Robin Swithinbank Interviews TAG Heuer CEO Frdric Arnault

January 27, 2022

Frdric Arnault, the son of on-and-off worlds richest man Bernard Arnault, was just 25 when he took over as chief executive of TAG Heuer. Two years into the job, the golfer, Nintendo enthusiast, and scion of the French luxury fashion dynasty LVMH is tasked with filling the shoes once worn by captains of industry Jean-Claude Biver and Jean-Christophe Babin. This week, his brand is contributing to LVMH Watch Week, an event that was pushed online by the Omicron outbreak. Arnault took some time out for a video call to talk to HODINKEE, covering this weeks new Autavia and Aquaracer Professional 200 models, and much more. HODINKEE: Frdric, TAG Heuers parent company LVMH is due to report its 2021 figures soon. Q1 to Q3 results showed significant growth over 2020 and 2019, even accounting for the Tiffany acquisition in January last year. Are you expecting a record year? Frdric Arnault: I cant comment on that, but the growth has been very strong in the watch and jewelry division [TAG Heuer, Hublot, Bulgari, Zenith, Tiffany, Fred, Chaumet, and Repossi]. Its the first year of Tiffany being integrated into the division. But organically, weve also seen very strong growth. The internal LVMH dynamic is strong. No doubt some of that will be because prices are rising. According to Stphane Bianchi, youre now approaching an average price of 3,000 Swiss francs. TAG Heuer has long been the first luxury watch brand, but are you in danger of leaving first-time watch buyers behind? If I look at the majority of our watches, theyre a watch of a lifetime. Theyll be someones watch for many years, decades. These people are the target we have. What do you think your customers want? They want to be reassured that when they buy a TAG Heuer watch it will last and not go out of fashion C and that it will keep its value. Consistency is extremely important and were investing in that. Knowing a watch design was the same 40, 50 years ago reassures the customer when theyre spending a large amount of money. It doesnt mean we cant be creative or innovative, or come with new designs or technologies. Were investing there, too. Is Ryan Gosling the face of todays lifetime watch buyer? We cant rely on Steve McQueen for decades to come. Ryan is a great fit with the brand and an icon in his world. We approached him with a project and the way things happened was very authentic. He knew the brand, he was passionate about our universe and hed never done anything like this before. The industry trend is that volumes are going down sharply while prices are going up, meaning the industry is still balancing its books. If TAG Heuers price points are going up, does this mean your volumes are going down? Were not going to reduce volumes. We believe there is room for growth in volumes, accompanied by growth in value. Were investing in the value of our products and the average price will increase in the years to come. But it will not be accompanied by a decrease in volume. What do you mean by investing in the value of your watches? This is really important. Our limited editions and icons resell for a higher price and so well invest in this value long-term. But theres a balance to find. Its important not to go too far in frustrating the customer with a lack of accessibility. Its important that the watch doesnt become an object of speculation and that customers buy watches because they love the brand, love the design, and want to wear it. Investing there is the priority. Does this also mean well see more watches powered by your in-house movements, which carry a higher tariff? Yes. We have more references with Heuer 02 and these volumes are increasing. The desirability of these is strong. What role will the TAG Heuer Research Institute play in all this? We have a strategy of innovation C we want crazy innovations. Thats going to have an impact on the core product were launching in volume. Were working on reliability and silent innovation that the customer doesnt always see, but that has a lot of impact. But not just that, were also working on innovation thats more visible. Youve not seen anything from the Institute at LVMH Watch Week, but at Watches and Wonders in Geneva we will have a groundbreaking innovation. Talking of what weve seen this week, youve introduced a 60th anniversary Autavia collection and a new Aquaracer Professional 200. How do these fit into your product strategy? The strategy with these releases is to clarify those pillars and reinforce them. Today, we have fewer, but stronger lines. Thats what were doing with Aquaracer, which has its own coherent universe. The messaging we put forward last year [for the Aquaracer Professional 300 launch] resonates well with the 200. And there are fewer references than two years ago, overall. Sticking with Autavia C five years ago, the line was rebooted following the Autavia Cup with a watch that was critically well-received, but which has since disappeared from the collection. Why? I dont believe in an exact copy of the past. The watch youre mentioning was too close a copy to the historic one. This year, were keeping the core elements of what the Autavia is. So in the novelties, weve got a flyback movement, which is very coherent with automobiles, and a GMT movement thats very coherent with aviation and travel. This is the Autavia universe. Youve proven yourself a big believer in the Connected, pushing the golf edition and last years sell-out Nintendo limited edition. But is there really a future in the luxury smartwatch category? Yes, we believe strongly in our presence in the segment and Connected is one of our core pillars. Theres a lot of potential creativity in Connected, and we are constantly improving on our pillars, particularly sport and health. Limited editions will be a part of it, but the main aspect is the core product. Yes, but beyond the 2,000-piece Nintendo edition, are people actually buying these high-end smartwatches? We know there are hundreds of thousands of people wearing these watches every day. Plenty are still wearing the watch we launched in 2015. The US and UK markets are strongest, and anywhere golf has a heavy penetration, such as Japan and Korea, due to the strength of our core golf product. But we dont look at market share, because our price point is much higher than the competition. Its a watch with a level of exclusivity and best-performing technology. We are in the quality game. Last week, Naomi Osaka debuted a new piece for you at the Australian Open. Why wasn't she wearing a Connected watch, given the synergies there? We tried, but she cannot wear any connected watch while playing professionally, because players arent allowed to communicate with others off the court during a match. And this would be considered a communication device. Theres so much talk of sustainability in watchmaking these days, a theme that seems particularly relevant to a brand like TAG Heuer that appeals to a young audience. Connected watches have built-in obsolescence. How do you account for that? Its a business where technology is improving and thats how the industry functions. From here, well be launching improvements at a slower pace because were investing in the durability of our Connected products. But if new battery technology comes along, we will need to integrate it into our products. Customers can recycle their watch with us and replace it with another at a reduced price. But theres no longer the option to upgrade to a mechanical watch. Many are saying this is the year when the luxury watch industry embraces NFTs and the metaverse. The rumor is that youre planning on getting involved. Is that true? Yes, we believe strongly in the universe of NFTs and TAG Heuer has legitimacy here, too. We have some exciting projects to come. TAG Heuer is about being avant-garde and innovative. We are a tech company with the Connected watch and we have the brands to be present in this NFT universe and the metaverse. And we have the team to come up with the right stories and deliver them. Robin Swithinbank is an independent journalist who has written for?HODINKEE?about?Dubai Watch Week?and his?life in Swatches, among other topics. He is a regular contributor to?The New York Times International, Financial Times, GQ,?and?Robb Report. He is also Harrods' Contributing Watch Editor.This interview has been edited for clarity. Shop this story The HODINKEE Shop is an authorized retailer of TAG Heuer. To view our collection,?click here. For more information about TAG Heuer, visit their website.TAG Heuer is part of the LVMH group. Although LVMH Luxury Ventures is a minority investor in HODINKEE, we maintain complete editorial independence.