It’s no secret that luxury giant LVMH’s watch division has been undergoing quite a bit of change over these last few months. Characteristically, industry veteran Jean-Claude Biver, the group’s watch division head, has been quite vocal about the evolution.
On December 11, 2014, TAG Heuer CEO Stéphane Linder announced the resignation of his position after only 18 months at the post. Having been at TAG Heuer for 21 years, Linder was elevated to his current position after previous CEO Jean-Christophe Babin relocated to sibling brand Bulgari.
Jean-Claude Biver celebrating Hublot’s partnership with the 2014 World Cup
Rearranging Zenith
For me, the effects of Biver’s rearrangement of the LVMH brands began at Baselworld 2014 when Zenith quietly announced a rather shocking thing: in a reversal of the usual move toward more in-house movements, Zenith plans to utilize Selitta movements in its entry-level timepieces and close the case backs.
Why is this shocking? Because Zenith is a complete manufacture. Aside from the famed El Primero chronograph movement, it also manufactures the Elite movement for three-handed timepieces.
In an era when “manufacture” and “in-house” have become all-important keywords for marketing, to use third-party movements at an historical company with a genuine history in self-manufactured calibers is more than slightly disquieting for fans.
Utilizing third-party movements not only takes away the “specialness” of a Zenith watch for fans of mechanical watchmaking, it also makes these watches less expensive at retail. Biver explained to me in a June 2014 interview that at the entry level, he was sure that those buying the pieces were not interested in which movement would be found inside.
This naturally signals that Zenith’s goal is to up production numbers and entice new customers by bringing retail prices down.
UPDATE on December 17, 2014: Zenith has confirmed that it has ceased to acquire Selitta movements and will use the Elite caliber for its three-handed watches again going forward.
Additionally, although I’m not sure it’s related, just one month after Baselworld 2014, Zenith announced the departure of CEO Jean-Frédéric Dufour, who moved to a new position as CEO of Rolex. During Dufour’s time at Zenith, a 20 million-Swiss-franc investment in manufacturing facilities allowed him to increase movement manufacturing capacity from 8,000 to 50,000 pieces per year.
The El Primero movement was introduced in 1969, while the Elite caliber entered the market in 1994.
Ex-TAG Heuer CEO Stéphane Linder
Rearranging TAG Heuer
Then came Biver’s rearrangement of TAG Heuer. Following Babin’s shift to Bulgari, Linder carried on with the brand’s planned second in-house caliber, CH 80, which was introduced within a Carrera collection slated to retail between 6,000 and 8,000 Swiss francs.
Back at the end of 2009, TAG Heuer introduced Caliber 1887, an “in-house” chronograph, but neglected to disclose the fact that its design was based on Seiko Caliber TC78, intellectual property that TAG Heuer purchased in 2006 when reliable chronograph calibers could not be found in Switzerland in large enough quantities thanks to the booming market for mechanical wristwatches.
The oversight brought quite a bit of public heat down on the brand at the time. I wouldn’t be surprised if Caliber CH 80 was a direct reaction to this.
TAG Heuer Caliber 1887, based on intellectual property bought from Seiko
TAG Heuer manufactures the components needed to achieve the Swiss Made label and accommodate the desired features and finishing at its own industrial facilities, while it buys in other subassemblies such as the balance spring, pallets, and escape wheel, which come from Swatch Group-owned Nivarox.
For Caliber 1887’s manufacture, TAG Heuer modernized its factory in La Chaux-de-Fonds to include a semi-automated workshop and hired new employees, investing about 25 million Swiss francs.
The brand had been experiencing extreme growth under Babin, who continued to push it by inching the collection upmarket with price increases (which automatically come with an in-house movement) and the creation of haute horlogerie products. And TAG Heuer invested another 40 million Swiss francs in the Chevenez location in preparation for the manufacture of Caliber CH 80.
The ill-fated TAG Heuer Carrera CH 80 collection was scrapped just months after having been introduced
Other plans apparently
Biver, however, now has other plans for the popular sports watch brand. A few months after Baselworld 2014, Biver canceled Caliber CH 80 citing cannibalization of Caliber 1887. It has also been widely reported in the Swiss press that TAG Heuer released staff and put other employees on short shift as a result. However, the press release that the company sent out stated that employees would not be affected by the redisposition of the brand-new Chevenez factory created to manufacture the Caliber CH 80.
The award-winning TAG Heuer Mikrogrider
Then Biver stopped work on the very pricey haute horlogerie products such as the winner of the 2012 Grand Prix d’Horlogerie Aiguille d’Or, the Mikrogirder.
The brilliant creator of this and other inventive timepieces for TAG Heuer, Guy Sémon, seems to still be at TAG Heuer for the moment, but the grapevine is already murmuring, and I wouldn’t be surprised to see an announcement about him moving elsewhere to land in my inbox anytime now.
Additionally, TAG Heuer announced it would only focus on watches from here on out, though it had also been moderately successful with lifestyle items such as smartphones, leather goods and spectacle frames.
