Spare a thought for 29-year-old Frédéric Arnault, chief executive of Swiss sports watch brand TAG Heuer and fourth child of LVMH’s Bernard Arnault; he can’t even go to a party without rumours circulating that he is changing jobs.
Last summer his attendance at a Bulgari event sparked speculation that he was about to take over as chief executive of the Roman jeweller. Even though he had said he was not moving to Bulgari in an interview earlier in the year, the rumours made it into the Swiss press and he was annoyed at having to deny them again. But when we meet in Geneva just before Christmas he is more sanguine. With an ironic smile, he says he has just read that he will be taking over one of the group’s fashion labels.
He isn’t. Instead, on January 8 he will step into the newly created role of CEO of LVMH Watches, with responsibility for TAG Heuer, Hublot and Zenith. LVMH is usually reluctant to share figures relating to smaller branches of its €79.2bn-revenue business, but according to Arnault the combined turnover of this triumvirate of brands is in the region of SFr1.6bn (£1.5bn).
Hard luxury is becoming more important for the group and the family. In addition to Arnault’s move, his younger brother Jean runs watchmaking at Louis Vuitton, and has relaunched the Gerald Genta and Daniel Roth brands, while his older sibling Alexandre is at Tiffany, acquired by LVMH for $15.8bn in 2020 and treated to a Peter Marino-revamped flagship last year.
LVMH entered watchmaking in 1999 with the acquisition of TAG Heuer and Zenith, when Arnault was five years old. It is almost as if a job was kept open for him as he attended first the famous Lycée Louis-le-Grand, then, like his father, l’École Polytechnique, finally becoming the first Arnault to work in the watch industry in 2017 when he joined TAG as head of connected technologies.
Not the case, he says. “It was really my will and my decision to join the [LVMH] group. My father never pushed me. My alternative was launching a tech start-up, which I did with a friend from school, in mobile payments, and we sold it to a bank.” BNP bought the 18-month-old business, Neos, in early 2018, shortly after Arnault joined Tag Heuer.
Tech bro phase out of his system, he chose to join the watch brand in part because the TAG part of the name is an acronym for Techniques d’Avant Garde. “Being an engineer,” like his father, “I was trained in mathematics, applied mathematics, computer science, and I really like the idea of disrupting, innovating and creating through science,” he says. That’s one thing you notice pretty quickly about Arnault: he is conspicuously clever. He plays the piano to concert level and is also keen on sports, which first brought him into contact with TAG when he was 12.
“My first watch was a TAG Heuer Aquaracer given to me by my father. Loving sports myself, I think it’s the sportiest brand in watchmaking.” Then, almost as if he feels expression of a personal opinion is slightly irresponsible, he quickly adds: “we validated that with surveys, and brand studies: sporty is one of the characteristics that’s stood out the most with consumers.”
Tall, thin, fresh-faced, tousle-haired and young-looking even for 29, there is something endearingly diffident about him. Talking with him is like speaking to a conscientious postdoctoral researcher who feels the need to substantiate his arguments with research and data.
When he joined TAG in 2017, his first job was building the smartwatch team of 60 people working in Paris. He took over as CEO in 2020 and set about “elevating the product and the brand”. Perhaps unsurprisingly, given LVMH’s raison d’être, he feels “it was extremely important to consider, treat, and develop TAG Heuer as a luxury brand” even if it meant venturing into price categories way beyond the brand’s comfort zone of SFr2,000-3,000 (£1,870-2,800). “There was a ceiling,” he says. The brand had never sold anything over SFr50,000 (£46,700) “but we broke it completely.”
The ceiling-smasher was the Carrera Plasma Diamant d’Avant Garde, a half-million euros’ worth of Tourbillon Nanograph movement, Isograph carbon nanotube hairspring, polycrystalline diamond dial and black sandblasted aluminium liberally smothered with lab-grown diamonds. It was a bold move for a brand better known for affordable sports watches, but he believes that TAG had the legitimacy. Annual sales of the model are in “the tens”, he says, with customers waiting up to a year to take delivery. “We’re watchmakers since the 1860s. If you develop a product with the best technical features, it has a cost. But if the design is right, if the brand is consistent through all these touch points, there’s no reason why the customer wouldn’t buy it.”
One of those “touch points” was associating TAG with Porsche, with whom TAG struck a long-term, global brand partnership three years ago, spanning specialised watch launches to traditional motorsport sponsorship and customer events. Both brands use the name Carrera for famous products, and both have a long history in motorsport, but they had never worked together. “We tried many times in the past but never managed to make it happen. But we felt it would send a clear message on who we are, so we took the time to build a relationship with the Porsche team.”
A return to Formula 1 with Red Bull was another. But it isn’t all fast cars and €500,000 watches. One of the big hits of last year was the SFr6,200 (£5,800) Carrera Glassbox, a name referring to sapphire crystal shaped like the domed watch glasses of the past, which imparts a retro look to a modern watch. The period style watch glass has been a bit of an industry trend, and is exactly the sort of detail that watch geeks get off on. It was introduced to mark the 60th anniversary of the Carrera watch and celebrated with a short — and really rather funny — film starring brand ambassador Ryan Gosling.
Arnault believes that the strategy of brand elevation is paying off. “In 2017, the average selling price was around SFr1,800. This year [2023], we are a little over SFr3,000. Since I became CEO in June 2020 [a year watch sales decreased by 30 per cent on average across the industry due to Covid-19, according to Bain] sales have grown by 50 per cent, and 2023 will be another record year.” At the same time production has dropped from around 500,000 watches a year in 2017 to a little over 400,000 in 2023.
Growth, he says, has come from selling higher-end watches, having less unsold stock and increasing direct to customer sales through ecommerce and own-brand stores. “We streamlined our distribution, halving points of sale while doubling the number of monobrand stores to just over 300.”
Ultimately the wisdom or otherwise of this strategic shift will become clear in years to come, but what is in no doubt is his sadness at leaving TAG. He has a thinly veiled warning for his successor. “The brand needs consistency. Now, it’s really important that the strategy we put in place continues.”
When asked about plans for the other brands, he takes refuge in executive obfuscation and says it’s too early to say. When pushed, he says that Hublot is in the process of “redefining the platform overall”, whatever that means. As for Zenith, he mentions the brand having had “a very important role in the industrialisation of watchmaking” which I suppose is a holding statement of sorts while he gets his feet under the desk and his head around the brands he will be, to borrow a favourite phrase of his, “road-mapping”.
Any professional move by an Arnault, whether it is his elder sister Delphine to Dior or Frédéric to oversee watches, raises the topic of succession, a subject which he greets with a polite weariness. “We all have immense respect, admiration, and love for our father. It’s his will, and it’s also our will, that he stays in charge as long as possible. And, as you saw, he extended the retirement age [to 80], to still be CEO of the group.” Bernard is 74.
Significantly this new job will see Arnault spending more time in Paris, closer to his father. “I will still be very committed to watches, but I will be working more closely with him on strategic projects,” he says. Then, perhaps feeling he has revealed too much, he adds, “I’m here because I love what I do. I love the brands. I love the project and the journey. Succession is not a topic we think about today. It will come in due time. And he’s a master of timing.” Another trait that Frédéric seems to share with his father.
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