THE BIG INTERVIEW: Panerai CEO Jean-Marc Pontroué

Jean-Marc Pontroué took over as CEO of Officine Panerai in 2018 after six years at the top of Richemont stablemate Roger Dubuis.

He has spent more time running Panerai during a global pandemic than outside of it, but has used the crisis to reposition the business, particularly as a brand that will invest outside global cities like New York, London and Paris with expert retailers incentivised to take the lead.

WatchPro: How has the pandemic affected your long term strategy, not just from a production point of view, but also when it comes to where you focus your energy internationally across Asia, Europe and America?

Jean-Marc Pontroue: As we speak today, it looks like we are coming to the end of the crisis, at least when I look at the UK and Switzerland. It is not certain, but I believe it is over.

From March to September 2020 the pandemic was very disruptive from a manufacturing point of view and from lock downs in different countries. We have been faced with hundreds of decisions without the information we needed to take long term positions. Management of the position was changing almost every hour.

Very often a local partner has great relationships with customers that are far stronger than we have, even if we are present in that city. So, we rely a great deal on the professionalism of our partners and their expertise in Panerai — Jean-Marc Pontroue

After six months of disruption, we have seen a strong recovery and today we are in a similar pattern to what we had in September 2020. That means we have ongoing travel restrictions so we need to appeal to domestic customers rather than tourists in the big cities.

Panerai has always been a brand with strong domestic demand. So, even as tourism has dropped away, we were selling to local customers. In America, we are selling to Americans; in the UK we were selling to the British; and in Japan, we are selling to the Japanese. What we do experience is that our boutiques in the major cities have seen fewer customers.

Panerai today has 170 stores. We have over-invested in stores over the past few years. Even during the pandemic, we were opening one boutique every three weeks around the world.

WP: I know you had a new head of Panerai in the UK and the first thing he did was tour the country to visit retailers in many major cities. That was refreshing because the impression before the pandemic was that Panerai and other Richemont brands were concentrating their effort on capital cities and tourist spending.

JMP: You are right. The UK is like France, where you have these two massive cities that capture all of the energy of our retailers, PR activity and marketing. What we have forgotten, as we say here in France, are the provinces. The provinces in France and the UK have been affected in similar ways. People have left London, as they have done in Paris. Plus, the two capital cities were heavily affected by a lack of tourism, while the provinces were affected less.

We saw the same pattern at the same time. The only difference was that, in France, we had activity in other cities while in the UK we did not.
Our new manager has taken the initiative to tour the country and understand distribution across the country. So, now, we are opening new doors. We have projects going on with our partners.

WP: One of the differences between France and the UK is that the independent multibrand retailers in the UK are incredibly strong and well-run. This means you would not necessarily need to open your own boutiques in most UK cities because retail partners are so strong. Does this affect your strategy so that you rely more on partners than selling direct to consumers?

JMP: I do not say that we will always open our own stores. Two thirds of the boutiques we have opened in the past five years have been with partners. Panerai does not have a plan to be everywhere with our own boutiques.

Very often a local partner has great relationships with customers that are far stronger than we have, even if we are present in that city. So, we rely a great deal on the professionalism of our partners and their expertise in Panerai.

WP: How would you describe the strength of the market right now? Demand in America, in particular, has been off the scale for the past 18 months.

JMP: We had a lot of reasons two years’ ago to be pessimistic about the short term future. One valuable lesson we have learned is that it is almost impossible to predict the future.

Why has demand been so surprisingly strong? First of all, the international environment from a financial point of view has been resilient. Almost all of our customers still have their jobs. They are working in industries that have adapted and thrived through the pandemic.

The second point is that we still have many countries around the world where parts of the population are breaking through and becoming customers for luxury products like ours. They may not necessarily buy watches, they might buy jewellery, handbags or whatever. But they are entering the luxury market for the first time, so there has been a continuously growing opportunity for brands like Panerai.

 

Thirdly, I look at disposable income. All of us have not spent what we usually do on restaurants, flights and luxury hotels. A share of the money saved is being spent on hard luxuries.

Finally, we are in the love business. You indulge yourself because of a special achievement, for an engagement, a wedding, a graduation or whatever. As long as those special achievements are still happening, people will want to celebrate them with luxuries like our watches.

WP: You mention the feel good factor. We cannot ignore the fact that we have a war in Ukraine causing geopolitical uncertainty. On the financial front we have volatile stock markets and cryptocurrencies have lost around half of their value since the start of the year. We have a cost of living squeeze. How much do these external factors concern you?

JMP: We do not make political statements in our group, but of course I am always hoping that the world will be stable. My grandparents have seen war in Europe, but until now I have not seen that. Having lived in Germany and Switzerland, I treasure the stability we have enjoyed.

