#Resilience


Georges Kern: “A dozen global brands, no more”

INTERVIEW

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March 2020


Georges Kern: “A dozen global brands, no more”

Surviving and thriving in our globalised, digital age means being one of those happy few brands that reach “godlike status”, as Georges Kern puts it. The CEO and co-shareholder of Breitling is outspoken about the obsolescence of watch fairs, reducing the “noise” in Breitling’s aesthetics, and his vision of the new luxury. He also tells us about an in-house automatic movement, and the big launch of the year. We met him in Grenchen.

A

s one might have expected with the arrival of Georges Kern – not only as CEO but also as shareholder – Breitling has changed a lot in two years. The first step in the five-year development plan signed with investor CVC Capital Partners (which acquired the brand for $870 million in 2017) was simply to get back “in control”, as Georges Kern explains. This required building a new management team as well as integrating the distribution network.

Breitling aficionados, even if they’re not privy to insider information, will already have noticed the ongoing transformations. Divers’ watches, dress watches, smaller diameters: the changes are aimed at making the brand’s output “more universal, less diffuse, and less aesthetically polluted”. The decor has also changed, with boutiques designed as industrial lofts, and squads of ambassadors. Breitling’s style is not as “loud” as it used to be, which means it can reach more potential customers. “Everything is being put in order,” says Kern.

Georges Kern, CEO and co-shareholder of Breitling
Georges Kern, CEO and co-shareholder of Breitling
QUICK BIO
1965: Born in Düsseldorf
1983: Studies in Strasbourg and St. Gallen
1989: Experience at Kraft Foods
1992: Joins TAG Heuer
2000: Joins Richemont Group
2002: Becomes CEO of IWC
2017: Responsible for watchmaking and digital at Richemont
2017: Becomes CEO and co-shareholder of Breitling

In his endeavours to revive a broad spectrum of the brand’s rich historical portfolio, the entrepreneur can count on the expert advice of a world specialist in the field of chronographs, Fred Mandelbaum (read his portrait below). A popular Instagram figure with an impressive collection of Breitling watches, this Viennese engineer has become a consultant for the brand, validating the historical coherence of the numerous re-interpretations and re-editions of the last two years. As a “third man”, he works closely alongside Kern and chief designer Sylvain Berneron in product development.

Breitling headquarters in Grenchen
Breitling headquarters in Grenchen
Georges Kern: “A dozen global brands, no more”
Georges Kern: “A dozen global brands, no more”

Some people have expressed their disappointment at the new wing-less Breitling logo. “The brand has always been much more than aviation,” Kern states. “Over the last 20 to 30 years, it had become locked into this niche. With collections such as the Premier, we’re going back to segments that were ours in the 1940s and 1950s. And we’re not giving up on aviation. Just look at the Avenger, the Aviator 8 or the Navitimer ladies’ models.”

AVENGER SWISS AIR-FORCE TEAM LIMITED EDITION
AVENGER SWISS AIR-FORCE TEAM LIMITED EDITION

The manager’s vision for Breitling’s development follows two main principles: the notion of “inclusive” luxury, which translates into a much more casual and informal way of consuming expensive timepieces; and exploring a “modern-retro” style, rooted in the past without being backward-looking. “We don’t want to be labelled as vintage. While we do indeed produce exact re-editions, it’s rather to show the depth of the brand. We’ve found our style.”

Our interview with Kern was organised around three main topics. Here they are.

CHINA

Europa Star: Has the “broadening” of Breitling’s range of watches already had an impact on financial results?

Georges Kern: We are ahead of the plan we presented to investors. It was a five-year plan and I expect us to achieve our objectives. Obviously, we don’t yet know how the coronavirus will impact our business, and for how long, but Breitling keeps growing in a way that is both organic and driven by integrations.

Part of this strategy was to make the Chinese market a priority target.

Indeed, we were non-existent in this market in the past. In a certain way, we have been lucky in the timing of our move! For a long time, other brands invested in growing the sport watch sector in China. It never worked. It is only now that the phenomenon has finally caught on with a younger generation, who enjoy a more casual style and no longer want to wear their parents’ classic watches. The timing is good for Breitling’s entrance: the Chinese market was prepared for us by other brands!

“At Breitling there is a variety of options, because so many fields have been covered, from electronic instrument timepieces to fine watchmaking. I can go wide, I can go deep, but what I don’t want to do is go high in terms of price!”

