When Georges Kern jumped ship in 2017 for Breitling, the watch world was stunned. Kern, flamboyant scion of a German jewelry family, had gained an international reputation as a marketing whiz. For 15 years, he had personified, with much razzmatazz and a heavy dose of Hollywood, the rise of the IWC brand owned by Compagnie Financiére Richemont. Moving to an established, but slightly sleepy, rival sports watchmaker best known for chunky aviator’s models seemed retrograde. Owned since 1979 by the reclusive Schneider family, relatively small and independent Breitling was overshadowed by behemoths like Rolex, IWC and Swatch Group’s Omega, making it a perpetual takeover candidate.
Ultimately, Breitling’s buyer wasn’t another watchmaker, typifying an industry in rapid consolidation, but private equity. In its first foray into watchmaking, European group CVC Capital Partners coughed up a widely reported — and hefty — 800 million euros for an initial 80 percent, subsequently buying out the rest of the company.
Kern’s move was all the more surprising as he had only recently been promoted to supervise all the Richemont group’s watch brands. That lined him up alongside Jérôme Lambert as a future leader of the world’s second-biggest luxury goods group, under the ever-watchful eye of executive chairman and core shareholder Johann Rupert.
The biggest incentive to join Breitling for Kern, whose career started at Kraft before progressing to watchmakers Tag Heuer and IWC, was the chance to own a stake — widely reported at 5 percent — with the opportunity for more on CVC’s exit. Nevertheless, his move was perceived as risky, given the watch industry’s cycles and vulnerability to everything from capricious Asian tourists to geopolitics in general. Exports of Swiss watches, the only industry data available, grew by 6.3 percent last year, but sales are still below their highs of 2013 to 2015.
Moreover, Breitling appeared becalmed. Production, which unusually for a Swiss watchmaker is public knowledge because all its watches are certified by an outside Swiss authority, was static at 150,000 to 160,000 pieces a year — and less in downturns. The group was highly dependent on the U.S., its single biggest market. And it was wholly absent in China, the main source of the sector’s growth. While production had been modernized with a brand new factory at La Chaux-de-Fonds and a long-awaited in-house movement, prospects were not entirely rosy.
Since his arrival, Kern has overseen a transformation, with new products, marketing and a leap in employees from 700 to almost double that.
Just his new Zurich office symbolizes how things have changed at Breitling. Located on a redeveloped industrial site mixing traditional Swiss brickwork with contemporary office architecture, he sits cheek by jowl with Google’s local headquarters, one of the tech group’s biggest outside the U.S. It is all a far cry from Breitling’s dowdy headquarters and assembly plant in rural Grenchen, some 90 minutes away.
“This is what we call our marketing offices,” said a relaxed Kern, 54. “We needed a place to welcome new international staff, from New York, from Paris, wherever. They’re not going to Grenchen. It’s very convenient for me, too. I’m here one to two days a week, the same in Grenchen, and I’m traveling a lot as well. What we like here is the industrial feel. If you look at our boutiques now, it’s all lofts and industrial style. The previous tenant was a reinsurer, and I’ve no clue why they rented this place.”
Eighteen months into his tenure and on the eve of Baselworld, here Kern sits back and talks with WWD about what has changed and the watch industry in general.
WWD: How well did you know Breitling? Was it a major competitor to IWC?
Georges Kern: Funnily enough, when I was at Tag Heuer in the 1980s, we looked at Breitling very closely. We were very jealous about the Chronomat, and extremely jealous about their advertising campaign. There was a very funny campaign in France. Later, there was regular mapping of our competitors, but I had no intimate knowledge about the brand. Breitling was always very strong in modern aviation, with the Avengers, the Chronomat, the Jet Team.
WWD: What surprised you most on joining?
G.K.: First, the manufacturing center in La Chaux-de-Fonds is one of the most modern I‘ve ever seen. They invested very heavily. It’s amazing. The brand was very profitable, very healthy financially. There were many positives.
What still strikes me today is the history. I didn’t even know Breitling invested the wrist chronograph. Nobody knows, which is a bit of a problem that we’re addressing. The watches were so beautiful, so versatile, so interesting. But in the recent past, Breitling had concentrated on the niche of a niche; these super modern, big, bulky, aviation watches. These, I discovered, were never the DNA or the history of the brand, which was always Air, Land and Sea (and not just aviation). Over the past 12 months, we’ve repositioned and said Breitling was always Air, Land and Sea. That’s exactly where the brand came from. Navitimer; Chronomat; SuperOcean.
Not only did I discover a wide, deep, history of beautiful products, I also found — which I’ve never seen before — two completely different communities of buyers and collectors. I had two extremes: we had the “recent past” community, loving those big watches; and the “Forties, Fifties, Sixties and Seventies lovers.”
