Will you always prefer Swiss Made? In 2017, Switzerland implements a new law that will change what it takes to be considered “Swiss Made”. I will walk you through my thoughts on what it means to be “Swiss Made”, the brand equity that has, but also explore successful companies such as A. Lange & Sohne who are not Swiss. Swiss Made is the ultimate signature of quality. It is important to know the history behind it and what it means.
Swiss Made is something watch collectors demand. Even many non-Swiss brands use Swiss Made movements for the marque of quality and accuracy it represents. Swiss Made has not always been a marquee for “premium” that it carries today. We view Swiss Made as the ultimate in watchmaking and pay a premium to wear it on our wrists. However, there have been periods in history (which I won’t cover too in depth) when Swiss Made didn’t mean the level of craftsmanship we associate today. Here are three specific examples and instances in history:
- In the 1700’s, watchmaking innovation in England was spurred by the Longitude Act where Parliament offered a reward (the modern equivalent to millions of USD) which inspired watchmakers to develop some of the best timepieces in the world. Finding longitude accurately turned out to require accurate timepieces. This led some English watchmakers to develop timepieces so accurate that they rival our capabilities today and were certainly some of the most accurate watches of their day. As a result, British made watches were invariably superior in technology by 1762. To keep up with demand, the British had Swiss watchmakers produce watches and parts and then labeled the watches “Made in London”. (See the landmark watch history book A Revolution in Time by David Landes for a complete history whom I summarize. You can pick up a copy on Amazon for under $1.00).
- During the late 1700’s, the French watchmaking industry was also booming. Innovations to invent the chronometer were spurred by a gentleman named Le Roy in the late 1700’s. The French became famous for decorating their cases, arguably setting a standard for making watches the jewellery item we own today. Watches produced by Breguet, Rogue, and L’epine were considered works of art so much so that George Washington, James Madison, and Thomas Jefferson sought them out (and bought them) in the late 1700’s (See Watchmaking: A Case Study in Enterprise and Change also by David Landes for an entertaining read).
- The final example occurs in a speech by the Swiss watchmakers themselves after coming to America in 1876 to find out why so many Americans had stopped buying (importing) Swiss watches. It is implied in the speech that the Swiss made excellent watches, but they also produced some sub-standard watches and had been exporting these unreliable pieces to America during the demand surge from the Civil War (1861-65). These watches proved expensive and unreliable while American-made Waltham (aka American Watch Co among other names) watches were being massed produced and were very accurate for being machine made. Swiss watch executive Edouard Favre-Perret said in a speech to fellow watchmakers in 1876: “instead of sending good watches to the Americans, the worst trash was sent…[the Waltham Watch Co] increased their plant and turned out a better ordinary watch than the Swiss watch.” In fact, testing by Mr. Favre-Perret showed a Waltham watch lost only 1.5 seconds in a day (a standard that far exceeds even current standards). After taking apart the Waltham watch, his watchmaker came to him and said “I am completely overwhelmed. The result is incredible. One would not find one such watch out of 50,000 of our [Swiss] manufacture.”
In determining the value of the Swiss Made brand equity, I will compare it to some “comparables” (when you value a company, frequently you value it to comparable companies). To do this, we must ask if its Swiss Made that drives people to buy or is there something else driving people to buy? Buying something because it’s Swiss Made is obvious, so I will offer a few examples of watches that are NOT Swiss Made to demonstrate some comparable examples:
- A. Lange & Sohne was founded by Albert Lange in Glashutte, Saxony Germany (near Dresden) in 1845 (see full history here). Lange watches quickly became known for their intricate quality and assembly. Following WWII and the Soviet occupation of Eastern Germany, A. Lange & Sohne ceased to exist until 1990 when one of the Lange family members and pre-war era watchmakers started the company up again with the aid of the International Watch Company (IWC). Today, the company produced about 5,000 watches a year and are some of the most respected watches in the world, rivalling Patek Philippe, Vacheron Constantin, Breguet, and Audemars Piguet. Lange watches are clearly not Swiss made, rather German made (another “made in” title associated with quality). Lange watches are a grail watch for many collectors and appear interchangeably with any of the brands listed above on the wrists of the most passionate watch collectors. In the case of Lange (and many of its Glashutte sibling companies), the lack of “Made in Switzerland” does not drive any perception of decreased quality or desirability.
- Bremont is the next example. Bremont is a London-based watch company that started in 2002 and produced its first watch closer to 2007. They produce primarily aviation themed watches but have started venturing into other sports watches. Bremont uses modified Swiss Made ETA movements. They feature a “London” hallmark on the watch face and the company website says they are designed, manufactured, and assembled in England (a non-official representative of the company told me most parts are made in Britain, but some smaller parts are Swiss sourced, but everything is assembled in England). In other words, when people buy Bremont, they are fully aware they are not buying Swiss. Bremont is a new company and is privately owned, so sales figures are not available. However, estimates for production and sales are currently over 4,000 watches a year, which is a very quick rate of growth for a new company. They also have 4 boutique stores worldwide and can be found at retailers throughout the world. Bremont is demonstrating a growing and unignorable interest in watches that are new and sold as non-Swiss Made.
- American watchmaking is coming back, on the small scale for right now (most manufacturers are producing hundreds of watches, not thousands or millions). However, many of the companies I have spoken to cannot keep up with demand including the Montana Watch Co, Niall, and Vortic Watch Co. Each of these companies either has some models completely sold out or has a sitting backlog. Many American watch companies still use Swiss ETA movements, but Niall and Montana Watch Co all source the rest of the parts (case, dial, straps, buckles) from within the U.S. and in some cases, from their hometowns or home states (Vortic used American made vintage pocket watch movements). These companies have shown there is excess demand for watches that are mostly made in America. When people buy their watches, they clearly know they are not buying a watch with Swiss Made as its identity.
The new law coming into play in 2017 is a strong move by the Swiss watch industry to reinforce what it means to be Swiss Made and ensure the quality they represent is backed up with the manufacturing quality. Currently, the law allows 50% of the watch to be made elsewhere, which in some cases (at cheaper price points) means watches are mostly made outside of Switzerland and assembled and inspected in Switzerland. The new law now requires 60% of the value added to a watch (including parts produced) to be performed in Switzerland, which should effectively eliminate the loophole some companies were taking advantage of. I have spoken to CEO Elie Bernheim of RAYMOND WEIL and another executive from a Richemont subsidiary who all say this law will not affect them at all as they already exceed the standard of 60%. This law will mainly affect the less expensive watches in the lowest categories (<$600) that currently tote “Swiss Made”.
I will leave you with this information and allow you to ponder whether you think “Swiss Made” will be just as important or more/less in 10 or 20 years from now? Will the rise of companies like Shinola and David Wellington continue to grow in popularity with millennials? Will this erode future brand preference for Swiss Made? Or will the hallmark of Swiss Made quality continue to command a premium at all price points? I don’t think there is a right answer, rather a complex topic to ponder and will be the result of a series of factors. I leave you to ponder.