Patek philippe seal

The Patek Philippe Paradox

Patek is as respected as ever as a horological colossus, but is slipping down the league table by pure business performance. A paradox, Robin Swithinbank suggests, and wonders what it means for Switzerland’s most venerable watchmaker and its place in the evolving industry.

Ask a watch collectors’ gathering to name the biggest Swiss brands, and most people will say Rolex and Patek Philippe, then probably Omega, Cartier and Audemars Piguet. Few would believe that Patek’s turnover is ranked fifth, according to Morgan Stanley, and was overtaken by AP this year.

Patek is as respected as ever as a horological colossus, but is slipping down the league table by pure business performance.

A paradox, Robin Swithinbank suggests, and wonders what it means for Switzerland’s most venerable watchmaker and its place in the evolving industry.

Some things you just don’t do in public. Stare. Admit to supporting Millwall. Drive a Nissan. Add to the list: question Patek Philippe.

Ever since I tip-toed into this business, Patek has worn a very bright halo. I’ve burnished it plenty. It’s an extraordinary brand with an extraordinary story – ‘the watchmaker’s watchmaker’ Right?

For a long, long time, there’s been no questioning its supremacy, and doing so would – and still could – be hara-kiri. Patek is horological bullion. But, and call this the Patek Paradox, there are signs Patek’s glow might be flickering.

In March, Morgan Stanley’s hotly anticipated annual watch report landed, and with it came some uncomfortable findings for Patek.

On first reading, all looks rosy. In 2021, the company’s revenues were up an estimated CHF 470m, a jump of 32 per cent, a fraction more than the industry average in a bumper year.

It also shifted 15,000 more watches, up to 68,000, again, an estimate. Some models are still thought to carry 12 year waiting lists.

So far, so healthy.

But behind those figures were the calculations that Patek’s market share had slumped over the same period, falling from 5.8 per cent to 4.8 per cent.

So too average retail prices, by more than CHF 5,000. And perhaps most uncomfortable was that Patek had dropped from fourth to sixth in the rankings, behind Longines and, far more significantly, its rival Audemars Piguet.

Annual turnover by brand in 2021

The comparison with Audemars Piguet is useful. The similarities between the pair will likely not need detailing here, but to pick a few: both are family-owned, both make high-end watches in relatively low volumes that buyers go crazy for, and both have a profile heavily dependent on a 1970s steel sports watch.

But there the similarities end. Patek may have a gleaming new facility in Plan-les-Ouates, but to the outside world, the brand’s story is as it was 10, even 20 years ago, defined by a strap line most laymen can have a stab at.

At the risk of hyperbolising, nothing has changed.

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Francois-Henry-Bennahmias chats with Hollywood actor Don Cheadle.
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Patek Philippe president Thierry Stern.

Up in Le Brassus, the story has evolved rapidly. Under François-Henri Bennahmias, one of the most polarising figures this industry is blessed with, Audemars Piguet has embraced the modern world, while sticking to its foundations and making very good, very expensive mechanical watches.

The cultural chasm is huge. Patek is wedded to Swiss watchmaking culture – protestant, monogamous and unflinching, like a mahogany boardroom table commissioned 100 years ago.

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Inside Patek Philippe’s Museum in Geneva.

AP, by contrast, has now long made contemporary culture its muse, tapping into its diffuse influences.

Over the past two decades, it’s made watches with Arnold Schwarzenegger, LeBron James and Michael Schumacher, and aligned itself with contemporary music, art, golf and, much to the consternation of some purists, the Marvel Universe.

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Audemars Piguet’s Museum and manufacture in Le Brasus.

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It still has the hardwood furniture, only it’s cut it up, sanded it down and covered it in street art.

And apparently, it’s working. Back to Morgan Stanley: its last four reports indicate AP has grown more than 50 per cent by revenue since 2018, while Patek is up only 13 per cent over the same period, culminating in the headline news that the two have swapped places in their niche-but-important head-to-head battle to be Switzerland’s largest family-owned high-end watch brand.

For Patek, just how much of a problem is this?

That depends on whether you see the problem as being Patek’s alone. Which really, it isn’t. The same symptoms – of both growth and stagnation – are evident across the spectrum.

