May you live in Interesting Times

There is an old Chinese curse "May you live in interesting times"; because, as Kierkegaard so aptly said "Life can only be understood backwards; but it must be lived forwards." I think that when we look back, we are going to see that the last week has been one of the most revolutionary in the history of the watch business for a long time.

Two trends have now solidified, the watch business is splitting into two, with ownership moving into the hands of either major European Luxury Groups or Far Eastern hands.

Consider these events:

Chinese corporation buys Eterna for 22.9 Million CHF (over $27 million US)
PPR buys majority share in SOWIND (G-P/Jean Richard/Movement factory)
DKSH (Swiss based but operates in Far East) buys Maurice Lacroix
Louis Vuitton buys movement maker LFdT

All in a period of less than a week.

LVMH & PPR are bitter rivals and both were latecomers in the watch business, far behind Richemont. LV whose brands were TAG, Zenith, Hublot, Dior & LV were often derided by Mr. Hayek; who (correctly) boasted that just one of his brands, Tissot, sold more watches and made more money than the entire LVMH watch operation. That claim fell by the wayside when, just prior to this year's Basel, LVMH announced the acquisition of Bulgari, along with its sister brands Gerald Genta and Daniel Roth.

PPR were much smaller in watches, with just the watch divisions of Gucci and Boucheron having any status; in fact PPR had dumped its most high profile watch brand, Bedat, to a Malaysian firm in 2009. But their ownership of Sowind now definitively moves them into the 'big leagues'.

The sales of both Eterna & Maurice Lacroix to firms whose principal focus is China is also very interesting, showing that these companies no longer are satisfied with earning just the smaller share which comes from being distributors and are looking to earn a much larger share of the 'pile'.

To me, the biggest news of the week, which was probably the smallest in financial terms, was LV's acquisition of LFdT, suddenly giving LV the one thing that they were missing, their own high horology factory. IMHO, this resembles Montblanc's takeover of Minerva; which, after a couple of years, resulted in Montblanc moving from almost an embarrassment to being a well regarded producer. The importance of having a 'flagship' atelier can not be over emphasised.

It is also worth remembering that the guy at the helm of Montblanc watches when they underwent their metamorphosis is now in charge at LV watches. I am going to keep a very close eye on the firm from here on in.

Here is Louis Vuitton's email to me about the takeover itself.

"The expertise in the design and implementation of high-end watch movements will enrich and strengthen the expertise of Louis Vuitton, which began operations in 2002 watch the opening of a workshop in La Chaux- de-Fonds in the heart of the Swiss Jura.

This decision is in keeping with the overall strategy of the house: that of integrating the expertise to develop and maintain the high quality of these products. For this, we always choose the best talent pool. The choice of La Fabrique du Temps, Geneva-based partner of Louis Vuitton since its inception in 2007.

Integrating the factory will ensure that Louis Vuitton increases its expertise in the design and implementation of high-end watch movements. Eventually, we also want to develop a training center to develop and watch to pass this valuable know-how."