Zenith Goes Dark – Can Haute Horology Save the Brand? – Episode 100

0:01 And to me, this reeks of like a management consulting company coming in and saying you need to reduce costs and increase profits. This is episode 100 of Open Work, a look inside the watch industry, a podcast from Collective Horology. I'm Gabe Riley, co-founder of Collective, and I'm one of the 100 clones of Asher Rapkin, co-founder of Collective.

0:25 Collective Horology is an independent watch retailer based in Ventura, California. We carry a wide range of independent brands including including Archinaut, Garrick, David Candeau, and more. To learn more about us and check out the watches we carry, or to listen to the other 99 episodes of this podcast, visit collectiverhorology.com.

0:44 Episode 100. When we started this out, gosh, it was what, January of 2024? Not even that long ago. That's what happens when you start recording every, every week. But Yeah, man. I, the idea of getting to 100 episodes is pretty wild. Do you remember how little I wanted to do this? You didn't want to do this? I did not want to do this. Why not? You didn't think the world needed another watch pod?

1:10 Yeah. I was like, why doesn't anybody care what I think? Which is probably still true. Yeah. If, if the, the comments on Facebook especially are any indication, no, no one really cares except to remind you what a fool you are. Oh, I don't, you're a fan. I don't need to be reminded about that. 100 episodes in, you know, the, the folks on Face— why are the people on Facebook the nastiest? It's ironic because you'd think of all the platforms, you know, on, on Instagram you can have a username, on YouTube you can have a username, TikTok is anonymous.

1:41 On Facebook, people show up with their actual first and last name and a photo of them, maybe sometimes their, their partner or their child or family, whatever it might be. And then they're just so incredibly rude. But if you were to listen to that, do you ever want the show shrill? Shrill? No. Fantastic show. And there is a scene in it where the main character is a, uh, she's a journalist and she goes to find her like biggest troll and goes and knocks on her door. Oh, really? Or their door. Yeah. It's fantastic.

2:09 Well, if we were to believe, but it goes exactly the way you think it would go. Oh, well, I'm not, it could go any number of ways. Okay. Well, it goes the way I think it would usually go. All right. I'll check it out. But yeah, if we're, if we're to believe those people on Facebook, Asher, we shouldn't quit our day jobs.

2:25 No, but, but, but in all seriousness, if you haven't ever watched Shrill, you should go watch Shrill. All right. It's a good show. All right. Got nothing to do with watching. There's your cultural recommendation. Episode 100 indeed. So look, today we're going to be talking about zenith. Obviously it's in the title of the show, I would assume at this point. Not at all what we had intended for episode 100. We had a special episode of Collective planned, but don't worry, there will be an episode 101.

2:53 You can all breathe a sigh of relief now, and we'll do, we'll do that special topic for episode 101. And to some extent, actually, it's just as, if not maybe more fitting for episode 101. Episode 101. I know it was really tough telling both Jean-Claude Biver and Max Busser that we had to cut their interpretive dance from this episode. Yes. Yeah. During a factory tour of Rolex.

3:16 Yeah. Well, dude, so, so that's coming for episode 101. But that's— we make no promises about what is coming for episode 101. It's an audio medium, so you'll have to use your imagination regardless. But look, the reason why we're not doing what we had planned for episode 100 is because there was huge news out of Switzerland. We mentioned it on last week's podcast. In fact, pretty much just as soon as we finished recording that podcast, we got the news, which is Zenith is doing something kind of remarkable or extremely remarkable. And unusual, which is they're effectively suspending distribution in retail for a number of years, and they're going to reemerge. It sounds like the plan is for 2029 with a rebooted brand focusing

4:09 on a different segment of the market. The segment, at least that right now is the one that's growing, which is that $50,000 and up segment, haute horology segment. That will be interesting. There's a lot to talk about here, but maybe we just start with what exactly has happened here at Zenith, and then I'd like to talk about how we got here and what this all means, what the implications are and what the open questions are. But what exactly is the news as we understand it? Yeah, so the facts of it are also a little, I think, unusual to perhaps American listeners because the way we operate here in the United States in terms of layoffs is different than the way a lot of other places in the world operate. I might,

4:55 you know, having gone through them myself, I can say it's a lot more brutal here in the United States in many ways than it is in other countries because other countries give worker rights a much larger piece of the negotiation discussion. So what happened was Zenith, which is of course owned by Louis Vuitton Moët Hennessy, LVMH, has entered into what is called a consultation period. What a consultation period is, is essentially when a company states their intention to eliminate a portion of their workforce. And then essentially goes into a form of conversation and negotiation with the people that are potentially going to lose their jobs as part of the restructuring of that organization.

5:36 Now, I won't get into like the nitty-gritty of like, is that performative? Do things come out of it? Because to be candid with you, I don't know. I've never been part of an international workforce reduction like this. But no matter how you cut it, the intention of LVMH is to reduce the workforce of that workforce, the current workforce of Zenith dramatically.

5:56 Now, I would caution reading into that as assuming that the reduction of these 200 jobs, both in Europe and abroad, means that that will forever be the size of the company. I don't think it will, largely because they're going to— if they are going to come back in 3 years, which we'll get to in a moment, as they're discussing, they may require a significant number of support staff. If I'm speaking completely cynically, I think their calculus is probably that it will be harder to replace watchmakers and artisans than it would folks work in marketing and sales and things like that. As somebody who comes from marketing and sales, I want to rebut myself, but well, I'm trying to— part of their, their position here is they're saying like they're going to suspend,

6:40 and we can talk about what this means, retail and distribution. And so if you're stopping selling your watches at retail, you don't need to just distribute them, you don't need a sales force, you don't need the marketing behind it for a period of time. Yes. Now I have a really hard time imagining that LVMH writ large would want to let go of a significant number of watch, watch makers based in Le Locle, even though they've said that that is a place where they are going to do a staffing reduction.

7:07 To me, that, that would— that seems like a bizarre move given the shortage in watchmaking talent in the United States. And pardon me, just in the world. Yeah, well, a lot of brands have gone through a reduction in Switzerland. So Montblanc went through— also in Le Locle— went through a big reduction in workforce, including watchmakers.

