News On December 2, the Swatch Group and Tiffany & Co announced a strategic alliance to further the development, production and worldwide distribution of Tiffany brand watches.
Michael J. Kowalski, chairman and chief executive officer of Tiffany & Co, stated "This alliance will place Tiffany within the distinguished collection of luxury watch brands manufactured and distributed by the Swatch Group. Nick Hayek Jr and I began discussing possible collaboration between our two companies over a year ago and I am delighted that these discussions have led to this historic agreement. The Swatch Group is the best conceivable strategic partner for Tiffany’s long-planned re-entry into watch distribution. It is the leader in the high-end watch business with unparalleled distribution capabilities and experience in the luxury segment of the watch business."
Nick Hayek Jr, chief executive officer and president of the group management board of The Swatch Group, affirmed the prospects for a long-term, successful partnership, noting that "Tiffany is a true luxury brand with a long-standing heritage in watches. The two companies will collaborate on design, engineering, manufacturing, marketing, distribution and service. In consequence, we fully expect to see Tiffany strengthen its position among the best known and most respected watch brands worldwide."
Under this agreement, the Swatch Group will incorporate a new watchmaking company in Switzerland. The new company will be authorized to use Tiffany’s trademarks and operate under the Tiffany name. Tiffany will participate in the watch company’s before-tax profits and in its governance through one seat on its board of five directors and seats on both the product design and marketing committees. The watch company will be wholly-owned by the Swatch Group.
Taking full advantage of the technological expertise and manufacturing capacities of the Swatch Group, the new watch company will produce a full line of Tiffany watches, all made in Switzerland. Many of the watch designs for which Tiffany is noted will be continued and new designs will be added.
The distribution of Tiffany watches will be made through the Swatch Group distribution network (Swatch Group affiliates, Swatch Group retail facilities and third party distributors), as well as through Tiffany stores. In addition, Swatch Group affiliates will have the right to establish and operate Tiffany watch stores in certain markets outside the US. The watch stores may also offer a targeted selection of Tiffany jewelry. The watch company will support distribution with a significant marketing campaign. According to Tiffany's Kowalski, "Our advertising and that of the new watch company will be fully integrated and support a common objective."
The initial term of the arrangement is 20 years; the term may be extended for an additional ten years if certain conditions are met. Nicolas G. Hayek, chairman and co-founder of The Swatch Group Ltd., said that "this agreement is a pathbreaking strategic move. It allows without any financial capital transaction the maximum utilization of manufacturing and distribution resources of both partners."
Tiffany watches are distributed through more than 180 company-operated stores and boutiques and approximately 100 independently-operated locations. Net sales of Tiffany & Co were $2.6 billion in 2006. The company operates retail stores and boutiques in the Americas, Asia-Pacific and Europe and engages in direct selling through Internet, catalog and business gift operations.
January 11, 2008