TAG Heuer's 28-year-old CEO, Frédéric Arnault, wants luxury goods to be more accessible to a wider audience, similar to the approach taken by his father, Bernard Arnault, the world's richest man.
The LVMH luxury empire has grown thanks to being made up of many brands with annual revenues exceeding $1 billion. Frédéric Arnault – CEO of TAG Heuer, and the third son of LVMH owner Bernard Arnault – said the Swiss watch brand is also preparing to join this group.
"We will soon join the billion-dollar brand club," Frédéric Arnault said in an interview with the WSJ.
Building luxury brands into billion-dollar giants has long been a strategy of Bernard, currently the world's richest man. This is how he transformed LVMH into Europe's most valuable company, with a market capitalization of $500 billion. To succeed, this strategy requires expanding the customer base, including the middle class, without compromising the brand's exclusivity.
Frédéric Arnault adopted his father's strategy. His task was to strike a delicate balance, offering limited editions like the $500,000 Carrera Plasma, while also selling watches to entry-level customers, such as the Formula One, which starts at $1,450. Lower-priced products would appeal to ambitious younger buyers, who would likely upgrade to more expensive models as they get older and more financially secure.
"For many people, we are the first luxury watch they ever owned," Arnault said.
Frédéric and his son Bernard Arnault in a Louis Vuitton production workshop in February. Photo: Bloomberg
To strengthen relationships with buyers, LVMH brands often maintain tight control over their stores. This is a differentiating factor in the industry, as luxury brands can rely on shopping malls and other retailers to reach new customers.
This gives retailers greater power and a better understanding of customer preferences. Conversely, luxury goods manufacturers have less power in determining the customer experience, such as pricing or product display.
With LVMH, they have complete control over the stores. This allows LVMH to tell its story "in the most vivid way, with architecture and product displays that match the space and service," Arnault said.
He was appointed CEO of TAG Heuer by his father in 2020. Since then, Arnault has drastically reduced the brand's number of retail locations, including third-party stores, from 4,000 before the pandemic to 2,500 currently. He has focused on opening his own stores around the world and is preparing to launch a flagship store in New York this July.
"I travel a lot. I oversee all the stores I build around the world. I also meet with all the landlords," he said.
China is a key market for them, even though it contributes less than 10% of sales, far behind their competitors. Arnault wants to open at least five more stores in China each year.
Opening new stores is expensive, requiring significant overhead costs. However, TAG Heuer has an advantage over other luxury brands because it belongs to the world's largest luxury goods group.
The presence of a Louis Vuitton or Dior store in a new shopping mall can make all the difference, determining success or failure. Knowing this, LVMH frequently allows its biggest brands to store their stores in order to secure prime locations for smaller brands.
"We leverage our group's strengths to secure prime locations in major shopping centers around the world. We've done this in many places, from the US, Europe, the Middle East to Asia," Arnault said.
They also apply this approach in advertising. LVMH buys shared advertising space for all its subsidiary brands. This allows them to negotiate discounted prices with leading magazines worldwide.
Nicholas Biebuyck, a director at TAG Heuer, said that bringing members of the Arnault family into the management of TAG Heuer is a double-edged sword. "This will open some doors, giving us more resources. But its brilliance will also overshadow our achievements," Biebuyck said.
Frédéric is one of Bernard's five children who are likely to inherit the LVMH empire. At the age of 12, he received his first TAG Heuer watch – a gift from his father. Frédéric played tennis and piano, and attended the prestigious Paris Polytechnic School like his father. He later co-founded an electronic payment startup and joined TAG Heuer in 2017 as its chief technology officer. Three years later, at the age of 25, Frédéric became CEO.
"For me, age doesn't matter," commented Stéphane Bianchi, CEO of LVMM's jewelry and watch division. "I've watched him grow into a talented leader step by step."
Since taking over as CEO, Arnault has upgraded the brand's status by adding more high-end models. He has also bet on smartwatches, which now account for 15% of sales. LVMH does not disclose the business results of each subsidiary brand. However, Morgan Stanley estimates that TAG Heuer's revenue increased 7% last year, to 729 million Swiss francs (811 million USD).
Currently, Arnault wants to leverage TAG Heuer's history with racing cars for advertising. The watch brand was founded by Edouard Heuer in 1860 in Saint-Imier, Switzerland. The company created the first stopwatch with an accuracy of 1/100th of a second in 1916. During the 1960s and 70s, these watches were widely used in Formula 1 (F1) racing. Afterward, they came to be considered sports watches.
In 1985, the TAG group – owned by a key shareholder of the McLaren F1 racing team – acquired Heuer and renamed it TAG Heuer. In 1999, LVMH acquired TAG Heuer, as Bernard Arnault sought to expand his empire into jewelry and watches.
Recently, TAG Heuer has shifted its marketing focus from football to Formula 1. The brand currently sponsors the Red Bull racing team and plans to launch three new models during the Monaco Grand Prix this month.
"We will invest heavily," Frédéric affirmed.
Ha Thu (according to WSJ)
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