Breitling advertisements in Europa Star magazines from the 1950s
Breitling advertisements in Europa Star magazines from the 1950s

This clientele is also increasingly important outside China. How are you dealing with this factor?

The Chinese are increasingly feeding off global trends, and for this situation we should thank the digital technologies that are making the global market so much more transparent. That’s the other element driving our dynamic with Chinese consumers: of course, they travel, but even if they don’t go outside of China, they are influenced by what’s happening in other markets, particularly in the US, Europe and Japan, where we are already very strong.

The Chinese market is nevertheless very exposed to risks, as we have seen with the political situation in Hong Kong, and the pandemic. The recent events highlight both the fragility and the strong dependence of the Swiss watch industry…

Luckily, that’s not the case with us. Quite the contrary. We are already among the top brands in most mature markets, and we’re in the top 3 in the United States and the United Kingdom, our n°1 and n°2 markets in the world. Now we need to strengthen our presence in Asia as a whole, and not just in China.

STRATEGY

A growing number of brands are looking to better control their image and increase their margins by opening their own stores and e-commerce platforms. What is your take on this pivotal change?

Consumers want the physical experience, and that’s not about to change. In China particularly, customers want to enjoy a 360° experience via flagship stores. We have about 100 Breitling stores worldwide and we plan to open many more, especially in Asia. But we are looking to include partners in the process: 80% of our stores are managed by retailers. In today’s world, the customer’s decision-making process can take months, while the act of buying is quicker than ever. That’s why we have to be everywhere, via our own boutiques, retailers, duty free, e-commerce... We want to go into the “casual luxury” segment, which is very under-invested by watch brands today. Last year, I was with thousands of bikers at the Wheels & Waves festival in Biarritz. Much more entertaining and engaging than watching a final at Wimbledon! Values have changed: giving more meaning to life, preserving the environment... All these social changes also have an impact on brands. If you don’t pay attention to them, you run into huge problems.

What proportion of Breitling’s sales are online?

Our rule is that e-commerce must equal at least the turnover of the largest physical point of sale in each market. Today, online sales represent 5% to 10% of the total, if you also include partners such as Mr. Porter. But beyond that, and much more significantly, digital is the most important channel in terms of ultimately leading to the act of buying.

In the United States, you have partnered with Crown & Caliber for a trade-in programme. Is this a first step towards a structured second-hand market?

All aspects of the watch market are becoming more controlled and structured. Nothing extraordinary there: it follows what has already happened in most other economic sectors. I don’t see why we would be willing to buy a certified Porsche with 50,000 kilometres on the clock, and not a certified watch. Similarly, why can we buy a Ferrari on credit and not a watch? In the United States and the United Kingdom, we now offer credit buying through our websites.

A growing polarisation is under way between the “winners” and the “losers” in the watch industry: fewer than ten billionaire brands lead the way, on the basis of a small number of timepieces that are more sought-after than ever.

That does not surprise me at all. It is simply a reflection of globalisation. There is room for ten to fifteen global watch brands at the most. You also see it in the automotive sector: how many brands are really global and significant? In fashion or technology, it’s the same thing. That’s how people define themselves nowadays: “I’m a Chanel girl”, “I’m an Aston Martin guy”. It’s certainly a bit sad for humanity, because globalisation is reducing diversity! But we absolutely have to be among those brands that achieve that “god-like” status.

So, one billion in annual sales…? (Editor’s note: estimates by industry insiders vary between 550 and 600 million for the brand today)

It’s totally realistic. I’m not scared of that number at all.

“A six-day generalist fair under the current structure is no longer of any use. It’s finished. The concept of an annual fair is also over. Today you have to go straight from the presentation to the store.”

The watch fairs are also in turmoil. What could persuade you to return to Baselworld?

Nothing. A six-day generalist fair under the current structure is no longer of any use. It’s finished. The concept of an annual fair is also over. Today you have to go straight from the presentation to the store. Time-to-market has been completely crushed. When we post a new timepiece on Instagram, the first questions from our customers are where and when they can buy it. For our Summits concept, we were inspired by Apple’s concept of keynotes: a single presentation and everything is conveyed to the press and the consumer. As for the retailers, we are in daily contact anyway.

However, even with (or maybe because of) daily discussions, the relationship between brands and retailers has never seemed so distant.

