Watchmaking in Japan

Citizen: a strategy of acquisitions


January 2018

Citizen: a strategy of acquisitions

Unlike its two fellow watchmaking companies which are launching an offensive internationally by moving their own products upmarket, this giant has opted for strategic acquisitions, the latest being the purchase of the watchmaker group Frederique Constant, following that of Prothor a few years previously.


uropa Star met CEO Toshio Tokura during a previous trip, in an interview by Joe Thompson. What we learned then is as relevant as ever. Here are some excerpts.

“The foreign-brand buying binge is a sign of changing times at the Citizen Group. The architect of those changes is Toshio Tokura. Since becoming president and CEO of Citizen Holding Co. in April 2012, he has initiated what he calls “drastic” changes that are transforming the group’s watch business. Among the highlights:

  • He has restored watches to their historic position as the group’s core product and launched what amounts to a “Watches First” growth strategy.
  • He has refocused on the Citizen brand, attempting to elevate its image by emphasising aesthetics as well as advanced quartz technology.
  • He has launched a foray into the lucrative luxury-mechanical market with an acquisition strategy designed to turn Citizen into a global, multi-brand watch group with a presence in every price segment.
  • He is tapping the mechanical-watch expertise of Citizen’s new Swiss subsidiaries to upgrade Citizen’s in-house mechanical watch technology with a view to making mechanical watches in Japan.

“Looking at the watch business over the past 20 years, we didn’t see much growth,” he says. “We needed to solve that.” Tokura and his team identified two major opportunities to expand their watch business. One was to boost the image and sales of its core Citizen brand. The other was to take a share of the luxury-mechanical market by acquiring Swiss brands.

In the Citizen Group’s annual report for 2012, the company explained why it purchased Prothor Holding (La Joux-Perret and Arnold & Son). “Demand for premium Swiss-made mechanical watches is expanding, particularly in China and other emerging markets,” Citizen said, “and we believe that participating in the premium luxury segment of the watch market is essential for the company to achieve its growth strategy in the watches and clocks segment.” With La Joux-Perret and Arnold & Son, Citizen tiptoed into the world of luxury mechanicals. Arnold & Son, an obscure, small-batch producer of high complication watches, was an add-on. What Citizen really wanted was La Joux-Perret. “The mechanical watch technology – that’s what we were interested in,” Tokura says.

For two reasons.

First, to protect Bulova. Citizen had purchased the American brand in 2008 to give itself a dominant position in the midrange of the U.S. market. Bulova happens to have a collection of Swiss-made mechanical watches. When ETA, Switzerland’s dominant movement producer, announced its intention to restrict sales of mechanical movements to third parties, Citizen worried about securing movements for Bulova and began shopping for a Swiss movement producer. La Joux- Perret solved the problem. It also gave Citizen the chance to revive its own outdated mechanical watch technology. Citizen has produced mechanical watches for nearly a century. However, since the quartz revolution, it has focused primarily on electronic watches.

“Our mechanical technology is quite far behind because we stopped developing it,” Tokura says. “We have a lot of catching up to do. There are a lot of things we can learn from the Swiss.” Prothor gave Citizen a toe-hold in the premium luxury market. The next step, Tokura told me, was to “buy a Swiss brand to really give us a footprint in that price range.” Frédérique Constant does that. The company, founded by Peter and Aletta Stas in 1988, is a leader in the so-called “accessible luxury” segment of the market. The core prices of the Frédérique Constant and Alpina brands are primarily between $1,000 and $5,000, with some models costing more than $10,000. The company does not divulge sales data, but FC Holding is substantially larger than Prothor Holding. (In 2009, Kepler Capital Markets estimated Frederique Constant’s annual sales at CHF 150 million and annual production at 90,000 units.) Frederique Constant also has significant mechanical watch production capacity. It develops, manufactures and assembles its own calibres, 19 of them since 2004, it says. As with the Prothor Holding acquisition, Citizen will leave Frederique Constant’s current Swiss management in place. Citizen has plenty to do managing the Citizen brand, Tokura says, without trying to manage four luxury mechanical brands. “We don’t have the experience,” he says with a smile. “We don’t know that world. It’s such a mystery to us.”