7:26 Chopard went through a reduction of work in their workforce, including watchmakers. IWC went through a reduction. It was actually pretty small, but they did, I believe they did lay off watchmakers as well. So watchmakers, it's shocking to think, but watchmakers in Switzerland are losing their jobs. Yeah. And I mean, you know, look, ultimately people, I mean, despite the fact that the Swiss have a very strong social safety net, certainly relative to the United States, it's worth looking into if you've never looked at it. It's really quite eye-opening. I do think it's not unimaginable that people will do exactly what you and I did, which is look to other industries for work if it really does appear that it's difficult

8:03 to get training in your space, or they might start their own thing. I mean, who knows? But I don't want to get too far off topic on that other than to say we don't know exactly what the total reductions will look like for a few more weeks because of the nature of, of how business is done in some of these other places. Now, the theory— one note on that. Part of the reason why they won't eliminate all these watchmaking jobs is, one, you're right, there is expertise and savoir-faire, and particularly if they're going to position the brand upmarket, They need to, one, figure out how to do that and develop the products. They need the people to ultimately make them and do that as a high level, so you need to

8:40 keep them around. The other reason why is Zenith— part of the reason why Zenith is reducing their workforce is because they actually have more infrastructure on hand than they're capable of selling watches. So at its peak, the estimate I saw was that in 1999 they were doing about 50,000 units a year, and more recent estimates have been under 10,000. So they have a huge facility there, and part of what they're doing and part of way they've rationalized the brand is that they make movements for other divisions of LVMH. They make movements for Hublot, they make movements— I believe they've done movements even for like Gerald Genta and other, other brands within the LVMH portfolio. So they need people around to do that. It's not like they're

9:23 resetting the brand and the factory just stops. Like, they're still making things at Zenith even if the Zenith brand itself isn't out there being sold for a number of years. Sure. Look, I think so the operating theory of all this, and I mean, we can be theoretical about this and hypothesize whether this is true, whether this is not, I don't know.

9:47 But if we listen to what they're saying, they're basically saying that the mid-market is a very competitive space that isn't as robust as it's been in the past. So in other words, They think that that sort of, you know, $7,500 to $15,000, $16,000 market is a tough one to compete in. And look, as a retailer, I can tell you, I don't think that's, that's untrue.

10:12 It is. It's a brutal place to compete in. There's a lot of competition. There are a lot of independents in that space that are coming up that are both below, right above, or in that sweet spot that are really delivering on creativity and rarity in that space. So that's a part of it. And we'll get to, to the brand challenges and opportunities in a moment. But what they see as their opportunity is on the high end. Now, they, I think, are basing that off of the success of the Zenith GFJ, which they re-released at Watches and Wonders 2 years ago.

10:49 Yeah. So that was the 2025. Yeah. 2025. Yeah. Which, look, gorgeous watch. Won the chronometry prize at the GPHG. Well, not only that, I mean, from a purely aesthetic standpoint, it's one of the few watches that I've looked at where I'm like, the bracelet— and this was on the original platinum— the bracelet looks as good as the watch, costs about the same as the watch, and you kind of need both because they're just that good. That then led to an absolute stroke of genius that the phenomenal, kind, and just totally awesome guy— we're obviously very biased here— who runs their design, Romain Marietta, pioneered, which was these collaborations with independent watchmakers. The one, of course, that, that saw the light of day first was with Naoya Takeda.

11:30 And yeah, yeah, phenomenal watch. And I, you know, I'm sure there's other ideas that he had as well about where that was going to go. But those watches did really, really well. And, you know, Zenith has always had a high watchmaking and high complication component to their business. I mean, some of the— they do some wild stuff in the Defy line with multi-axis tourbillons, for example.

11:53 You know, so I think it's not— it's not a question of whether the potential is there for Zenith just writ large. I think it is whether Zenith can come back in the way that LVMH is looking at, like, for example, Gerald Genta or Daniel Roth, where the production is severely reduced and the price is significantly increased. Whether that will work for Zenith or not is, I don't think, a foregone conclusion one way or the other, or whether the market will still be there in 2029. I mean, part of— yeah, let's go back to, to the house of brands, you know, the Breitling house of brands. And, you know, one of the things that Georges Kern has said is like, look, right now— and Universal Genève is another example of a brand

12:46 that was rebooted upmarket— he's like, look, right now the pendulum in the watch market is swinging upmarket. You know, brands in the $50,000 and up space are growing and doing well and driving the growth and the profitability of the watch industry. But that could change. And that was part of the reason why they, they not only went upmarket with Universal Genève but then also introduced Breitling under Galley in terms of the price— Galley under Breitling, sorry, Galley under Breitling, right, in terms of price segment. It's because he is taking a long-term view of things and saying, this is where the market is moving now. But who knows where it will be in 3 years, 4 years, 5 years? We're building a house

13:24 of brands for the long term. So, you know, I think part of this, you know, the stated one, the stated reasons here, they're saying, well, you know, the reason we're in this pickle is because of flagging demand for watches holistically in Asia and the Middle East because of the Swiss exchange rates, because of the strength of the Swiss franc, and because of tariffs in the United States.

13:50 Now, every watch brand is facing those challenges, yet Zenith is the one that's sort of folding up shop. So there's a lack of, I think, and we'll talk about the history here. That's not the only thing that Zenith is facing. I mean, yeah, but this is what they're saying. These are the 3 reasons they've laid out. They've said this is what's— this is why we're in the position we're in. And that just takes a lack of accountability, frankly. All those things are truly happening, but other watch brands are growing and succeeding and clearly They're not. So that's part of it. But, you know, like that's where the global macro economy is right now, and that's not necessarily where it's gonna be in 2029.