WWD: What were your priorities and how did you set about meeting them?
G.K.: There were three or four major issues. Number one was product. When you’re in a super niche, it’s hard to innovate. There were lots and lots of different variations of pilots’ watches: Roman numerals, indexes, Arab numerals, with and without engravings, you name it. It had gone so crazy the collection was no longer “readable”: there was no longer any clear image, it had all been blurred. Nobody understood anything. So the first thing we did, we segmented it in clear design codes, design elements.
There were two things we needed to do. We needed to go back into the more classic segment, where we weren’t, but where the brand was in the past. Last year we relaunched the Premier, a line from the 1940s, which is more “sports elegant.” It’s a new segment applicable all over the world and a shift from big bulky watches.
Secondly on product, we’ve dramatically modernized the existing big bulky lines. It’s about how to be contemporary in design. You can make very tasteful four-wheel drive SUVs. You can do something very stylish, still being big. But then you have to do a very nice convertible and a coupe. This is what we’re doing. We trying to improve the SUV design and launch coupes and convertibles in due course. You’ll see a lot at Basel.
Already we’d launched new products; for example, our civil aviation watches. Back in the 1960s and 1970s, Breitling was the official watch supplier to all the civil airlines. In the 1970s, Breitling did a series of PanAm, TWA and Swissair watches. We relaunched then and there’s been such enthusiasm you can’t imagine. For the first time in years, celebrity and megastars are calling us and asking to get the watch. Apart from airlines, we’ve also redone the Curtiss Warhawk, a historic pilot’s watch named after the famous U.S. World War II fighter plane. But the most important innovation has been Premier.
WWD: What about women’s watches?
G.K.: Breitling was also always good in ladies’ watches, but not in ladies’ sports watches. People know much less about them today. But that’s also something that’s going to change, most probably next year.
WWD: What about marketing and advertising?
G.K.: Communication was our second problem as it was very outdated. All these blond girls waiting for the pilots. It wasn’t even macho in a funny way. It was an outdated way, in a way that was very primitive. This has nothing to do with #MeToo. I personally thought it was awful. I’m changing things because I thought it was awful.
WWD: Does that explain the recruitment of so many “squads” in your advertising now?
G.K.: We come from aviation, and planes fly in squadrons. So I thought it would be fun to have a squadron of people. Secondly, I believe more in teams than in individuals. Third, it’s a very flexible campaign: you can have male, female, young, old, local, international. Fourthly, you can allocate a squad by product group; the SuperOcean is linked to the surfer squad; the more technical watches are linked, of course, to our explorers squad; our pilots’ watches, with the Jet Team. So it’s very easy to segment, in terms of message, to get the message through in a much more comprehensive way.
The last element, which is very important, just as with distinguishing our boutiques, we wanted to go into sports and activities the others don’t have. We’re not in Formula One; we’re not in tennis or golf. We’re in new sports or areas where the others aren’t. We are in triathlon; we’re in surfing; we have an explorer squad. We do stuff that’s different, that people relate to more. It’s more inclusive, it’s much more relaxed. We want to be the cool and relaxed alternative to the more formal and traditional brands. That’s why we’ve chosen these people, these squads, this boutique design, this photo shoot design and style. It’s all part of an overall concept.
WWD: And the response?
G.K.: On social media, it’s becoming a phenomenon. Everybody’s a squad. Everybody’s using squad. In a year, we were able to own that idea. I love it. No more single people. It’s really squads. And they have to have a mission. The people we use are all authentic. When you look at the surfer squad, you might not know them, especially in Europe. Likewise our explorers. But the point is, when you check them out, you find they’re all number one.
Now we’re advertising with the world’s longest-flying Curtiss Warhawk pilot. He’s 93. He’s been flying the plane for 60 years. The guy is a star now because he’s authentic. Our Jet Team are real pilots. Bertrand Piccard is a real explorer; Kelly Slater is the best surfer in history. These are all successful, authentic people.
Of course we also have our film squad. But I have one particular reason, and that is China. If you want to build up China, you need to have an impactful film squad. Apart from Brad Pitt, Adam Driver and Charlize Theron, we have Daniel Wu. He’s huge.
WWD: What about distribution?
G.K.: Our third huge problem was distribution. Some 60 or 65 percent of our sales were done through agents. The problem was, these people — they did their best and I love them all — they have different objectives. They are more short term, they don’t own the brand, they have limited contracts, etc. In the past couple of months, we’ve bought out all the agents, which was a huge task, to control the market, the gray market, pricing, to be closer to our customers. When you invest, you need to know it’s implemented the way you want.
WWD: How did the agents react?
