Future Perspectives: Breitling + CVC
It’s October 30th 2020. If you’re reading the article this year, you’re well aware of how dark the current state of global affairs are. The world has been plagued by a pandemic, and economic uncertainty. The decay in the democratic process is coming to a pivotal moment in the US with the elections being less than a week away. These are uncertain times, so let’s be certain about something. Let’s talk about Breitling.
133 Years & 2 Families
If you have closely followed the major changes in the world of horology, you might have stumbled upon the fact that in 2017-2018 Breitling completely changed hands in terms of ownership. In the history of Breitling, the company has changed hands a total of 3 times. It was held in the Breitling family for 95 years, before being sold to and held by the Schneider family for 38 years. Why is this relevant? Well the latest acquisition of the brand is by a private equity and investment firm called CVC Capital Partners.
The brand as a whole had been stagnant in terms of innovation under the Schneider family (with the exception of the B01 movement). Stagnation in the world of horology is nothing new, but it is important to note that Breitling itself had evolved very little in the last four decades prior to the CVC buyout.
This takeover was equivalent to your local neighbourhood pie shop that was operated by a grandma named Sally being taken over by Hostess Brands. The recipe and the baking process had been in her family for over a hundred years. Sure, she’ll buy strawberries and apples from other companies to fill the pie internally, but the pie as a whole was a great product. Now the new owner is an entity whose main purpose is to maximize every dollar being invested in the company regardless of the pie quality.
Am I claiming that Breitling is now owned and run by greedy corporate number crunchers? Without stepping on anyone’s toes, Hell yes. But it’s a lot more complicated than that.
Adapt. React. Readapt. Apt
The reality facing any Watch Maison is that it needs to evolve before it becomes just another vintage brand that no one knows about in 50 years’ time. Each brand needs to do this before its references become the subject of a Hodinkee article which unyieldingly and ironically will skyrocket its market value. In order to survive and continue driving a profit it has to become attractive to potential customers while remaining relevant to existing customers. A brand has to constantly strive to strike equilibrium between historical significance and modern cues.
Ever heard of the Swatch Group, LVMH or Richemont? Chances are that there’s a good possibility you own, have owned or will own one of their watches in your lifetime. The companies mentioned above are the parent companies that have a collection of brands under their management/control. Choice was always an illusion.
The main reason for any company’s existence is to drive a profit. If that rationale can be accepted we can see why CVC saw an opportunity in the pre-existing value and heritage in Breitling. They understood that the brand and company could use an injection of capital, and more importantly new aggresive management to further establish and accelerate Breitling’s market share internationally.
This third change in ownership of Breitling SA has major implications for what their watches/products will look like moving forward, and what we can expect from the company as a whole. If you’ve paid attention to the marketing/branding of the company along with the new product releases you’ll notice a major departure from what Breitling has historically offered.
Breitling’s Future Personified is Georges Kern
After the initial takeover of Breitling by CVC, he was appointed as the CEO. Georges hustled hard for 17 years at the Richemont watch group. He served several roles at the group. Most notably, he served as the CEO of IWC at one point, and later promoted to lead director of watchmaking, and marketing for the entire Richemont organization. It’s no surprise that someone capable like him would take the pay raise by joining Breitling. I can assure you CVC wrote a big cheque for him as a formal welcome. It was the same situation over at KIA automotive group stealing a lead German designer from Audi. Shout out to Peter Schreyer for saving Kia with a single design.
Money Making Motives
The rise in demand and popularity of the more nostalgic and popular historical references at not only Breitling, but across the board for all watch brands has spurred a plethora of re-releases and re-re-releases. It has definitely been a retail money grab, but the strategy had been extremely lucrative for all the brands that have taken part in it. Breitling thus far has re-released the 765 from 1953, the more notable 806 from 1959, and the Zorro Dial top time. I am sure the list will continue to grow moving forward.
What one can deduce from this move is that Georges and the management team at Breitling are practical business people. If the market demands it, give it to them. They aren’t artificially restricting supply. *cough* Rolex *cough*
Cheapening the Legacy Reference
There’s no doubt that the “Navitimer” over the last 6 decades has had many variations in terms of complications, case size, movements, and case materials; however, never in Breitling’s history has the Navitimer name been associated with a watch with no chronograph complication. I have to admit the “Navitimer Automatic 38” left me extremely dissatisfied. As mentioned above, this move is an attempt to cash in on the name. From an investor standpoint, as well as collector standpoint, it was a foolish and short sighted decision to release the new Navitimer product line without the chronograph complication. The move is equivalent to Rolex releasing a new Submariner with 30m of water resistance fit only for handwashing, or Omega releasing a Speedmaster reference without a Tachymeter.
Loss Prevention Measures
The positive is that we’ll be more likely to get our hands on the reference that we want, whether it is the actual vintage reference or alternatively the retail re-edition. Conversely, the flipside is that the re-editions will suppress the grey market price of genuine vintage pieces. If you’re looking for a vintage timepiece that will have long term value appreciation, the re-edition business decision by Breitling definitely works against the grey market for vintage, and pre-owned watches.
On the molecular level, steel is steel, or is it?
Moving forward I expect Breitling to assert itself more aggressively with marketing. Their social media campaigns with hashtags, celebrities endorsements, and messaging aligns itself with the younger generation in terms of feel and language. Establishing a lifestyle brand as a marketing strategy requires careful maintenance and curation over decades. Only time will prove how effective their marketing dollars were in convincing the end consumer that their steel was mined in the mountains of Sardinia, and forged at the mouth of a volcano by the Tokelauan.
Final Thoughts
If you’re a prospective buyer of the Breitling brand moving forward, you need to have a good appreciation for the company’s strategic position. Personally I feel like the pre-CVC references will definitely have a mark of history unique to their era prior to the major changes happening to the brand. Value wise, pre-owned and vintage references from this brand when purchased at the right price point will always be smart plays for the conscientious collector. It is also a very exciting time for the brand, being able to make radical business decisions, even unpopular decisions are always better than no change at all. With a management team that’s able to listen to current market trends I am sure the brand is headed towards extreme profits, too bad you can’t buy stock in CVC.