14:31 So I think it raises the question, and to me this reeks of like a management consulting company coming in and saying, you need to reduce costs and increase profits. And it just feels, yeah, it feels like someone from McKinsey showed up stuck their finger in the air and said, oh yeah, I mean, hmm, look at this. Yeah, you know, the Swiss franc is really strong. You've got tariffs in the US, Asia is falling. The segment of the market that's growing is $50,000 and up. You guys should reposition into the $50,000 and up segment. It just feels very of the moment. And look, I mean, you know how much I love to pick on management consultants, but in this particular instance, I think there's, look, there's the— so you're defending the choice.

15:17 I'm defending the fact that something had to happen. Yes. Because like, and, and, and, and like, I struggle with this a little bit because I love Zenith. I love the watches. I love the people. And most of all, I will forever be personally indebted to them because the business that we have does not exist without them taking a flyer on us for our first collaborative watch. So yeah, we were nobody. Absolutely. And they took a flyer on us before anyone else would. So I like— the other side of it is, as somebody who's been laid off, it's really difficult for me to separate out what it feels like to be laid off from whether or not that is the right choice for a company. Yeah.

16:10 Because when you look at a situation like this, you have to evaluate it. Like, you can't just evaluate— like, part of the reason why it's fun to pick on, like, McKinsey or Boston Consulting Group or, like, you know, pick whatever circus and clown you want is that those people feel like they don't have any connection to the humanity of the moment.

16:32 And whether their recommendations are financially sound or strategically sound, they're devoid of any form of empathy and humanity. And that's part of what makes it so deeply hurtful when you know a consultant is involved. Because yes, it's easy to make fun of them in the way that we are. It's easy to say Claude could do as good of a job, like whatever. I think that's dismissive and frankly quite reductive from a point of view. Like, I'm sure there are places where management consultants have been valuable, but the one thing I think we can all agree on is that they don't give a crap about the people whose lives they ruin because that empathy has never been shown in any scenario of a major layoff one way or the other. So, well, I'll get off that.

17:15 They're also a convenient scapegoat for management. If management doesn't want to make a tough decision themselves, they can hire a management consultant and say, well, they told me to do it. But so I, all of that is to say what I'm about to say does not negate change or diminish the human cost, the human cost of this. And I cannot stress that enough. And if I were somebody who works at Zenith and was in this position and I were listening to me right now, I'd probably want to— or about what I'm about to say, I'd probably want to turn this off and throw a rocket at their computer. So, and honestly, I get it. We'll hang us— we'll hang a dartboard in the LVMH or the Zenith headquarters with your face on it. I don't think it's the people

18:00 who are still going to be there that are going to be pissed. They can borrow it from Swatch. I think it's the people who are going to be looking for a new job. Fair enough. Okay. All of that said, look, something had to give here. The brand, like when you would go into retail stores, there were too many watches in the box for Zenith.

18:17 It is no secret that Zenith watches at full retail are a deeply, like that just didn't happen. I mean, maybe there was a— I mean, GFJs, you know, notwithstanding, and some very specific limited editions aside, mostly the expectation with Zenith was a discount and a significant one at that, which brought the secondary market down to a place where, you know, the secondary values on standard Zenith production models were really quite difficult. And I suspect made selling new Zenith very challenging because, You know, people are well-informed. And if they know that a $15,000 watch can be had for $7,000, it's very, very, very difficult to close that gap on a production watch owned by a luxury holding company.

19:03 It's slightly different in the independent space, not tremendously, but slightly very different when, you know, it's a mass-produced, quote unquote, mass-produced watch by a large company, whether or not that is factually true in the process in which they are made. That is a perception that has to be fought.

19:20 I do think that that market is the case. I think that in an effort to probably make up the revenue challenges, and I'm guessing here, but I would imagine an effort to make up some of the revenue challenges they'd lost in volume, that increased the base prices. The base prices increased the delta between the secondary market and the primary. The problem made itself worse. Production then decreased.

19:43 Watches were being sold at You know, the prices they're being sold at and it becomes a death spiral for money and something has to change. Now, all that said, the brand for Zenith is beloved. Yeah. And even if you talk to like, you know, the grouchiest internet actually troll, they're still gonna tell you that Zenith is awesome. Yeah. Even if the next sentence that they come out with is some, you know, diatribe about like pricing and value and whatever. There's a ton of like just love, pent-up love for this, for this brand, these watches, the movements, the story, all of it. So, you know, for everyone who throws a stone at like, good luck with that kind of attitude about Zenith rebooting, I would like to remind

20:31 you that H. Moser& Cie existed long before Edouard Meylan came in and rebooted the brand. This is a great point. And, you know, you could be buying Moser pocket watches for pennies 15 years ago. Look where they are now. Yeah. So I think, you know, it's, again, it's very easy to dismiss this stuff and say like, they're hiding behind this or that or the other.

20:59 But the reality is if something had to give, and they've already demonstrated a little bit, through GFJ, for example, what it could look like if the brand's average price point was $50,000, $60,000, $70,000 instead of, you know, $7,000, $10,000, and $15,000, I don't think this is necessarily a bad idea.

21:19 And I'll go one step further. When I worked in media, I started working— when I was working in media, it was around the same time that YouTube was beginning to have a significant audience. So I'm thinking of when I was at like MTV, for example, in the late And at that time, like a lot of— Did you ever meet the cast of The Hills? Yes.

21:37 Oh yeah, right on. Very cool. Separate conversation. Anyway, at that point there was a lot of pirated MTV content online. Like MTV was like doing everything it could to sue the pants off of YouTube instead of taking a step back and going like, wait a minute, look at all these viewers that are here. And of course they eventually got there, you know. Oh, SNL, the same thing. They tried to shut that all down and drive people to some NBC website to and then they realized that YouTube would be the force that actually kept SNL relevant. Yeah. So my point is, like, sometimes you just have to look at behavior and accept it. And if people are lining up to pay full price for some of these Zenith pieces and you're gonna lose some of the others,

22:20 I think the calculus for them is actually an act of relative— and, you know, I don't wanna call it this way 'cause, like, I'm not a huge corporate guy fan-wise, but, like, it is kind of a brave choice from a corporate standpoint because if you think about it, like, what should MTV have done? Like in these moments, they probably should have acknowledged revenue loss in the near term for significant opportunity in the long term and gotten on that, that, that bus way earlier than they did. It took about a decade for ViacomCBS, Sheinhardt Wig Company, whatever, to actually do it. What Zenith is doing here, or LVMH is doing here, if we were to believe what they're saying, is actually a very painful thing that could potentially result in being relatively

23:00 successful and profitable down the road, which is we're going to write this down. For a couple of years. We're going to invest in R&D. We're going to spend the time, the effort, the money, and the capital, like the relationship and reputational capital to do this the right way. And if we're successful, it will bring this brand back for its 4th, 5th, 6th incarnation, whatever it is, as something completely different than what it's been for the last quarter century, but what it needs to be for the next quarter century. Now, if I were the regional sales director who just got laid off on this, I think it'd be like, yeah, whatever. I, you know, middle finger, you know, screw you. I was in the trenches for this brand for years.