G.K.: I’m not going to tell you the arguments I had. But I can either offer a big carrot up front [buying out an agent outright], or I can say, I’ll keep you, and your team, and I’ll give you a beautiful incentive depending on your growth, and, in addition, depending on our exit plan.…You can structure a deal beneficial to all parties. That’s why it went so smoothly.
We’ve now bought out all the major markets except two, Austria and Eastern Europe, where we’re extremely strong, and Scandinavia, where we’re also very strong. But we just have no time, and no physical capacity to do them. We’re now 1,300 or 1,400 people, coming from 700, so we need to digest this. We have deals, but just need to physically do them.
WWD: That sounds like plenty of challenges to start with. Was there anything else?
G.K.: The collection, communication and distribution were three fundamental issues. The ultimate one was that Breitling was not in Greater China, which is 50 percent of the market, because they were never interested in China. We have phenomenal potential in China, and we’re growing strongly. The new generations there, the Millennials, they don’t want to buy the watches their parents bought. There’s the Internet, there’s social media, they travel. They see how strong Breitling is. And tastes change. They want bigger watches. We can go very quickly. Things are moving very quickly.
WWD: Did you do this all at once, or in steps?
G.K.: When you’ve seen as many brands as I have in my life, and so many problems and mistakes, you walk into any brand and ask the 10 most important questions without any analysis. And you quickly, very quickly, understand where the issues are. That’s called experience.
We did everything at the same time. We’ve been working a lot over the last months. But I have a very experienced team, coming from basically the whole watch industry. From Audemars [Piguet], from Rolex, from Jaeger [LeCoultre], from Chopard. I have a melting pot of the whole industry. I got very good people and they’re also shareholders, so it’s all good.
I took people I knew. I haven’t spent a dime on headhunting. We hired 30 to 40 managers and I knew them all. Everybody saw the opportunity. I always say, we’re a a huge start-up, with very old people. It’s like a coach who prefers having an experienced team. You explain something on the board, and the guys know how to play.
WWD: So what is your management style? I’ve always known you as an individualist?
G.K.: Let’s not be naïve: if you want to move quickly, you need experienced people. They’re a little bit more expensive, but they have a sense of independence. I don’t have time, especially with private equity, to go into too long discussions or explanations.
Where you’re right is that I have a very clear vision of what I want to do, which I’ve obviously shared with everybody, and which has been enriched by their experience. Coming from many brands, it was very good to listen to different perspectives. We very quickly agreed on a strategy on how to structure the collection, etc.
What I also did, for the first time in my life, I last year held a seminar with collectors, bloggers, I even made the mistake to invite some journalists. We had two or three groups of 25 people and we went through everything. The collection, the history, key messages, product design, everything. Not only we, as a management team, had an idea, but we presented it, and many things came out. And I adjusted many things. And this was really helpful.
WWD: That’s all fine, and sounds very long term. But what about CVC’s time horizon?
G.K.: You have to understand. I correct all the journalists on this. When people say, you have the pressure of shareholders, I say, I have the pressure of myself. My whole money is in this company. Neither does my management team need the pressure, because they have invested their money, too. I’m not talking about stock options here. I’m talking about money that was in my account, and that’s not in my account anymore. It’s very different. Whatever we do, we all have to be aligned. Me, my team, some of my former agents. Discussions are very different than when you work in a big corporation. It’s a totally different feeling. At a big group, if you’re fired, you even get a check. If you’re fired here, you lose your money. It’s different.
WWD: What’s been the impact on the brand?
G.K.: Being owned by private equity is the best thing that could happen to Breitling today. We can invest, we don’t have burdens, we move incredibly fast. The only thing we’ve been asked to do is create value. Brand equity. The value of a brand when it’s independent or in private equity isn’t the dividends paid, like at a conventional group. The value in private equity is brand equity. It’s very different. We’re in an investment mode, a development mode. It’s a totally different mood.
Eventually finding a buyer will be easy. Super easy. I don’t know anybody who wouldn’t like to buy Breitling. It’s one of the best and strongest brands in the watch industry. I’m not worried at all. There’s so much money in the market.
WWD: What is the group’s performance? What’s happened to production?
G.K.: The public figures are meaningless, because we’ve stopped all our quartz watches. We made huge quantities and I stopped it because I thought it would downgrade the brand. But even without quartz, we’re still growing. Something like 160,000 to 170,000 pieces last year. We had a very good year; even though we’ve decreased distribution a lot. More automatics, which had a double impact on our turnover. And that came even through, when we took over the agents, we closed a lot to clean up the gray market. But we’ve opened more Breitling boutiques. Sales are much higher than suggested. But you have to note we also integrated our agents, so you have to distinguish between organic growth and integration growth. People don’t always make that calculation. But it’s going in the right direction.
