MENAFN - Khaleej Times
UAE - Swatch Group: Merchant of emotions
(MENAFN - Khaleej Times) The horse gallops. So does the time, philosophically speaking. Beyond this contentious commonality, there is a definitive reason that binds up the creature, the machine and Nayla Hayek in a relation. She calls it unbridled passion.
Nayla Hayek is the chairperson of the world's biggest watchmaker, but her story wouldn't resonate well with no mention of her father, Nicolas George Hayek, the saviour of the Swiss watchmaking industry in the 1980s.
Nicolas was born on February 19, 1928, to a Lebanese mother and a Lebanese-American dentist, both Greek Orthodox Christians who later migrated to Switzerland. He studied physics and mathematics at Lyon University in France. In 1950, Nicolas met a young Swiss au pair, Marianne Mezger, in Beirut and married her the following year before permanently settling in Switzerland. They had two children, Nayla who now heads the Swatch group which her father founded, and G. Nicolas Jr, the CEO of the company.
Talking to Khaleej Times in Abu Dhabi recently, Nayla, who took the reins after Nicolas's death in 2010, said her father was such a genius that no one can ever fit into his shoes. That's no daughterly overreaction given his extraordinary vision that salvaged the Swiss watchmaking industry, the third pillar of the country's economy, from a catastrophe brought on by the Japanese quartz revolution in the 1980s.
Nicolas, already running a successful engineering management consultancy in Zurich, was hired by a group of bankers to oversee the liquidation of two major watchmaking companies on the brink of financial collapse - ASUAG and SSIH. But ignoring the brief, the charismatic entrepreneur restructured the companies and recaptured the Swiss market share in the world, which had dwindled from 50 to 15 per cent, with the invention - and flamboyant marketing - of Swatch, a low-cost breed of plastic watches.
Swatch was a technological breakthrough because it used far fewer parts than traditional Swiss watches, hence cheaper to manufacture. An orgy of hues and designs, Swatch proved to be an instant hit with the young and the trendy. The rest, as they say, is history.
"It was always clear that we will never ever have somebody of his calibre and stature. I have tried my best to follow his footprints and at the same time develop my own way of doing it," Nayla said of her style of work.
Nayla is thankful to her father for grooming her to the top job of a global conglomerate over the years. "I had a big chance to be on his side for many, many years, learning not only business but also other values. We, as a family, always discussed our business decisions. It has never been a one-man show. We were involved in the business on a daily basis, so his death came as a big shock."
She is equally thankful to her employees. "The people in our company were so good and supportive, so the business went on smoothly. They placed lots of confidence in me because I was not stepping into a place where nobody knew me. But the outside world, especially journalists, was more or less shocked when I took over because I had never been a person who made an effort to make my presence felt.
"Having said that, it is not an easy job to be at the helm of a group like this, but I must say I love the job and I love the challenge," she added.
Nayla revealed that she was surprised when her father spoke his mind for the first time - a year before his death - about his succession plans.
"Look, I want you to be the next chairman of this company," Nicolas told her.
"And I asked him why me."
"Because I think you have the right mix of instincts. You have many things that are similar to me, and a lot more that are genuinely yours. You and your brother, who's the CEO, will make a good team."
"I was surprised when he told me this. And he was right," Nayla said.
Revolution 51 re-enacted
The number 51 seems to be a magical figure for Swiss watchmaker Swatch.
Back in 1983, to stonewall the Swiss industry from the Japanese quartz invasion, consultant Nicolas G. Hayek spearheaded the launch of a 'second watch' that would do more than telling the time. The new breed of economic, plastic watches took the world by storm with its provocative and seductive feel.
Swatch pioneered the revolution by reducing the number of components in a quartz movement from the "typical 91 to a much more manageable 51". The strategy ticked and Swatch went on to become a global giant, crossing the milestone of 400 million watches worldwide.
Riding on the magical number 51 again, the Swiss group has embarked on a mission to breathe a fresh life into the world of mechanical watches. The Sistem51, which Swatch launched in Week 51 of 2013, or the second-last week of the year, has achieved this by using just 51 parts instead of the hundreds of components typically found in a mechanical system.
Much like in any engine, mechanical watches require regular maintenance, lubrication and cleaning to go on working for a couple of decades, and even longer. Swatch promises that the Sistem51 delivers precise, long lasting, maintenance-free performance thanks to unprecedented technological innovation made possible by several years of R&D.