23:45 I humped all around the country or wherever selling your watches, telling your story and working my butt off. And I would suspect that the, that no one, that no Arnaud is like losing, you know, a bonus or, or a distribution. No, they need to be rewarded for this. You're probably getting more for that. So, you know, so business savvy. Exactly.

24:03 So I, I totally recognize and utterly support the legitimate, I'm sure, white-hot rage of some of the employees that are suffering through this. But I think it would be irresponsible of us to not acknowledge that there was opportunity here. Let's do a little history lesson. I want to talk about how we got here. How did we get to the place where, to your point, from our perspective, you know, there's this uncanny valley between what they're asking in terms of price for the watch and what the secondary market, what the market will actually pay for them. Too many problems. That's perception.

24:40 That's not enough demand. I know, but, you know, I want to, I want to be charitable. There are other points of view out there. Well, let's clear— let's be clear when we talk about that. And we've said this many times over here to say uncanny valley. Come on, man. But this is a really important point. What a watch trades for on the secondary value is not a testament to its quality. No. And I think this is a thing— definitely not. And this is, this is something that gets, that gets confused so much when, you know, when you listen to like secondary watch, you know, traders talking on pods or whatever where they're like, that's a good watch or that's a bad watch because it trades X or trades Y. I could not disagree.

25:19 Supply and demand for that watch. A market is not the same thing as an artistic expression. Yeah. So I want to just put that out there. But okay. So uncanny valley, please. Continue. How did we get— how did we get to this? How did we get here? Okay, and I don't want to go through the whole history of Zenith because you're— to your point, this is a storied brand that has a— has an extremely rich history, has a— has an attic full of decades and maybe even a century-plus of horological treasures.

25:47 There's always something in that attic. Thank God LVMH is sustaining that attic and keeping it alive. But I want to talk about the 27 years of LVMH ownership and management of the brand. They acquired the brand in 1999 from Dixie. So this was a Swiss industrial group, was associated with Paul Costella.

26:05 He was really kind of viewed as like the guy who kind of owned and ran Zenith. So they acquired the brand from him. I've seen some numbers that said in 1999, around that time, they were doing about 50,000 watches a year. It's hard to, to get data on all of this stuff because the company was essentially private at that time, and then it becomes part of a big holding company and they don't exactly share all the numbers, blah blah blah. But suffice it to say, we know that the manufacturer a little lock has a capability of producing tens of thousands of watches and movements a year.

26:37 Then the brand goes through CEO after CEO after CEO. So Thierry Nataf leads the brand actually for about 8 years at the beginning, 2001 to 2009. Then Jean-Frédéric Dufour, now CEO of Rolex, runs the brand from 2009 to 2014. Aldo Magada is there. He runs the brand for about 3 years. Then Jean-Claude Biver, if you remember when he was kind of running the watchmaking division of LVMH. He stepped into the void at Zenith, and he, during Zenith's tenure at LVMH, when he was at LVMH, and so that would have been, I guess, 2003 or so when he joined LVMH, you know, he was really viewed as sort of kind of modernizing the brand, or some people would say Hublotifying the brand, and really introduced a lot around the updated

27:26 Defy collection. But even Thierry Nataf was known when he was at the brand, which which just preceded Biver for colors and big watches and things like that. But this was clearly a brand product-wise trying to find its footing. And then it really does under the next era. So after Jean-Claude Biver's interim time period in 2017, Julien Tournare becomes CEO of the brand in 2017. And the brand really starts to find its footing. It finds a voice in its product. You know, Romain Marietta becomes the chief product officer. Design becomes a really clear hallmark of the brand and something that they're known for— interesting collaborations, very graphical watches. And they also really clean up under Tornayre's time distribution.

28:16 So he takes the brand in 2017 from about 850 retailers— geez— down to 550 by 2022. So a lot of people think about Tornayre's time at Zenith as like a turnaround of the brand, a growth of the brand. And I think in the mind of the collectors, Zenith really started to have some mojo. They had a number of product hits and the brand was ascendant. However, on the retail side, they're cleaning it up, they're tightening it up, they're focusing. Those aren't mutually exclusive. Yeah, no, they're not. In fact, they might even be required.

28:49 Exactly. So, you know, I think people, you tend to think of Tornier's time period there as a time of expansion, but in terms of just retail footprint, it was a retraction. And under, under his his reign, they do really well. So for instance, and I want to talk about this time period, but by 2022, you— they're doing about 24,000 watches a year. So that's a big cry from where they are now. The last estimate from Morgan Stanley for 2025 was that they were doing 8,500 watches a year. So 500— yes.

29:25 So in a period of 3 years, so in 2022, they say they're doing about 24,000 watches, and then just 3 years later, the estimate is that they're doing 8,500. The brand and the demand for the demand, the demand for the brand, if you're to believe the reporting, absolutely collapses. Now, but before that happened, Tornayre in 2023, he moves on within the LVMH Group. He's at Hublot now. And so, you know, they have a new CEO. So Benoît Declercq, he comes over from Panerai and Richemont Group to run, to run Zenith. And of course, under his leadership now, the brand is is repositioning.