Right now we are out of the turbulence of the pandemic but there is new turbulence. How much that will affect financial markets, we cannot be certain. We just hope it ends as soon as possible for the safety and security of everybody and for the economic stability of the world.

WP: We know that Americans, in particular, are highly sensitive to stock market fluctuations and their impact on their pensions. Spending does rise and fall, particularly in luxuries, based on what they see in their 401Ks. Another factor that has impacted the watch market during the pandemic was the challenge of manufacturing during lock downs for your factories.

That caused supply to drop, which may have had a positive affect because discounting on the grey market has dried up. I appreciate that we are not politicians, but my point is there are external factors that CEOs like you have to deal with.

JMP: That is true. But Panerai has always been fortunate because we never had serious shortages. I do not like to go around the world and see retailers that do not have our bestsellers in their cabinets. Panerai has also never had a situation of oversupply in the market. The situation for us was that we had shortages during the pandemic, with some retailers running low. As we speak, there is still tension in the supply chain, but things should be back to normal in the next six months.

WP: Looking at the annual figures for Swiss watch exports from last year, it was a record year, but only just, ostensibly returning to pre-pandemic levels of around CHF 21 billion. This was reflected in the Morgan Stanley report for the state of the industry in 2021, bit also showed an interesting trend for privately owned watchmakers like Rolex, Audemars Piguet and Patek Philippe outperforming group brands over recent years. What do you think is behind this variance in performance and what can be done about it?

JMP: That is a very fair question. You have seen a rebirth in the fashion and accessories business that has been led by the groups. But when you compare us to the three brands you mention, I would not consider those to be independent brands. They have all the structure and scale of group brands. Are they more agile than group brands? Have they got something that group brands do not have? I have doubts about that.
From my experience as part of Richemont, I have never felt any difficulty making decisions and charting our own path.

At the same time, we have the advantages of being part of a larger group in terms of shared intelligence, marketing, finance, real estate, people, technology. These are all important to the success of Panerai.

Our ecommerce has grown from nowhere to what it is today. That would not have been possible without the power of Richemont. I don’t know how it is in the UK and USA, but in Switzerland it is incredibly difficult to find world leading IT experts for these types of projects.

This is just one example. There are many ways in which being part of a big group is an advantage and is giving us the platform to grow over the next decade.
Panerai is a size where we can enjoy the benefits of being part of a big group while at the same time having a lot of agility and entrepreneurship.

Since 1997, we have been a disruptor in the watch business. For example, making oversized watches at a time when the fashion was for smaller, slimmer models. That was disruptive. But we needed the power and stability of the group to invest in the company.
Panerai is an innovator when it comes to product design, materials and experiences, and I have always been supported by the group.

WP: Two words you used there, agility and stability, stand out for me. They can seem contradictory but are both vital for any business. Agility is vital in responding to events, but stability brings reassurance and experience. One of my observations, having worked in the United States and the UK for many years, is that groups like Richemont appear to rotate their executives in and out of different brands and between different countries in a way that privately owned companies do not. Do you agree, and do you think there are advantages to either approach?

JMP: My predecessor [Angelo Bonati] was CEO of Panerai for more than 20 years.

WP: Yes, but I am speaking more about in-country teams where executives tend to move around within the group.

JMP: That is how we grow those people. Former, the former head of Panerai UK is now here in Switzerland.

People are not moving because they are not happy with the brand. Many people in our team have been here for many years. It is more to do with the success of people in their countries. The UK has been one of the most successful markets for Panerai. We forget that our first boutique opened on Bond Street only four years’ ago. It is not a new market, but it is a fast-growing market.

That said, we were focusing too much on London and not enough on the rest of the country. That is something we are addressing.

In the last 12 months we have added 100 people to our team, taking us to 850 people. It is one of the beauties of being part of Richemont that our people can move to new brands and new challenges within the same organisation.

WP: We are speaking a couple of weeks before Watches & Wonders and the new watches are currently under embargo, but how are you feeling about being back at a major global trade show?

JMP: I am really excited that we will be meeting people in person for the first time in years. Meeting on screen is OK, but we need to get together with the press and retailers.

There are even people in the Panerai team that we have not met in three years. Human contact is the most important thing about Watches & Wonders.
It is also an opportunity for industry to celebrate not only coming though the pandemic, but coming through incredibly successfully.

On the product front, it is about Panerai introducing new concepts. This year it is our Submersible collection that has the most focus. We have the Carbotech model and the eSteel. We are also telling the story of the recyclability of our products, which is becoming more and more important.

We also have our friends from Watchfinder [owned by Richemont] on our stand. I know that will create a lot of excitement.