Mumbai: Jean-Christophe Babin, president and chief executive officer of luxury sports watch maker TAG Heuer SA, said in an interview that the firm is growing at double digits in India despite the slowdown as it focused more on smaller cities. And with the economy recovering, the firm, part of Paris-based LVMH Moet Hennessy-Louis Vuitton SA, or LVMH, the maker of Dior watches and Krug champagne, will increase its marketing budget by around 30%. Edited excerpts:
Globally, within the LVMH group, wines and spirits, and watches and jewellery are two divisions that have performed very badly. Where does TAG Heuer feature in the scheme of things?
If you look at businesses that LVMH is operating, the watch industry has been the worst-hit by the recession. If you look at the official statistics for Swiss exports, the reports for the first eight months of the year declined close to 26%. It has almost been more than 12 months that the watch industry has been losing ground at a pretty rapid rate—minus 25%, if the statistic is correct, it is a lot.
Time check: President and CEO Tag Heuer Jean-Christophe Babin. Abhijit Bhatlekar / Mint
This doesn’t mean TAG Heuer is at minus 25%; we are doing better than that! We are declining in the US, in Japan, because the crisis in those markets has been so bad at the consumer level with the credit crunch and unemployment. But there are countries where we are growing and India is one of them.
In India, TAG Heuer reported a significant drop in sales, with practically no sale in metro cities, which accounts for 60% of all your sales.
Mumbai is the heart of the financial community in India. Obviously, with what happened in banking, the first half of the year has been pretty hard. Delhi reacted differently; you can’t really compare metros. So just by shifting efforts, or by adding more to secondary cities when things were tough in Mumbai, we were able to develop these secondary cities.
Our growth this year is still double-digit; it is indeed less than last year because of the first half of the year.
So we probably won’t grow as much as 2008 in 2009 but we will still grow double-digit and outperform most of the industry.
We didn’t slow down our investment base, and as a result, have continued to gain market share in India. And because the economy is coming back, we will be putting more resources this year, close to 30% over what we spent last year.
Having worked with P&G (Procter and Gamble Co.), do you think it’s time for luxury brands to adopt a similar strategy that focuses on factors such as cost and value for money?
Your point is very valid for many luxury brands…they have to rethink their price. It’s a question that TAG Heuer has answered since ages.
The company has always been price conscious in a way where value for money has been built into our DNA. And by this, I don’t mean being cheap; it means that for Rs40,000, for Rs1 lakh or Rs4 lakh, to deliver the best product or service versus any competitors in that price range.
Are you worried about the potential loss of the aspiring middle class, which is saving more than ever today?
In India today, probably 10 million people can afford luxury watches, which is really the upper, upper-middle class. We are targeting 5-10 million people in India, who are not necessarily rich but are wealthy enough, and usually top business executives.