30:06 But think about, think about the tear that Zenith was on. And, you know, basically COVID is almost just like this, this mountain that they scale and then fall down. So the brand has this mojo under Tornaire. It rises to this level in 2022 and then absolutely collapses. I think part of what happened here, and yes, Tornaire deserves a lot of credit for cleaning up distribution, for working with Romain on great products and really leading with design as a hallmark of the brand. But I think COVID papered over a lot of the trouble in paradise because during the COVID period, all watches sold. I mean, all ships rised in watch collecting. Yes, rised. Oh, all ships, right? All ships rose in watch collecting during

30:55 COVID Yeah. Hey, it's Gabe. Now, if for some reason you find yourself wondering what you can do to support Open Work and the good folks at Collect Horology. You can of course pick up an independent watch or maybe some merch at collectivehorology.com, but really the number one thing you can do to support us if you're enjoying the podcast is give us a rate and review on your podcast player of choice. That just goes a long way to helping the right audience find this show. And while you're at it, you can check out and please subscribe to our YouTube channel where we got hundreds of videos on independent watches and of course on the business of watches. Thanks so much, of course, for listening and for your support. We hugely appreciate it. We never take it

31:41 for granted. Let's get back to the show. You know, we talk all the time about, of course, the Rolexes, APs, and Pateks, and that's true, but the whole market did really well, and I think it's papered over some structural things there, actually, because— so what changed? Well, okay, so 2 things. One, Sure, yes, you can't discount the COVID effect.

32:00 Absolutely right. But that was also a period at Zenith of intense risk-taking and creativity. That's when we saw the Chromatic Defies. Did those really sell in quantity? Yeah, those were backordered forever. That's when the Chronomaster Sport was released to incredible success. Well, wasn't that kind of COVID It looks like a Daytona. Listen, my point is the right product for the— it was the right product for the time.

32:29 And also within those lines, there was a lot of creative exploration that ultimately led, I think, to part of what bolstered the brand. And as you and I well know, those products were in development long before COVID Yeah, but dude, I think I agree with you. I want to separate out, as you did before, creative risk-taking and good product and things like that from actual commercial success. Those are two different— well, those things were both.

32:56 What happens, I think around '22 to '23, are a couple things happen, right? The rug gets pulled out from the industry. This happens to everybody. It's not just Zenith, right? And some people are left without a chair. And then we start seeing the problem begin to snowball. Now our production estimates are wrong. Suddenly our suppliers have caught up and now it's time to buy. You know, the 5,000 cases for Chronomaster Sports that we ordered, even though if we had our choices right now, we probably would have only ordered 2,000 or something, you know. So in 2023, just to put numbers behind it, management at Zenith said they were targeting an annual increase in production of 10 to 15%. So they were producing more,

33:42 or planning to at least produce more watches, while the market for their watches, according to the numbers we're looking at, was collapsing underneath them, right? Right. So, and then of course they get hit with, you know, all the stuff that happened in 2025 that has caused a significant amount of misery to the industry in general. So look, to a certain degree, it's like, you know, you gotta have a little bit of— wow, I really am saying all the things that will irritate people who are struggling here, but you have to have a little bit of empathy for Benoit Clerc because like he's operating against decisions that he probably was, you know, he came in to catch a falling knife. And he sure did.

34:19 However, I don't know what could have been done differently here that would not have involved a closing of even more doors and a reduction of production even further, which is essentially what they're doing. Yeah. You know, and repositioning, like you, you kind of have to, because if we're talking about a company of hundreds of people globally, I mean, the money's got to come from somewhere.

34:46 And, you know, I think when you look at the rest of the, of the field at LVMH, excluding the sort of, you know, haute horology projects like Daniel Roth and Gerald Genta, when you look at like Bulgari, they've done a pretty good job of identifying the market segment they're going to speak to and really like hammering away at that.

35:05 About TAG Heuer, because they're— I'll get to TAG in a second. You know, same, same situation I would argue with, with Hublot. Yeah. You know, like they, they, they're not talking to watch enthusiasts. They got their own thing going and they're just cranking. TAG, TAG is a different beast because as much as TAG wants enthusiasts to think about them in one way, the reality of that business is, you know, airport vacation and the rest shopping.

35:33 It's a mass luxury. It's a mass luxury. You know, and I think with that one, it's like you can kind of make up the difference because you have so many doors and so many different points of sale in terms of type, you know, and so many different price points and so many different products that like you have, you have a much bigger palette with which to paint.

35:51 Like TAG is interesting in the sense that like they can release a $2,000 quartz throwback watch that both enthusiasts and mainstream folks are like, okay, you know, and you can just, you can just like unleash the production firehose on that thing because for, for not everyone, but for a vast majority of the watch collecting community, $2,000 is a very modest price for a collectible watch, quote unquote collectible watch. And I think for other folks, you know, for, for like normies who are not watch collectors, $2,000 is like not an inconceivable amount of money to spend on a quote nice watch as defined by the brand, not necessarily something to aspire to as a watch. Yeah, it's reasonable. I mean, that's approximately what you spent 10,

36:33 20 years ago on an Aquaracer that you bought off Amazon. Yeah, you know, and that was a watch that you were really proud to own and should have been because it was not a bad watch. So I think, I think TAG had, you know, and they can do that while focusing on different corners of the market and being successful in that regard. So TAG has a lot more levers to pull than Zenith. There is no $2,000 Zenith.

36:54 Yeah, that's not possible, you know. And a $100,000 Zenith, it seems crazy without a GFJ there to start to edge it up. So Zenith operates in a much more narrow bandwidth than the other brands inside the portfolio that make watches. Even Louis Vuitton has a lot more flexibility in the watches that they can make and release than that Zenith does.

37:16 So Zenith is a much harder brand to manage, to run, to execute, and to grow than anything else inside the stable. So let me ask you this. Let's assume— and again, these are estimates, it's hard to get these numbers, blah blah blah blah blah— but let's say they were at the height of COVID they're doing somewhere between 20,000 to 24,000— 20,000 to 24,000 watches a year. Yeah. And it, and it falls below 10,000.

