Audemars Piguet set to increase production of watches in 2020

CEO Francois-Henry Bennahmias wants to tackle issue of shortage and is doubling down on Code 11.59, Audemars Piguet's first major collection in decades.

Sat, Nov 02, 2019


YOUR dream of owning an Audemars Piguet (AP) could become a reality in 2020.

"Next year, we're increasing production to 120,000," quipped the Swiss Haute Horlogerie manufacturer's CEO Francois-Henry Bennahmias.

The Frenchman, who took over the helm as chief executive in 2013, was speaking in Tokyo last month during AP's new exhibition, Beyond Watchmaking, which runs until Nov 4.

But he milked the joke for maximum effect with a dramatic pause as he took in the reaction of those in the room before they broke into laughter.

AP's annual production has stayed at 40,000 for years, so tripling it would be an audacious move even for the typically flamboyant Mr Bennahmias.

Mr Bennahmias clarified that production will increase to about 44,000 pieces next year - a modest increment of around 10 per cent - though that might still hardly be enough.

Despite being on the road for about a month visiting AP offices all over Asia and doing numerous press interviews, he was in an extremely jovial and chatty mood.

Then again, there is no reason for him to not be upbeat: the company saw double digit growth in 2018 and recorded a turnover of over one billion Swiss francs (S$1.37 billion) in revenue - and he was feeling equally bullish about 2019 even though the year is not up yet.

The numbers are all the more impressive, considering AP remains fiercely independent and is the only Swiss luxury watchmaking company still managed by its founding families.

On cranking up output, Mr Bennahmias said: "Today, we're ready for 47,000 to 48,000 watches." The former pro-golfer, who cut his teeth in retail working in the luxury fashion industry before joining AP in 1994, added: "We know that because of the missed opportunities in the stores everyday."

He was referring to the fact that if a customer walks into any AP boutique or authorised retailer today looking to buy one of its iconic Royal Oak models, it's certain that he will leave empty-handed.

"The inventory is short everywhere and we've reached a point where it went too far - when we've had to say 'no' to a customer eight out of ten times - that is not what we want," explained Mr Bennahmias, who adds that the goal is to reach 50,000 by 2022.

But changing the output is not as simple as punching in a new number on the machine and expecting spanking new Royal Oak watches to roll off the line.

"Adjusting is not an overnight thing - we need the skills, the watchmakers, the facilities, the training - so we will be investing big on our manufacture in Le Brassus (AP's birthplace and headquarters) over the next seven years," he added.

Nothing, it seems, can rain on AP's parade even though 2019 got off to slightly rocky start when it unveiled Code 11.59 - the brand's first new collection in decades - at Salon International de la Haute Horlogerie in Geneva.

As the watch featured a round face rather than the traditional octagonal one - designed by Gerald Genta in the early 1970s - that has become synonymous with AP thanks to the popularity of the Royal Oak, the Internet went berserk.

Mr Bennahmias, in another interview, maintained that AP stood its ground despite the harsh online reception.

In fact, the plan now is to produce twice as many Code 11.59 watches in 2020: "We'll double the quantity to 4,000 next year, and we don't make 4,000 unless we are sure we can sell them," he said.

The increase can also partly be attributed to the brand's growing customer base. It has discovered that more than half of its Code 11.59 buyers are first-time AP owners with an average age of 25 to 35 years, a younger demographic that could potentially become even bigger as pop stars like Justin Bieber and Bruno Mars show their love for AP on social media.

The former posted a photo of his vintage yellow gold Royal Oak as a wedding gift to himself in October; while the latter shared a shot of seven new yellow gold Royal Oak ref 15202 watches he bought for his band as holiday gifts in January.

Asked why luxury watches are so much in demand nowadays, Mr Bennehmias put it down to the fact that people are becoming more educated about watchmaking. "When I first moved to the US in 1999, if you go down to Madison Avenue and ask anyone what is the price of an expensive watch, they'd say US$5,000. Today if you ask that same question, most will say US$25,000 to US$30,000," he said.

But he added that AP is still far from realising its full potential. "We have about eight billion people on the planet - if you take the top 1 per cent who are the wealthiest, that's 80 million people. Even if you divide that number by four, that's 20 million people - and we have only 40,000 watches.

"We have not even scratched the surface."

Not the right time for e-commerce yet, says AP's head honcho

On retail past and present:

"So much has changed. Initially, we were selling watches in suitcases which we brought to see the client. If you sold two or three watches in a day, it was time for a celebration. Today, we say "no" to a lot of people who want to buy watches (because of the lack of supply), but that has taught us a lot of things and because we went with that (business model), we are much better at tomorrow as well. We are now a complete global brand with a collection that is made for every single country - we made mistakes in the past producing models for dedicated markets, but that is now gone."

On e-commerce:

"I look at it as a tool to reach people who are not near a store, so it's not putting your watch in a basket and checking out. The brand is much more than that - we want to get to know you as a client. We tried it last year in China (with Chinese e-commerce platform and it was not bad, but nothing to make us go, 'Wow, it's so fantastic, let's now go sell 20,000 watches online'."

On the downside of selling online:

"There are many different policies all over the world, and that makes it complicated for watches. Take the 30-day return policy in the US: you order your watch and after 29 days, you send it back and I have to give you a refund on the price plus shipping.

And now the watch is not new anymore - it becomes pre-owned. So not only did I not make any money on the new watch, I now even have to reduce the price."

On why AP isn't rushing into the pre-owned market:

"A highly skilled watchmaker can repair about 200 watches a year. If we take 2,000 trade-ins - which is not a scary number and not too far off from reality - we'd need 10 watchmakers. But they also cannot spend too much time overhauling the watch, because we don't make any money until we resell it . So I'll need everything in place (before we enter the pre-owned market), otherwise service will suck and we might have to stop for the wrong reasons. But the good news is nobody will penalise us if we don't start doing it tomorrow. We are independent and the goal is not to be the first but to do it right."