WWD: What’s been the impact of the 2017 deal with Rolex’s subsidiary Tudor to cross-sell movements?
G.K.: I wasn’t there at the time, but it makes perfect sense. The idea was to create another, open, source for automatic movements. They’ve now set up a company and are building a real manufacturing center for these Tudor movements. Chanel is also involved now. Breitling, meanwhile, is supplying its movement to Tudor, although not as many. But it still helps us a lot to cover fixed costs. Likewise for them.
WWD: Let’s turn to the watch industry in general. Where do you stand on e-commerce versus brick-and-mortar?
G.K.: Breitling was never active online. We’ve now built a huge team. We’ve launched China, working with Alibaba, we’ve launched the U.S., we’re now launching in Europe. In a couple of months, we’ll be in e-commerce worldwide. We have a few deals with pure players, like Mr Porter. And we’re present via many of our dealers, who have their own sites. We need to treat our clients in a very omnichannel way. But that’s no secret. Everybody’s going that way.
For sure, in the industry, you’ll have less and less wholesale and more and more retail. But this is more due to globalization that you can commute, that transport is easy, that people want to have buying experiences in big agglomerations.
WWD: How many Breitling stores are there now?
G.K.: We have roughly 90 boutiques, but most are external, with our partners. The boutiques, whether company-owned or with partners, generate abound 25 percent of sales. E-commerce, by contrast, has just started.
As for the future of the industry, there are two things to consider. What is the long-term trend, and what about short-term cycles? Long term, I’m not worried at all. Digital watches are not an issue. Yes, we’re in the same market, but it’s like in the beverage market — you have water and Chateau Lafite. We are selling a Chateau Lafite. So the comparison is ridiculous. Everybody is saying Apple is selling more watches than the whole Swiss industry. But this comparison doesn’t make sense. The beauty with the watch industry is we’re not a commodity. This is the difference with the car industry. In the future you’ll have autonomous driving, you’ll go from A to B. Everything related to the feeling of sound, speed and smell: it’s gone, it’s become a commodity. High-end watches aren’t a commodity. It’s a piece of jewelry, it’s a piece of emotion, it’s memories, it’s rewarding.
Nothing will change in the watch industry. You will have 300 million Chinese buying in the segment in a couple of years. The potential is phenomenal. Long-term, I’m very confident. In our lifetime, nothing will change. In our children’s lifetime, nothing will change. Young kids, they all want watches. My son bought a vintage watch. So I’m not worried. Of course there will be short-term cycles, [but] what do you want me to do, jump out of the window? You have to deal with it.
WWD: And the future of trade fairs given what’s happening at Basel and SIHH, the two premier shows?
G.K.: Traditionally, fairs were opportunities for us to sell. But we don’t need that anymore. We’re in daily contact with our clients, the Internet, etc. Secondly, you don’t launch novelties by calendar year. We don’t do this anymore. It’s not in April or in January I have to launch watches.
We’ve changed our format, we now have summits in spring and fall all around the world. We want to launch the product from the catwalk to the stores. Our summits are like a Steve Jobs presentation. Huge screen. And in an hour, you’re done. People don’t wait. In the old days, the articles would come out in the monthly magazines, manufacturers said the watch would be available in September and actually it came out in January. Today, it’s online. People go on your web site and say, “I can’t see the price, I cant’s see the availability.” So they say, “why do you present it if you cannot ship it?” So, if you don’t need fairs to sell, because you sell anyway, what do you do at a fair? What’s the aim? I think it could still be interesting as a communications platform.
WWD: Will you say a little more about the appeal of entrepreneurship and running your “own” company now?
G.K.: I had opportunities before, but it had to be the right opportunity. Now there was a train passing, and I jumped on it. But I was always very lucky when I was in the corporate world to have been dealing with people who gave me the liberty I wanted. I had people who trusted me, thank god.
I never really had a mentor. But I was lucky always to have people who were smart and who believed in me at a very young age. Even at Kraft, I knew the ceo, even though I was nothing, a drop in the ocean. Likewise at Tag and at Richemont. I was always lucky to have very senior people who believed in me.
WWD: Is it different now with your own money invested?
G.K.: It would be terrible if I said, “yes!” That would mean in the past I was not professional or I was not performing! Of course, I was as professional before. But it’s still different when you do it on your own. You think about the real consequences of your actions. It’s not so much shareholders or no shareholders. It’s more a matter of big or small. When you’re in a big corporation, you have billions in cash. What is the impact of a mistake? You go home and you sleep. When you own a company that’s smaller, you have to be sure yourself the cash is there, that everything works. It’s a totally different feeling. The downside is you have no safety net. The advantage is that you move much more quickly.