37:42 What do you, what do you attribute that to? I mean, if it wasn't kind of the rising tide and the retreat of COVID watch frenzy, and let's say like we can say some of it is sure demand in Asia or the Middle East, let's say some of it yes is due to the Swiss franc, let's say some of it is, is due to tariffs. Other brands are telling us that, you know, I think, I think, I think the case shape decline economy kicks in here too. I mean, look, go back to one of our favorite phrases from Nicholas Bowman Scargill, right? Nobody saves to buy a Rolls-Royce, which is to say, if you occupy that as a brand, if you occupy that space between $7K to $15K as your average price point, for the majority of people who are buying things like that,

38:24 myself included, it is a considered purchase that you save for and you're buying. And if you're looking at that and your inputs are, I don't need to spend this much, as we talked about with the secondary, or I may not be willing to or able allocate that money to a purchase like this anymore because $15,000 is a couple of months saving, you know, me saving up, or a couple, or even you have a year of me saving to get there. Is this really what I want to spend my money on? That is, you know, versus like the new HVAC for the house or a vacation or whatever else might be a family priority. That's part of why this is such a tough market to compete in. When you go to a $50,000, $60,000, $70,000, $100,000 watch, nobody's making a choice there.

39:04 About what they're doing. That's not what I'm asking. I'm saying, why is Zenith suffering in this context disproportionate to its competitors? Because it's— because of the point I made earlier, which is that operates in a much narrower bandwidth. Let me give you a counterfactual here. Yeah, Breitling.

39:19 Sure. Okay, another famous legendary chronograph brand occupies a similar price point, a price segment. Okay, I get, I get beaten down for saying price point for some reason. Price segment. They are, they're in a similar part of the market, similar you know, brand strength, prestige, all that sort of stuff as Zenith, blah, blah, blah, blah, blah.

39:40 Their sales haven't fallen. And because I don't think they're an accurate— I don't think they're an accurate comparison to Zenith. They're an accurate comparison to TAG Heuer. I mean, if you think about the— and I know they don't make this watch anymore, but if you think about like Breitling, Breitling has and sold— actually, I take that back. I was thinking of like the Colt from Breitling a couple of years ago, but they still have the Endurance. The Endurance is a $3,200 watch.

40:04 It's a meca-quartz $3,200 watch. So my point is— and Breitling goes all the way up into the 6 figures too. But Breitling— hang on, Breitling has more levers. Yeah, but the business under Zenith absolutely collapsed. What do you think is unique about— well, first of all, Breitling isn't doing gangbusters right now. No, no, no, no, I know that. A lot of brands in this segment aren't. It's the toughest segment, but none of them have seen their sales deteriorate rate as aggressively in the way that Zenith has. But to go from 24,000 watches to 800— 8,500 watches in a period of 3 years, that is, if those numbers are to be believed, that is absolutely a mind-boggling deceleration.

40:45 But my argument there would be that Breitling is a mass-market luxury brand. Zenith was a boutique or is a boutique luxury brand. They're not the same. Got it. So they're between a rock and a hard place. Totally. Breitling has a lot more flexibility for what they can away with at a much lower price point than Zenith.

41:05 So Zenith doesn't have the flexibility of an independent brand to pivot and move and adjust, and they don't have the scale of a major luxury brand and the— and to be able to move product or help them, and then also adjust product into segments that are winning. They're interesting. Okay, so that, that's what I'm saying. Like, it's a very, very— like, it's a tough needle to thread for them.

41:28 Because of how idiosyncratic a brand Zenith is. But they tried so many things. So like, like, I think to some extent part of what I saw going on with Zenith for the last few years was like throwing spaghetti at a wall. Like, the— let's take the example of the most recent watch they released. I believe it's got an El Primero time-only movement. The diver-not diver.

41:50 The diver-not diver with the rotating bezel. It's like, to me, that watch reeked of like, we're trying to figure out something here that would work. We're trying to see if we can get some flexibility to move into another segment. You know, it's a time-only watch. It will be less expensive than a chronograph, but it's still interesting because it's a Zenith and it's straightforward. It kind of looks like a Submariner the same way the kind of the Chronomaster Sport kind of looked like a Daytona. Maybe that, you know, maybe lightning will strike twice there. So that would be the very latest example, but it seemed like they were trying things from a product standpoint point to try to find those levers that you're, you're discussing, like giving themselves more

42:30 options, giving themselves a bit more product diversity. There— I thought their rebooted, uh, Pilot watches were really good. They took that collection from a place that what I didn't think was particularly compelling to some really nice watches. They were trying to make it work, but nothing's— nothing seemed to stick because, like I said, again, they are operating in a very narrow bandwidth. If you were trying to open up their bandwidth— yes, I understand that, but the thing is, in order for that to work, like a consumer has to be open to that possibility. And let's talk about how watch enthusiasts often look at it, right? We— there are these, these two competing pressures, this, this hope and desire for ingenuity

43:12 and creativity from the brands that they love. And then this feeling of like, but stay in your lane, you know? Yeah. And like, we want you to be the El Primero brand. Think of it like There are segments of people out there who look at things like the Cartier Dumont watches and like feverishly defend them as pilots' watches because there is a, you know, connection to early aviation that's over 100 years old, even though by any modern definition of a pilot's watch, it doesn't fit the trope.

43:49 But that's the, like, permission structure that helps create, like, the value in that watch. So somebody be like, oh, it's a dress watch, but it also comes with this, like, heritage of, like, early tool and blah, blah, blah. That permission structure is very valuable. Yeah. Yeah. And when you think about Zenith, there's not a lot— like, the permission structure there is very narrow.

44:10 Like, think of it like this. Remember with the Chronomaster Sport how many people ragged on it for looking like a Daytona and, like, claiming, like Zenith had no claim to Daytonas at all, which of course is like factually ridiculous given the history there. And how many watches borrow from each other and even the shape. Sure. But my point is like, there were, there were no Daytonas without Zenith for a very significant period of time. So saying that they're biting off the Daytona, but that the Daytona wasn't biting off the El Primero.