Take, as a second case, a comparison between two other members of the establishment, Swatch Group’s Breguet and Richemont’s Vacheron Constantin.

Breguet grew by 15 per cent last year, according to Morgan Stanley. That might sound good, but it’s less than half the industry average, meaning the brand is going backwards. Which, we’re told, it is.

Breguet’s revenues have shrivelled by 40 per cent since 2018, say those same reports: only four other brands in the top 50 scored worse.

Meanwhile, over at Vacheron, revenues were up by 26 per cent during the same period, including a 72 per cent spike during last year’s annus mirabilis.

Vacheron’s market share also grew last year; Breguet’s shrank.

Change in annual turnover by brand 2018 to 2021

Why? The culture, stupid. Vacheron is still making the same stuff as before, but increasingly, when it does something recherché like métier d’arts, it’ll draw on the kudos of another prestigious cultural institution, such as Le Louvre, to contextualise and hype the story.

See also zeitgeisty campaigns pairing it with Abbey Road and the gnarled explorer Cory Richards.

Breguet, sitting behind its own beautifully polished mahogany boardroom table, it still spearheading its narrative with the poor old Queen of Naples.

The problem, while we’re on it, isn’t so much the product, although there is a design debate here, just for another day. The problem is how it’s dressed up.

Luxury watchmaking hasn’t and won’t change, and nor will luxury watch consumers – they still want what they can’t have. But the mechanics of how you make them want it have changed.

Desirability, as marketeers call it, can’t only be generated by the product itself. Design, innovation and experience are important, but brand strategists talk of thinking beyond your category and focusing on the future as the principles of long-term growth.

And who’s doing that? A quick tour of industry websites is revealing. Patek’s ‘news’ section is a list of new products and rare handcrafts. AP’s ‘stories’ include tales of smash-hit machine Mark Ronson and the New York sculpture it’s commissioned from artist Meriem Bennani.

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Audemars Piguet is pushing the limits of contemporary watchmaking with pieces like the Royal Oak Concept Black Panther.

Breguet picks up on its tourbillon exhibitions. Vacheron on the music it produced with musical artist Benjamin Clementine. The glacier is shifting, and these examples are just the tip of the iceberg.

Again, this isn’t about today. Patek’s current operating margin is thought to be around 35 per cent. Very healthy. But will it be there in 10 years time? What about 25? The industry needs a strong Patek. Will it get one?

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Jay-Z, husband of Tiffany ambassador Beyonce, was the first celebrity to be seen in the Tiffany Blue Nautilus 5711.

This isn’t a doom-laden prediction. I’m not saying Patek’s time is up. Hell no. In fact, there are signs it may have got the memo. Last year’s green-dialled and Tiffany-blue Nautilus 5711 hype watches – not that it would ever, ever call them that – and a customer base that includes cultural needle shifters Jay-Z, Drake, Cardi B and Conor McGregor are all signs of a brand poking a toe out of a dusty chrysalis.

At Watches and Wonders, Patek released a pair of Calatravas that were introduced to me as being for a younger generation of consumers.

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Patek Philippe’s 2022 Ref. 5226G-001 Calatrava is pitched at a younger customer.

It was frankly astonishing to hear the brand talk this way, and also refreshing, exciting even. Critics lapped them up. Only a week later, in came a handsome 1/10th of a second monopusher chronograph.

For want of a better word, all this makes Patek cool again. More of the same to come?

S8pakyvp ioyykl06 robin swithinbank about the authorWe’ll soon know. But what we know already is that the watch industry is being reshaped. Not around new and old, at least not in terms of founding dates.

You can be venerable, low-volume, high-end and extremely successful – but you’re best off recognising the factors that make you desirable have moved on.

And if you haven’t figured that out by now, be warned. The clock won’t wait.

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2 Comments

  1. Stopped reading at “the watchmaker’s watchmaker”, because that is not Patek, it’s infact JLC.

  2. Interesting article – but it does not address how a brand may actually be being destroyed though it may enjoys gains in the short and mid-term

    Also, not much mention of Rolex – which, like Patek, has so far avoided jumping into pop culture – has stuck to its tried and true formula, but is achieving remarkable success

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