A dramatic event occurred in the financial markets yesterday that will certainly affect many of the Swiss watch brands that we love and follow.
The SNB (Swiss National Bank) made the sudden announcement of its decision to scrap its cap on the Swiss Franc against the Euro (at 1.20CHF per Euro). This news sparked a wave of volatile trading in the currency markets, with knock on effects being felt in the share markets as well. The Swiss Market Index dropped 10 percent, wiping 133 billion francs off its value, while the shares of watch industry giants, Richemont (Compagnie Financiere Richemont SA) and The Swatch Group both fell 19 and 20 percent respectively, from Thursday’s open.
With Swiss Watch brands being export oriented, the higher value of the Swiss Franc now means that overseas buyers will have to pay higher prices for the same goods. Higher prices leads to a fall in demand, meaning less goods sold, meaning: Not a good situation for an export driven economy like Switzerland. (Edouard Meylan mentions in his open letter below that orders were cancelled on the same day that the news broke, see below.)
This unexpected event will certainly become a big talking point in the watch industry this year, particularly when it comes on the cusp of SIHH next week.
While we will hear more reactions at SIHH in Geneva from the watch brands themselves, have a look at this early reaction from Edouard Meylan, CEO of H. Moser and Cie, who published an open letter to Thomas Jordan, President of the Swiss National Bank:
I wanted to personally and publicly thank you, regarding your dramatic move releasing the minimum Swiss Franc exchange rate of 1.20 to the Euro.When I woke up that morning I had a strange feeling. As I checked the news, I wondered, “What am I going to do today?” aside from our usual business in January. There was no new conflict, no big news about emerging markets slowing down, and thank goodness, no new terror attack.
I am an entrepreneur, and I own a small watch manufacture called H. Moser & Cie, based in Schaffhausen, Switzerland. Very Rare is our tagline at H. Moser & Cie. Very Rare, because we produce 1,000 watches, we are entrepreneurs in an independent, family-owned business that employs 55 people, and because we are a manufacture in the true sense of the word, developing and producing our own ingenious watches.
As an entrepreneur in a small Swiss company, I like a challenge; whether it’s the pressure from the big luxury groups in supply or distribution. Or, a fight to do more with small budgets against the avalanche of big advertising and marketing. Well, today, Mr. President, your dramatic move helped step it up a notch: over 95% of our watches are sold to people outside of Switzerland, and the first retailers called the same day to cancel orders.
So this morning at 10:38 when my CFO sent me an email titled “Breaking News”, I thought “aha, finally something to do”. Something that forces me to find smart solutions to continue our growth and improving profitability and to ensure continuity for H. Moser & Cie. and the jobs for 55 people working for me.In fact, one thought crossed my mind: why not just move 2 kilometres into Germany and continue business as usual in the EU? I’ll even beat that other restriction on permits for workers from the EU that came up in February 2014 – around 20% of my employees are German.
Let me make my appeal clear to you, on behalf of the many small and mid-size businesses that employ so many Swiss people: I trust you have a strong plan that will help all of us make it through with you over the long term. Because otherwise, along with many other wonderful Swiss creations, H. Moser watches may just have become very, very, very rare.
CEO of H. Moser & Cie.