44:45 Is a little bit of a ridiculous statement, but what it demonstrates is that Zenith's permission structure was very narrow. Yeah. And, you know, I think in those— like, when you talk about the Pilot Watch relaunch, was it awesome? Yeah, man. That Porter Yoshida piece they did was totally cool. Oh, that green ceramic piece was totally cool. But I guarantee you there were collectors who were looking at it and being like, if I'm gonna cross-shop this with an IWC Mark XX or something, or, you know, one of the ceramic pieces or whatever, whatever, they're going to see Top Gun fighter pilot squadron watch from IWC and not from Zenith.

45:24 Yeah, don't forget the dive watches. And they had, they had history there with the, the Plongeurs from the 1970s. But yeah, do you see what I'm saying though? Immediately compare the Zenith Defy diver to an Omega Seamaster and a Submariner, right? So if we go— tough, it is. Now if we go back to what they want to do with the brand, end. Part of what I think the opportunity here is, when we talk about themselves out of all those mid-market comparisons, you— they can stop being compared to an Omega and a Rolex. There you go.

45:52 If they— if they're basically— it can just be them, right? So if you say like, fine, whatever, whoop, I'm gonna do this now, are you gonna lose a bunch of people who are like gonna point fingers at you? Totally will. But the calculus of LVMH is whatever, you know what I mean? So I think that's a tough pill to swallow for a lot of collectors who, you know, really love this era of Zenith.

46:18 But the other way to look at it is like, look, brands go through eras. And, and, you know, like, ironically, I suspect that this will actually create a near-term bump in Zenith sales as people are like, last call, right? Exactly. And, you know, so I think that— and that might be a little bit of, you know, of like a last sign of life in a sense where people, and I hope they don't misread that as like people racing out to go get something. It's like, oh my God, did we make a mistake? Like, no, I don't think that's what's happening there. I think it's like nothing is more appealing to a collector community of any variety than scarcity and termination.

46:54 But I do think getting rid of the lack of a permission structure is going to help them in the long run. So let's close on this. You just brought this up, which is there are a bunch of Zenith watches out there. So first thing, there are people who own Zenith watches now, they're gonna need them serviced. And fortunately, LVMH— Zenith has said that they're going to service those, they're gonna service those watches.

47:17 They have the service— LVMH has the service center infrastructure to handle that. And Zenith's not going anywhere either as a movement manufacturer, so they'll continue to support all the parts and the components needed to service their watches. There's that. But then there's all the watches out there in the world that are unsold. They're sitting in retailer displays and safes. They're probably sitting in LVMH's various warehouses and staging points around, around the world, things like that. There are watches that rolled off the production line, presumably because of this consultation period you mentioned. The factory is still working there. They may even still— I'm sure, I'm sure, I'm sure there's projects

47:53 that were going to launch in the next 3 to 5 months that are probably staged, and to your point, ready to go, maybe even had media buys associated with them. Who knows? So what happened happens to all of the watches that are out there in the wild sitting at retailers or wherever they're supposed to go? And I think one question is like, what are the retailers going to do now? You know, you've presumed if you're a Zenith retailer and it's an important brand to your store, you've invested over the years obviously in stocking the brand, buying the inventory.

48:22 But also you probably have tens, if not up to 100 units in stock. You've also built out, you know, you have a section of your store you spent tens of thousands of dollars or more to build out with displays and signage, and you can't just shut that down. You have this black hole in your store. Is, you know, are they gonna just fire sale these watches? Is LVMH gonna go through the effort of buying them back? So I think there's— what happens? There's a couple things to look at that. One is the actual agreement between a retailer and LVMH.

48:51 And I obviously, I'm not an LVMH retailer, so I don't know, but I would have to imagine that those contracts are written the way they tend to be written, which is basically LVMH is in control of every everything but carries no liability or, and is fully indemnified against any sort of loss in this kind of way. And oftentimes it's well within their right to just shut the brand down. And yeah, but of course, yeah, but I can almost assure you that they have much more control over the retailer because that, you know, honestly, a lot of people just sign these agreements and they don't think about them because they don't realize they may or may not be negotiable because usually when these things are signed, it's when a brand is in an ascending position,

49:27 not a descending position. And it's, this is the agreement, sign it or don't. You know, so all of that to say, like, could a retailer turn around and be like, I need to recoup my costs for this build-out or this or the other thing? From a legal standpoint, I would be surprised if there was space in their agreement with LVMH for that to happen.

49:45 That's the legal side of it. But there's also the watches themselves. Hang on, I'm getting there. And to be clear, I don't know. I've not seen that agreement. I cannot speak to it. This is pure conjecture based on other agreements we've seen. And from other major companies? The inventory is a trickier question because it also depends on is that retailer in business with LVMH on other brands? So think about it like this. If I'm in business with LVMH on Bulgari and TAG Heuer and now I'm, you know, I'm getting screwed by Zenith, there is more of an incentive for LVMH to want to do something to help because if I were that retailer, I'd be like, I'm not going to buy more watches from you here when I've got $400,000, $500,000 of deadstock inventory there.

50:32 So basically— And the retailer also doesn't want to fire sale them either because they have to worry about their relationship with the other brands in the stable. Correct. So they got to do something, right? Which is— and I mean, look, what are the choices a retailer has? The choices a retailer has is to— the best one is to get a buyback. But, you know, who knows if LVMH will do that? Second best choice would be if they— well, let me rephrase that.

50:54 The absolute best choice would be sell them all at full retail. Yeah. Okay. Barring that, a buyback, barring that, and understanding with the brand that they're going to sell the watches for whatever they have to sell them for. My guess is sell the watches for whatever you have to sell them for is probably going to be the answer, is my guess. What do you think would make sense for the brand to say, look, you're going to have a sell-down period, sell the watches, and then there's a buyback after 90 days or something? Like, because they also have to think about winding down the displays and things like that in their store, moving into different brands and all that. I think that there's a low likelihood

51:32 of LVMH doing that because LVMH doesn't have to do that. And when corporations don't have to do things like that, they tend not to. Yeah, but the devil's advocate, yeah, devil's advocate to that would be the devil's uncanny valley. The devil's uncanny valley of the Diablo is They're trying to position this brand ultimately upmarket and high-end and going out with a fire sale right now doesn't help them. Think about what Cartier did. The McKinsey clown who's sitting there will tell you it doesn't matter because the clients that are going to be looking for a 50% off deal on a Chronomaster Sport aren't going to be the guys who are buying your GFJs. Yeah. But I guess here's the way I think about, you know, I recently reread Kitchen Confidence.

