President's Corner May 2013 - The Winston Legacy
Martin Scorsese was smiling on the front pages of an IHT advertisement, and showing off his Rolex watch for all to see. One could assume that BASELWORLD 2013 was the show of Rolex, however the star of BASELWORLD 2013 was actually Swatch.
The new Hall 1 at BASELWORLD is the centerpiece of the new strategy of the BASELWORLD organizers - giving the major watch brands center stage. It’s like a gigantic aquarium with no small fish allowed. To visit any of those booths you need an invitation and appointment; you cannot just walk in and request to see a watch that is displayed in the window.
Around the year 1990… The watch industry had just started to recover from its major crisis. The banks had a firm grip around the watch companies’ necks. At the time Swatch was considered a joke, selling Made in Switzerland watches for less than USD100. However, Nicholas Hayek was waiting in the shadows to swoop on the entire failing industry.
At that time our booth was located in Hall 6. It was a great place for doing business as a lot of Hong Kong companies and their clients were in our immediate vicinity.
Outside the hall was a stand selling baked potatoes with sour cream for USD9. Both the potato stand and Leibish & Co. were doing brisk business. The Swiss watch industry was fragmented and struggling; diamond dealers were respected exhibitors and nobody really talked about international branding, but all that is history.
Today, the potato stand is gone and so are the Chinese private buyers.
Shortly before the 2013 BASELWORLD show I heard the stunning news that Swatch Group had acquired the Harry Winston brand. The Swatch Group today employs more than 29,700 people in over 50 countries. Gross sales in 2012 amounted to CHF8.143 billion (2011: CHF7.143 billion), with net profit of CHF1.608 billion (2011: 1.276 billion).
Upon looking at Swatch Group holdings and its balance sheet it is easily understood why the potato stand is gone - this is not a business for baked potatoes. In a short few years Nicholas Hayek used his foresight, his business intuition, and financial muscle to acquire the crème de la crème of the Swiss watch industry, incorporating a host of the watch world’s greatest names under his umbrella.
Hayek was no corporate raider who bought failed companies to resell them at a profit. He was a visionary leader who created a USD4 billion empire from broken or struggling brands and in the process virtually saved the Swiss watch industry in its entirety.
Following is a list of brands owned by Swatch Group: Breguet, Blancpain, Glashütte Original, Jaquet Droz, Léon Hatot, Omega, Longines, Rado, Union Glashütte, Tissot, CK watch & jewelry, Balmain, Certina, Mido, Hamilton, Swatch, Flik Flak, Endura , and now Harry Winston.
Total exports of the Swiss watch industry in 2012 was over CHF20 billion. So, in March, when Swatch acquired Harry Winston, the strongest jewelry brand in the world, he definitely placed a crown on his head. Really great brands are not built or destroyed by the first generations, they take 2-3 generations to mature or lose relevance.
The Harry Winston name is attached to many important fancy color diamonds, such as the Hope Diamond - the most famous blue diamond in the world.
When Nicholas Hayek died at his desk in the middle of his working day in 2010, aged 82, his son, Nick Hayek Jr., was already firmly in charge of Swatch Group. In one of his first statements to the press he confirmed that his father’s vision is continuing: we don’t fire people to make a good impression on financial analysts.
According to Christie’s auction house, Harry Winston bought a new colorless, flawless 101.73-carat diamond for a record USD26.7 million at an auction in Geneva on Wednesday the15th of May.
Christie's representative, Raul Kadakia, told reporters after the sale that Harry Winston was the buyer of the diamond that smashed the previous auction price record for a diamond in its category by more than USD10 million.
"Twenty-three million (Swiss) francs! Your last chance! Twenty-three million, sold!" shouted Francois Curiel, the head of Christie's jewelery division, referring to the USD23.5 million price before tax and commission, before clinching the deal in front of some 150 people gathered for the auction at a luxury Geneva hotel.
As the first ever buyer of the new diamond, Harry Winston had the privilege of naming it. They decided to call it the "Winston Legacy," Kadakia said, pointing out that this was the diamond dealer's first major purchase since it was snapped up by the world's leading watchmaker for USD1.0 billion in March.
Switzerland's Swatch Group, best known for its brightly colored plastic watches, has been eagerly expanding its luxury offerings, and Wednesday's sparkling purchase more than likely tickled the group's chairwoman, Nayla Hayek, daughter of the founder Nickolas Hayek, who was named chief executive of Harry Winston earlier this month, more than anyone else. Her first strategic move as the head of Harry Winston was to make a point - Swatch will restore the old glory days of the jeweler as evidenced by the purchase of the Winston Legacy.
The original Legacy, polished by Harry Winston, was this 69.42 carat diamond. It was purchased for Elizabeth Taylor by husband Richard Burton for over USD1 million. She wore it frequently while they were married, but after their divorce, she sold it for more than USD5 million. This stone would easily fetch USD15 million today.
Marilyn Monroe was not only one of the greatest Hollywood stars who ever lived, she was also a living advertisement and symbol for Harry Winston.
The Swatch acquisition of Harry Winston will return the great spirit of one of the best known jewelry brands to its original sparkle. With the purchase of the magnificent 101.73 carat D IF, Swatch Group is well on the way to restoring the Winston Legacy.