Swatch says the Sistem51's high-tech escapement has no regulator; the rate is set at the factory with a laser, making the manual rate adjustments normally required by a mechanical watch unnecessary. The movement features a 90-hour power reserve.
The watch's movement is made entirely of ARCAP, an alloy of copper, nickel and zinc with exceptional anti-magnetic qualities.
The watch cannot be or need not be serviced as all movement components are hermetically sealed within the case, preventing moisture, dust or foreign objects from interfering with its operation. Swatch says the resulting inner peace would guarantee the movement a long, serene life and enduring performance.
The Sistem51 is 100 per cent Swiss-made and is the world's first mechanical movement with entirely automated assembly. Critics say one of the Sistem51's greatest innovations is the movement architecture. All its 51 components are welded together to form a single assembly centred on a single screw, meaning fewer components require lubrication and wear-and-tear will be much less than it would be with more conventional architecture.
David, one of the early birds to own the Sistem51 in Switzerland, was amazed by the lightness of the watch. "You cannot believe that you are wearing a mechanical watch. The 42mm size seems to be ideal for me. The watch just fits perfect on the wrist," he reviewed on the Internet.
The Sistem51 debut models come in four colours - red, blue, black and white, the last of having a more feminine look. The black comes on a leather strap versus the silicone ones for the rest.
The 32 billion Swatch Group, which has over 160 factories in Switzerland and employs 31,000 people worldwide, has 18 brands under its belt, ranging from low-priced Swatch to the luxury segment like Breguet. The company's portfolio also includes Harry Winston, Blancpain, Jaquet Droz, Glashutte Original, Leon Hatot, Omega, Longines, Rado, Tissot, Balmain, Union Glashutte, Certina, Hamilton, Calvin Klein, Mido and Flik Flak.
Ahead of February's formal full-year results, Swatch said it ended 2013 with gross sales rising 8.3 per cent to 8.817 billion Swiss francs (9.7 billion). Sales were up 9.1 per cent at constant exchange rates, the group said, adding that it expects dynamic growth for the entire year 2014.
Swatch recorded an operating profit of 999 million for the first half of last year with group sales up 8.7 per cent year on year.
"The success of our company is mostly producing everything about watches - from dials to cases to movements. Production is the key to our success. We make parts for lots of Swiss watchmakers. We also have wholesalers who buy movements from us and resell in other parts of the world. But selling watch parts for other companies is not the most significant contributor to revenues," the chairperson said.
GLOBAL BUSINESS POLICY
She clarified that the company's strategy is not to shift focus away from Asia, but develop in other parts of the world as well. "It's true with all business, not just watches, that to rely on just one market is dangerous. China is a very big market, but if you are solely dependent on the Asian giant, you will end up in trouble if that market develops a problem. So we were and are focusing on building businesses in other parts of the world."
"The US market is now growing very positively. India is another market which is fast growing. But the biggest problem in the subcontinent is an unsteady rupee. We are growing about 40 per cent in our market share in India. The revenue in the rupee terms is wonderful, but if you convert it into the Swiss franc, it's really worrying."
"So rest assured we are not shifting our focus from Asia, but we certainly don't want to put all the eggs in a single basket," she added.
Nayla said that despite a struggling Europe, "we are doing very well in these markets. Spain is the most hurt. Italy and Germany are good. And, of course, Switzerland is a very important market".
"One country where we are investing very much is the US. It's an important market for us because the retail business there is weak. So we have started to develop our own retail chain. We have lots of our own boutiques."
Nayla said there is big growth in countries where the group is able to set up its own boutiques. "In some markets where we are forced to be with a partner, it's difficult to find the right people. So it's easier to have our own stores in countries where we can invest 100 per cent."
Talking about her strategy for the UAE, Nayla said Abu Dhabi is a very important market where new malls and projects are mushrooming. "We will have new boutiques in the upmarket Sowwah Square and other places as the Capital keeps growing." Business in Dubai is a simple road because, she said, the market is so big and developed. It is a matter of starting boutiques at the right place at the right time. Nayla promised the run-up to the 2020 World Expo will see a big expansion in the emirate. She said Dubai is special for the company, which is also the majority shareholder of Rivoli Group, having recently acquired additional 18 per cent from the private equity arm of Dubai Holding, via its subsidiary Technocorp Holding, for an undisclosed amount.
Swatch, which now holds 58 per cent of the Dubai retail group, has gained a network of 360 retail businesses across the Middle East through the acquisition which would help the Biel, Switzerland-based group to maximise growth in the region.