52:17 The old Anthony Bourdain tell-all. Actually, I listened to the audiobook version of it because I— did he read it? I had read the book before, listened to the audiobook because he reads the audiobook. And it's just— I love that guy's voice. Yeah, it's great. It's fantastic. Go ahead. And so he talked about the stink of death on a restaurant, and it's less clear to customers of the restaurant. So the analogy doesn't quite hold, but to people who work in a restaurant, the second restaurants start doing like specials, like, you know, early bird dinner specials or, you know, changing the menu constantly or things like that, the people working at the restaurant start jumping ship because that's the stink of death. They know that is a business that

53:04 is foundering and they need to get the heck out of there, like rats scurrying off the ship. And I think the same thing is true if you put these watches on fire sale and people's last memory of Zenith is that these watches were just discounted, you know, it was the soup of the day and they were flooded on Jomashop and places like this. And the residual values are— it's like it makes the brand less desirable to everyone. Part of buying a Zenith upmarket when they're, when they're up at $50,000 and up is the desirability. Think of the brands that trade there. They all project prestige, desirability. You can't have it. And so for the brand, the last memory of the brand to be the fire sale and the stink of death, I don't think helps them get

53:54 customers back. It's a possibility, but I mean, look, man, you could buy Gerald Genta jump hours for nothing 7 to 10 years ago. You could buy Daniel Roth not for nothing, but nobody really was paying attention to it but for a very core group of cognoscenti. And the trade— and most of those Daniel Roths were trading even the chronographs for $10,000 or less. You know, a few years ago, and I'm sure those were all blown out when, when those brands closed too. You're not wrong because that is absolutely a thing that could happen. I'm just saying I don't think it's a foregone conclusion if, if that's what happens now. Well, the other, the other thing is Cartier, of course, famously did a huge buyback about 10 years ago, and that was for them to

54:36 reset that brand. No, not the brand, to reset the watchmaking of the brand. I think there's a distinction with Cartier, which is that Cartier is a high jewelry brand. Brand that makes watches, and watches are a meaningful part of their revenue but not the entirety of their revenue, versus Zenith, the number 2 watch brand by revenue in the world now.

54:55 Yeah, but I, but at that time, I feel like the buyback was a chess move that helped get them there. Yeah, yeah, but I'm not, I'm not disputing that it was the right choice. It was. But my point is, for them, there was other stuff at stake at that moment other than just the watch business. I see what you're saying. You know what I'm saying?

55:10 Because like, if you, if, if a Cartier— what if, if you walk into a Cartier boutique, right, and like some Panthère piece of jewelry is $50,000 and then next to it is a, you know, a Santos at 50% off, you're really screwing yourself on, on the jewelry. Yeah. Okay. All right. So I think, I think that, and they make way more jewelry and various other sundry stuff than watches, at least at that point in time.

55:35 Yeah. So I think, I think there, I don't think it's an apples-to-apples thing. I think honestly the Gerald Genta or the, you know, Alain Silberstein's another example of this, you know, like brands that like petered out and did not— they didn't, you know, just— they were, for whatever reason, they went out but then came back for a sec. Do you think anybody who was looking at that Alain Silberstein Resonance collab, that awesome grail watch that, that Waco did, and was like, well, Alain Silberstein's secondary value on the market 15 years ago was garbage? Yeah. Yeah. No, maybe that's why they're saying they're going to take 3 years, is it gives the market enough time to metabolize all that dead stock and clear it out and move on, and then they

56:14 can come back in when it's gone. Well, here's the other way to look at it. 3, like the 3 years, dude, they could be back next year. They could be back 10 years from now. They could never come back. Well, they've set, they've set 2029 as a, as the date to reintroduce the brand. Oh yeah. Yeah. But are they contractually obligated? Yeah, that's what I'm saying. I mean, I, I, I would say like, again, going back to the Swiss labor law things, there are unions involved and things like that. They probably do need to have some kind of timeline for this cuz it, they can't operate the business as freely and easily as if they were domiciled in a in another country with more liberal labor laws.

56:53 But who knows? I mean, I do want to go back to your point that all told, look, this is an act of bravery. It's easy for us to sit here on this podcast and for other people to share their opinions about how they got here, what they could have done differently, what they should do now. And talk is really cheap. And so often on this podcast, one of our— I think our biggest complaints about the watch industry and the business of watches is that a lot of brands and businesses just do nothing. You know, they watch their businesses erode, they get complacent, they take too long to make decisions, they don't make decisions that are, that are really bold and decisive.

57:38 And I do think you're right that LVMH here, I think, deserves credit for, in my opinion, for 2 things. One is for doing something about it. Yeah. You know, like I think a lot of other businesses and brands within major holding companies in similar situations would just sort of stick their head in the sand or sell it or sell it. And that's the other point I think they deserve credit for is I do think it would've been easy for them to sell it, but they've decided that this is a brand worth saving and they're trying to figure out how to do that and how to preserve it and make sure it's around.

58:12 Now, whether or not they execute it flawlessly, who knows? But I do think, all things being equal here, the intentions are probably in the right place, and they have a heck of a brand and incredible watchmaking on their side. So I really do hope it works out. Shall we leave it there? We'll leave it there. Well, thank you so much for listening. Open Work is of course a production of Collective Horology. You can find us online at collectivehorology.com.

58:43 You won't find any Zenith watches, but you will find watches from over 20 independent watchmakers there. And please do get in touch, send us your feedback, your questions. How would you manage this situation differently? Let us know. And to do that, you can email podcast@collectivehorology.com. Live from Ventura, it's episode 100.