It’s as true for the watch industry as it is for any other: when the economy takes off, you have to be ready. In concrete terms, that means making sure you are sufficiently prepared in advance to be able to react quickly when necessary... and pip your competitors at the post.
That, briefly, is the strategy devised by Peter Stas, CEO of the Frédérique Constant group, which was recently bought by Citizen. The company founder will remain in place for at least the next five years, and that’s an important detail. Peter Stas believes that in those five years, the watch industry will begin its long-awaited recovery. The first green shoots are already starting to show: “In the first quarter, we recorded growth of 3%. For the month of April we’re up 4% over last year. At Baselworld, order volumes rose by 6%,” notes Peter Stas.
Doubling growth in 5 years
While the 2017 figures are encouraging, it’s the 2022 numbers that Stas is really interested in. Today, the company makes 155,000 watches. Over the last few years production has grown steadily at a rate of a little over 10,000 units per year, across all ranges (quartz, mechanical, manufacture, smartwatches). For 2022, however, the group is aiming even higher, targeting annual production of 250,000. The arithmetic is simple: in order to achieve this volume, Frédérique Constant needs to increase its production by 20,000 watches per year, which is double its current growth rate.
“We didn’t really have any choice,” Peter Stas explains. “With our current capacity, we couldn’t expand to more than 170,000 or 180,000 watches per year. In two years’ time, we would have had to put the brakes on. Instead, we will use the next two years to double our surface area and increase our production capacity.”
Reason vs. temptation
With all this capacity due to come on stream in 2018, there will be considerable temptation to add new divisions, and perhaps increase the number of manufacture movements as a proportion of the mix of pieces sold each year – thus significantly increasing revenue.
But that’s not Peter Stas’s aim. The number of manufacture calibres is growing, but modestly. From representing 20% of sales two years ago, they are now at 25% – so there’s no rush to overhaul the entire production process. What’s more, as Peter Stas points out, “The most profitable segment for Frédérique Constant is around the CHF 1,000 mark.” This is a long way off the CHF 8,000 in-house Perpetual Calendar, or even the new manufacture Flyback at CHF 5,000.
No, the spectacular new extension will be devoted to high-volume production, the core range that has made Frédérique Constant one of the heavyweights of the independent watchmaking sector in less than thirty years. This increased volume, which will reach 250,000 units within five years, will also help to feed a retail network that is burgeoning thanks to Citizen. The parent company gives Frédérique Constant the benefit of a powerful retail network, particularly in the United States, where Citizen has no fewer than 1,700 points of sale. Starting tomorrow, the Japanese group will also be distributing the Geneva brand, and the beast will need to be fed.
