Today Moet Hennessey Louis Vuitton (LVMH) announced the purchase of Swiss watch maker Hublot from the company’s founder, Carlo Crocco.
The outright acquisition of the company brings Hublot, founded in 1980, into the orbit of the largest and some say most voracious, luxury goods company in the world.
Known for targeting and then acquiring niche high end companies and redirecting their focus on growing profits, LVMH’s other watch bands include Tag Heuer, Zenith, Chaumet, and Fred.
The timing of the sale highlights the extraordinary growth in demand for luxury label watches – particularly Swiss automatic timepieces. Exports of Swiss watches grew 16% in 2007, the highest level in 18 years. Even mid-market brands like Swiss Army are coming out with automatic watches; a testament to the value of this market segment.
According to Hublot CEO Jean-Claude Biver, who has run the company since 2004, LVMH was the only choice when it came to a sale. Biver is a horologic old hand, having already built Blancpain and Omega into must-have brands, and his approach to Hublot was laser focused. With their decidedly masculine and modern yet approachable designs, the Hublot Big Bang family of watches is now very much a status symbol among the younger set.
In a recent interview with hr: magazine, Biver made it clear that his goal with Hublot was to build it into a brand that attracted young, successful and entrepreneurial buyers. To reach that demographic, he invested an unusual amount of energy and marketing dollars in Internet media, including courting bloggers. Traditionally seen as the domain of mass market bargains, using the Internet as a key advertising tool was something usually frowned upon in the luxury timepiece world.
He also took more traditional approaches like limiting the brand’s distribution to an exclusive network of only 300 retailers worldwide. By design this model creates shortages, thus forcing the use of waiting lists. Combined with a cult-like appreciation in targeted social circles, Hublot’s street cred, and sales, grew at a healthy clip. In 2007, sales were US$150 million and are expected to reach US$250 million this year.
LVMH’s purchase price was not disclosed, but according to its CFO, Jean-Jacques Guiony, the multiple paid for Hublot was more than two times 2007 sales and roughly 12 times 2007 EBIT. It is probably safe to say that a nice return on investment will be forthcoming.
As watches become increasingly important symbols of success – and this trend is rapidly moving to emerging economies like China and Russia – I think that we will see more market consolidation under luxury powerhouses like LVMH and and Richemont. The economies of scale offered by such large and well financed organizations allow for the kind of expensive and time consuming product development needed to keep new models hitting the market and stoking demand.
That demand for mechanical watches is a fascinating outgrowth of our ever more wired, computerized and automated lives. Just like custom or bespoke clothing, hand made and hand powered timepieces provide a human and wonderfully imperfect quality to life. They are things that help carve out a sense of individuality and display, if only to their owners, an appreciation for craftsmanship.