That’s because three disruptions have affected retailers very strongly. First, the opening of brand boutiques. Second, the reduction in the size of the distribution networks, together with the increasing dominance of a small number of brands that seize all the attention. Third, e-commerce. Today, retailers have a huge problem with differentiation. When I go to Hong Kong, I see the same display every hundred metres: these are different retailers, which all carry the same brands in the same window display! And their liquidity problems lead directly to the parallel market. Our advantage is that we are a “local” brand, which means we are strong with local customers. We do not depend on tourists. This helps us during this coronavirus crisis. The retailers appreciate it.

COLLECTIONS

You’ve introduced a lot of re-interpretations and re-editions since your arrival. How do you go about “resurrecting” timepieces?

It’s like dancing, two steps forward, one step back! I involve a lot of people in the creative process. The first of them is Fred Mandelbaum, who has an encyclopaedic knowledge of the chronograph and the history of Breitling. Whenever I have a question on this matter, I call him. We collaborate closely on reeditions: that of the Navitimer Ref. 806 of 1959, for example, which he sent back at least five times with corrections. Another key element of product development is a “sounding board” I put in place: some 25 people from different backgrounds (collectors, journalists, bloggers, retailers) that I bring together twice a year for a two-day seminar. This has resulted, for example, in what will be THE big launch for Breitling this year.

Can you give us more details about this model?

(He brings out the watch.) Here it is, in preview. It has huge historical significance for Breitling and is very easily recognisable, even from afar. We will launch it in April. The third iteration with the team was the right one. What I discovered at Breitling is that there is a variety of options, because so many fields have been covered, from electronic instrument timepieces to fine watchmaking. I can go wide, I can go deep, but what I don’t want to do is go high in terms of price!

Which collection is your current best-seller?

In value, the Navitimer is number one, including reeditions and automatic models. Everything works with this collection! The Superocean Heritage is our second line. Next comes the Avenger. The new Premier line is fourth in value – and not necessarily due to China, but rather to more mature markets, where aficionados expect new kinds of products.

How do you ensure your supply of mechanical calibres? There is a lot of uncertainty around ETA. You have also started a collaboration with Tudor.

It’s an open secret: we are launching our own automatic movement based on the B01 in the coming months. And the partnership with Tudor continues to work very well. We also collaborate with ETA and Sellita, so we are well balanced.

Has your new strategy caused you to lose certain types of customers?

That was inevitable. But others have come in. Actually, I have bought many myself. And today, I would buy them all... Also, this is the first time in my 25-year career in watchmaking that I’ve bought vintage watches.

Today, big independent brands seem to be more dynamic than big groups.

They move faster, because they don’t have the ball and chain! We are extremely flexible, with a lean organisation. In a big group, you very often play more in defence than in attack because in many cases the people in charge are administrators rather than managers — of course there are counter-examples. When you’re an entrepreneur or an independent brand, you’re always on the offensive. It’s very different.

Georges Kern: “A dozen global brands, no more”

FRED MANDELBAUM BREITLING’S HISTORICAL AUTHORITY

As a computer engineer, Fred Mandelbaum finds moments of relaxation far from electronics. Since the 1980s, he has assembled an impressive collection of mechanical chronographs – including many Breitling models – a selection of which can be viewed on his Instagram account @watchfred, which has more than 50,000 followers. “In the 1980s, I used chronographs to optimise the production steps on assembly lines,” he recalls. “So it was a working tool for me. Little by little, however, I started to enjoy these beautiful watches and they became more than tools: a source of joy and finally of... addiction!”

In 2017, Fred Mandelbaum got a call from Georges Kern, who had just taken over the reins of Breitling. They decided to meet, and Fred welcomed the CEO to his home in Vienna, Austria. “When he came to see me, he was like a child with stars in his eyes, in front of my collection,” says Mandelbaum. “I started helping him with the process of renewing the brand, as a consultant.” Together, they design at least one re-edition per year – such as the Navitimer Ref. 806 1959 last year. The expert also advises on the historical coherence of new models inspired by the vast catalogue of the brand founded in 1884 by Léon Breitling. For Mandelbaum, there is no doubt that Breitling is to the chronograph what Apple is to the smartphone: a reservoir of pioneering models.

“You could own 2,000 watches without having a meaningful collection,” he points out. “My rationale as a collector is to make sure that each timepiece I own has been relevant in the history of its segment. Hence, I aim to collect all the Breitling models that meet this criterion from the 1930s until 1979 and the emergence of the ‘modern’ brand.”

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