The Middle East has been one of the fastest-growing markets for Swiss timepieces, with their exports to the UAE surging 13.3 per cent in the 10 months to October, outpacing the meager 1.8 per cent rise in overall Swiss watch exports.
Harry Winston Buy
Nayla said the idea behind acquiring Harry Winston - for about 1 billion - is that the beautiful jewellery brand is rich with a sparkling history. "There is a lot which we can achieve with the brand whose key weakness was the watch part of it. Therefore, it is an easier challenge to develop the wonderful brand. The New York-based jewellery giant has had a watch factory for 10 years in Geneva, but was using a third party for production. Now Swatch Group produces most of their watches," said Nayla, who is also the new Harry Winston CEO.
What went wrong with Swatch Group's partnership with American specialty retailer Tiffany? Nayla explained that Swatch never had a partnership with them. "They came up to ask if we can do watches for them. So we developed a strategy according to which we set up Swatch-funded Tiffany Watch Company to produce timepieces for them. We looked after the production, wholesale and marketing while they had representation on design and marketing committees. If Tiffany had fulfilled what was written in the contract and put into action what Michael Kowalski (Tiffany CEO) had promised, it would have been a huge success.
"Tiffany was not an investor but had pledged to support the brand by keeping certain amount of watches in their boutiques which they did not fulfil. Most boutiques either did not have watches or did not have enough stocks. We were the 100 per cent investor and if the partner who takes a profit share did not fulfil its obligation, there was no point in going forward," Nayla clarified.
Last month, Tiffany was ordered by a Dutch arbitration court to pay Swatch Group 402 million Swiss francs (448.79 million) in damages over the failed joint venture to produce and market watches.
Talking about her calling in life, Nayla said everybody has to have a passion - something that makes you stable and makes you feel capable of fulfilling your duties and meeting challenges. "And I am sure the watches, my family and my horses are a vital part of my life that makes me stable."
Watches are fascinating. It is a passion because, she said, every brand has a DNA which generates a fascination for that particular brand.
Watchmaking as an art thus has a philosophical connection to horse breeding. "I am a breeder of horses. Watchmaking and horse breeding both involve a passion to create. To produce something and to wait breathlessly for it to come out is a soul-filling experience. One is a creature and the other a machine, yet I really cannot differentiate the passions."
But from the emotional point of view, horses are more important for Nayla, who has been breeding Arabian horses for 32 years. "I am an international judge of horses. I am rider of horses. I was a show jumper. I got my first pony when I was nine and horses have since been a part of my life."
"Unfortunately I don't get to spend enough time with horses these says. I spend more time with watches after I took a plunge into the business. If you are board member, it consumes a lot of time. I have been looking after the Middle East for 15 years now. It's a huge responsibility to be the CEO of one brand and chairperson of the entire group at the same time," she explained.
Love for Arabian horses
Talking about her love for Arabian horses, Nayla said they are a part of the region's tradition and culture. They are very intelligent and a breed well connected to the humans. "They want to keep a relationship with the humans. I also love them for their beauty.
"We always say when you come into contact with an Arabian horse, you get a disease which we call Arabitis. It is a love sickness," she said jokingly. No wonder that out of around 80 animals in her stud, 60-70 are Arabian horses. "Next year, I will have 22 fouls coming in. My trainer is hoping that I would sell some, but I don't like to sell my horses. This is a problem. I keep most of the horses after breeding."
Nayla has her own theory about the passion of watch collection. "I have lots of watches, but I must admit that I am a Swatch collector. I am one of those crazy people who wouldn't mind standing in a queue for hours to get a limited edition Swatch. I still remember there was one platinum special edition which we only sold through banks. And I was there at four in the morning to join a serpentine queue of buyers in the rain."
"I don't think watches need to be expensive to collect; they just have to mean something to you. So I collect watches which I love, never mind of their price."
"Every watch shows you the time. You can have one watch all your life; you need not change it at all. You don't even have to own a watch; you can just look at your phone to see the time. You don't wear a watch because you want to see the time. Yes, telling the time is one part of its role, but the watch chimes something about your personality," Nayla deciphered her philosophy about timepieces.
"A watch is all about emotions. Whether to own or to gift, 99 per cent of people buy watches out of their emotion. And this is the secret of our success. Everyone - fathers, mothers, sons, daughters and friends - whoever was gifted a watch would keep it as a treasure for emotive reasons. So I believe watches are forever and will always have a big market."
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