And now, Linder leaves the 127-year-old brand. He has not said where he is headed.
For some words on Biver’s complete strategy, please watch this just-released Watches TV video interview with the master strategist.
The strategy of Jean-Claude Biver, who will serve as TAG Heuer CEO in the interim, seems pretty clear to me: he is positioning LVMH’s three most popular brands so that they remain in their own market segments: TAG Heuer will return to the 1,500 – 3,000 Swiss franc range where it has historically been a leader.
Zenith will be positioned just above that. And Hublot – Biver’s own baby – will be the top dog in LVMH’s stand-alone watch chain.
Why change a winning game there?
These actions so far do not seem to touch Bulgari or Louis Vuitton, who, as multi-product manufacturers, continue to march to their own beat.
For more on Louis Vuitton’s near-term strategies, please see Louis Vuitton’s Journey To Watch Nirvana (Or Meyrin).
Trackbacks & Pingbacks
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[…] Biver is set to take over this post in the interim, adding Zenith to his workload as CEO of TAG Heuer and chairman of LVMH’s watch division. I describe the last LVMH rearrangement – including the big changes at Zenith in 2014 – in Jean-Claude Biver Restructures LVMH Watch Brands; TAG Heuer CEO Stéphane Linder Resigns. Coincidenc… […]
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[…] that Jean-Claude Biver has established order among the LVMH brands (see my speculations by reading Jean-Claude Biver Restructures LVMH Watch Brands; TAG Heuer CEO Stéphane Linder Resigns. Coincidenc…), so I was expecting pricing more in line with TAG Heuer’s past when I […]
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[…] […]
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[…] […]
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[…] have reported on individual watchmakers and their oeuvres; we have reported on the doings of big groups; and we have reported on horological topics surrounding major events such as the FIFA World Cup […]
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[…] in the quest to do so. The recent leadership change and re-focused strategy at TAG Heuer (see Jean-Claude Biver Restructures LVMH Watch Brands; TAG Heuer CEO Stéphane Linder Resigns. Coincidenc…) was perhaps the most visible example, but it seems to me that there has been an unusual number of […]
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[…] opinion is divided. While watch-insider.com opined that Guy Sémon could be the next CEO, over at Quill & Pad the speculation was that Sémon could soon follow Linder out of TAG […]
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Really enjoyed reading your analysis. Much food for thought and much that I didn’t know, but some of it is starting to make sense. Thank you!
Thank you, Horologium! Yes, the strategy makes more sense with each passing day…
I was under the impression that Zenith had decided to stop using Sellita movements. It has been reported on a few different sites. Can you confirm this?
I have not heard this. I will see if I can get confirmation from Zenith one way or the other. Thanks for bringing it up!
I also heard that Zenith will use only it’s own movement Elite and El Primero
In early November, Zenith CEO Aldo Magada stated in a German GQ ezine that Zenith had ended its experiment with buying Sellita movements. The original German article is here: http://gisbert-brunner.gq.de/post/98139137028/im-blog-gespraech-zenith-ceo-aldo-magada
Here is an attempt at translating an excerpt from that article:
“GQ author Gisbert L. Brunner: What has become of the views expressed during the BASELWORLD, that Zenith will use Sellita movements in the future?
Aldo Magada: We have stopped this venture. Zenith will remain a wholly self-contained factory. In this context, we will further develop our Elite automatic calibre into a new generation.”
The question for speculation is: Was it Biver who directed the use of Sellita movements, or his predecessor? His predecessor came from the Bulgari acquisition, and with a jewelry background may not have fully understood the importance of Zenith’s heritage as a pure manufacture. Biver’s history with brand-building shows that he respects such heritage. Also, his move to take over the watch division at LVMH was coupled with a reorganization at LVMH that separated the watch division from the jewelry division. Of course, assumptions that Dufour left Zenith because of Biver are speculative in the absence of first-hand data. Certainly, becoming the CEO of Rolex would be a promotion and opportunity for just about anybody in the Swiss watch industry, so one sees no evidence on the face of it that Dufour was run off, or the basis for speculation that Linder was run off.
Thank you for that link, Rick! I will confirm directly with Zenith as soon as possible. If it is true, then I commend CEO Aldo Magada, as that could certainly be the effect of listening to markets and tastemaker voices.
I do not think by any stretch that Dufour was run off. I think he was presented with the opportunity of a lifetime and he took it. I asked Jean-Claude about it personally just after the announcement, and he stated that he was happy for his friend.
As for Linder, I cannot even pretend to know the real story behind what has been presented in public. Certainly, he must have been at least a little disappointed to see some of his decisions overturned, but that is speculation and I cannot say more as I do not know. These are simply the facts all tied together.
Hello, Rick.
Today I was able to confirm with Zenith headquarters in Le Locle that indeed the brand has meanwhile stopped using Selitta movements. Thank you again for the heads-up!
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