LVMH Watches’ New Face

NEW YORK -- Daniel Lalonde gets a little disturbed when people say that brands are mature.<P>"Brands don't mature; management matures," said Lalonde, who recently took over as president and chief executive officer of LVMH Moet Hennessy Louis...

NEW YORK — Daniel Lalonde gets a little disturbed when people say that brands are mature.

This story first appeared in the June 17, 2002 issue of WWD.  Subscribe Today.

“Brands don’t mature; management matures,” said Lalonde, who recently took over as president and chief executive officer of LVMH Moet Hennessy Louis Vuitton’s U.S. watch and jewelry division.

It’s a fitting attitude for someone just joining luxury conglomerate LVMH, which now counts about 50 brands in its enormous portfolio.

Although in recent months LVMH has sold some divisions, the watch and jewelry category has become a new focus. The company in recent years emerged as a powerhouse in the watch and jewelry arena by snapping up some big name brands, including Tag Heuer and Ebel. The U.S., still seen as having high potential for luxury goods, is a key market target for the division.

From headquarters in Springfield, N.J., Lalonde oversees the U.S. and Canadian strategies and operations of LVMH’s watch and jewelry brands, which now include Tag Heuer, Christian Dior and Chaumet. He is also overseeing Omas, the luxury writing-instrument brand business LVMH acquired in 2000. Ebel and Zenith, also owned by LVMH, are operated separately here, as is Fred, the high-end jewelry brand, so those businesses don’t fall directly under Lalonde’s oversight.

In addition, LVMH is initiating a new diamond jewelry and retail business as part of a partnership with DeBeers.

In an interview, Lalonde described his plans in simple terms. He said he’s in the process of consolidating many aspects of the division’s operations and back-office functions to streamline costs and create synergies between the brands. Information technology, finances and after-sales services are some areas getting such attention.

Lalonde also noted that the company is looking to raise the prestige and price points of all the watch and jewelry brands to boost growth. While LVMH doesn’t break out sales by country, last year, the watch and jewelry division saw its sales drop 12 percent to $480 million worldwide, while LVMH’s total sales rose 5 percent to $10.9 billion. Although watch sales fell, at LVMH’s recent annual meeting in Paris, chairman Bernard Arnault said profits from existing brands such as Louis Vuitton and Dom Perignon will be used to develop its more recent acquisitions, including both Tag and DeBeers.

Lalonde, who takes over the position formerly held by Susan Nicholas, was somewhat of an unusual choice, since he has no experience in the watch industry. The 38-year-old was previously ceo at Nestle Nespresso, a high-end coffee brand owned by the Nestle conglomerate, and he also held positions at Haagen-Dazs and consulting firm Deloitte & Touche.

A dapper man who has lived in New York, France and Switzerland, Lalonde likely attracted LVMH’s interest because of his international experience, particularly his familiarity with business in Switzerland, where the bulk of high-end watches are produced.

As a newcomer to the watch industry, Lalonde admits he has a lot to learn, but he believes that his experience is right for the position.

“I love brands, and I have enormous respect for the power of brands,” he said. “This is not a difficult transition.”

As for how the watch industry differs from the world of food and beverages, Lalonde said, “I think there needs to be more focus on the consumer in the watch industry. A lot of companies focus on the retailer, which is important, but we need to be sell-through oriented, as well.”

The watch world has consolidated rapidly in recent years, and there are few independent upscale brands. With its increased focus on watches and jewelry, LVMH goes head-to-head with the Swatch Group, which owns brands such as Omega and Breguet, and Richemont Group, whose holdings include Cartier, Piaget and Jaeger-LeCoultre.

Lalonde said each of the LVMH watch and jewelry brands is in different stages of growth. Tag is its largest watch brand, with estimated sales of about $300 million. The 142-year-old line has undergone a transformation in the last five years and was acquired by LVMH in 1999 for a reported $750 million.

While it’s still best known as a sport brand, Tag has expanded its offerings in recent years to include more fashion styles and additional styles for women. It has been repositioned as a more upscale line, with a price concentration between $1,000 and $3,000.

At the recent Basel fair, Tag introduced its first full collection of gold products, including some with diamonds, ranging from $6,000 to $12,000, and there have been some special pieces introduced to sell for as much as $50,000.

“Tag has transitioned quite well from a moderate-priced sports watch line into a well-accepted luxury watch line,” said Andrew J. Block, senior vice president at watch retailer Tourneau. “The introduction of the Alter Ego watch for women has further moved along [Tag’s] transition into a brand where higher price points are more readily accepted. Tag has gained a significant share of the $2,000-to-$3,000 watch market.”

Women’s offerings have become a more important part of the overall product mix and now account for about one-third of total volume.

While the U.S. is the biggest market for Tag, as part of the repositioning, its distribution has been scaled back, and Lalonde would like to see it get still more exclusive.

“We are in about 1,200 stores, and we would like to see it get down to about 1,000,” he said. “I would rather see more growth in key stores.”

Tag also recently opened a store in Manhattan’s SoHo district, its first U.S. unit, bringing the total store count to eight boutiques. The store here is seen as a test, but Lalonde said the firm is not in a rush to open additional units.

Meanwhile, Tag Heuer has just launched eyewear in its first licensing deal with Paris eyewear firm Logo. The line retails for $205 to $385 and includes sport and fashion pieces.

In an interview at the recent watch fair in Basel, Switzerland, Jean-Christophe Babin, Tag’s worldwide president, said that while eyewear would help spark further growth, Tag Heuer is not aiming to plaster its name across a lot of categories and it does not intend to enter any new product categories soon.

Christian Dior is different in that it spans categories, including ready-to-wear, fragrance and cosmetics. Dior watches fall under the umbrella of LVMH’s watch and jewelry division, but the styling is done in conjunction with Dior’s other fashion items.

Currently, Dior watches are in less than 200 doors with prices between $500 and $1,000. Plans are to expand its distribution to about 500 stores, including more fine jewelers, Lalonde said.

Chaumet is a relatively small business and is more known for its jewelry pieces than for its watches. The company is looking to build on Chaumet’s French heritage and keep the brand’s distribution selective. Most retailers that take on Chaumet sell the watches and jewelry, with prices ranging from about $1,500 to $5,000.

“We have a great brand portfolio,” Lalonde said. “It’s up to us to bring it to the consumer.””