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(Bloomberg) -- Small, lower-end Swiss watch brands face a more uncertain future after the Swiss National Bank’s U-turn on the franc cap, according to Greubel Forsey SA, whose timepieces start near 290,000 francs ($333,000) and can exceed 1 million.
The central bank’s move to end the minimum exchange rate against the euro could threaten the existence of smaller watchmakers and cause more consolidation in the Swiss watch industry, David Bernard, chief operating officer at Greubel Forsey, said in an interview at the Geneva watch salon today.
Bernard said some of the fiercest price competition will be for watches selling at about 1,000 francs, and that pressure will also be on the mid-tier range. Last week, H. Moser & Cie. Chief Executive Officer Edouard Meylan wrote an open letter to the SNB saying he contemplated moving the 55-employee company across the border to Germany to reduce his costs after the central bank’s surprise decision spurred clients to cancel orders.
“When you see how brands need to fight to win, it’s going to be quite hard with the strong franc,” Bernard said. “Up to 50,000 francs, it’s going to be quite tough because there is a real competition on that pricing.”
Even Switzerland’s biggest watchmakers are suffering, as Swatch Group AG and Cie. Financiere Richemont SA have announced they’re considering price increases to salvage profitability after the SNB surprise decision knocked about a fifth off their market value.
Swatch and Richemont, which own some of the premium brands such as Breguet and Cartier, are more shielded than others as they’ve been reporting record cash positions. Richemont, which ended December with 4.9 billion euros ($5.7 billion), is considering price increases in Europe of 5 percent to 7 percent, while Swatch CEO Nick Hayek has said he is contemplating increases of as much as 10 percent for some brands.
“Some of the smaller watch brands, which do not have a good balance sheet, will have an issue with declining margins and therefore it could lead to a further consolidation,” said Rene Weber, an analyst at Bank Vontobel AG. Richemont and Swatch might end up buying some, according to Bassel Choughari, an analyst at Berenberg in London.
Bernard also said that smartwatches are a “real danger” to timepieces with price tags of 2,000 francs or less. Richemont acquired 20 percent of Greubel & Forsey, which makes about 100 watches a year, in 2006.
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