia inspired by the old one. There will be a nostalgic heritage collection made out of the Monaco, plus the Monza which will be next year. And 2017 is Autavia. So in 2017 we will have three watches in the heritage collection: the Monaco- the original one with the crown on the left side- a Monza, and we will have an Autavia.
C11: Will that be a single model or will the Autavia become a new range of models?
JCB: No, it will most probably be a single model. With heritage we don’t want to start again with collection. We want a unique model. It means one Monaco. I think we have done the mistake when we released Monaco to make five, six, ten different styles or colours. I think heritage should be one. So there will be one Monaco in the future. There will be one Monza in the future. And there will be one Autavia in the future. Eventually you can have variation with the leather strap or different colour, I’m not opposed to that. But I want one model, otherwise it’s not a heritage anymore. I want a real heritage.
C11: The last Autavia was the 2003 re-edition which used the 1970s style case. Are you thinking about going back into the 1960s or is it a 1970s style case?
JCB: We will go back to 1963.
C11: That’s a lovely watch….
The Future of the Calibre 36 El Primero and Sellita
C11: While we’re talking about watches and the future, what about the Calibre 36 (Zenith’s El Primero)? I got the sense when I last spoke to you that that was unlikely to be used in many models going forward.
JCB: El Primero has no room at TAG Heuer. I don’t want the El Primero. It’s a legendary movement but it belongs to Zenith and I don’t want any confusion. In my opinion, when we have such a great CH80, when we have an 1887 that works perfectly well, why should we need another?
C11: Are you happy with the performance of Sellita? I guess now it’s been two or three years since TAG Heuer first started using Sellita instead of the 7750, are you comfortable with the way that Sellita movement has been performing? It’s often a question collectors have where they say “I know it’s a clone movement but surely somehow the ETA must be better than the Sellita”?
JCB: We have never worked so closely with Sellita, never, never than we do today. There is not one day where our engineers or watchmakers are not taking to Sellita. Which means we are now supporting Sellita. We are even helping them to increase our quality requirements or to meet our quality requirements. Never, never have we been so close.
And if you work so close with a supplier, then at the end of the day, you get what you want. You get the quality you want. You get the specifications that you want. You get all your requirements. But if you just treat a supplier like a supplier, and you are not cooperating with him, you are not giving him your advice, you are not communicating with him, then the supplier is just like a dead supplier.
So Sellita has become a very important asset to us because we work with them as if they would belong to us. They don’t belong to us, of course, but we work the same way with Sellita as we work with our own company. And we have the same requirements. So the new way and new partnership that is now taking place with Sellita, and I’m very pleased with it. Of course, it has helped me a lot because I’m a good friend of Miguel Garcia, the owner of Sellita. It helps to consolidate and to strengthen our partnership. Now he’s not just a supplier, he’s become a partner and that makes a huge difference.
C11: Lastly, I wanted to talk on the Connected watch. I saw last week in the news that you’ve increased production because the orders have been very strong, which is fantastic. Probably one of the most innovative parts, if you put the watch to one side, I think has been the ability to upgrade or trade in after two years, which I think is something people have appreciated. Is that something you might consider offering to other Connected models or will it always be an upgrade from Connected to mechanical?
JCB: We should always give the possibility to connect to eternity because we are a watch brand. And a traditional watch brand, their products are always connected to eternity. And whatever Connected watch we produce, we should always give the opportunity to transform it into eternal which of course means mechanical. That is the concept we have.