After surprising the Swiss watch industry by building Frederique Constant to a power with over 100,000 pieces in annual production based on classic design at affordable price points, former Phillips product manager and Dutch national Peter Stas and his wife, and partner, Aletta have big plans in the sports watch category with Alpina. And they are now entering haute horology as the backers of just-launched Ateliers deMonaco where the opening price point is approximately $88,000. Recently Dr Stas sat down with Elite Traveler President and Editor-in-Chief, Douglas Gollan, in Frederique Constant’s Geneva headquarters to talk about his newest endeavor, how he made the transition from electronics and how his privately held company intends to meet the challenges of the day.
ET: How is business at the moment?
Peter Stas: Things are moving. For the second quarter we’ll be doing the same as last year, which is an improvement from the first quarter. We introduced a lot of new models and that is helping, but I’m not convinced it’s over. There are some good signs from the U.S. such as the stock exchange is up, unemployment growth has slowed, and when I speak with friends in other industries, they see some pick-up. We were profitable in April, and we should be profitable for the year.
ET: What was your background before starting Frederique Constant?
Peter Stas: I used to work for Phillips. I was the first general manager for accessories—headphones, microphones, all the things they let a young product manager work on. But Aletta and I always had a passion for watches. We were young and we liked watches, but mechanical watches were always very expensive, so we thought there must be a possibility for a classic watch at an accessible price. We started designing watches on PCs, which was unusual back in the late 80s, and we designed six prototypes over a two year period. Then, I took a week of vacation and we went to a luxury fair in Hong Kong with a nice pricing sheet, and a Japanese wholesaler bought 350 pieces. So I went back and resigned from Phillips and that was the start of the company, and that customer is still a customer today.
ET: How did the Swiss watch industry view two Dutch nationals coming in and offering classic Swiss watches at affordable price points?
Peter Stas: Initially we were not taken seriously at all. It was “very nice, bye bye.” Eventually they saw us as a good entry-level to attract a younger consumer to mechanical watches and we created excitement for the category.
ET: Where did the name Frederique Constant come from?
Peter Stas: Frederique is Aletta’s second name and Constant is my second name. It was a tradition in our families to keep these second names as they were the first names of our great-grandparents. Constant Stas founded his lithography company in 1904, and also making clock dials, so there was a historic link.
ET: Tell us about Alpina?
Peter Stas: We kept getting a lot of requests from distributors for a sports watch, but we believed we needed to keep Frederique Constant consistent as it is known for classical watches. We purchased Alpina in 2002. At one point Alpina was nearly as big as Tag Heuer and Breitling, but when we bought it, there were only three people there. So we really bought its heritage of sports watch designs. We positioned the company strategically around sports and lifestyle, but again as accessible luxury, and clearly differentiated it from Frederique Constant. We have continued to introduce new models, including in 2005 the Regulator, and in 2006 the Regulator Extreme, and now even a tourbillon. Our production today is 8,000 pieces annually and we believe we can grow to 50,000 in the mid-term, say in three to five years.
ET: Have you considered a higher-end brand?
Peter Stas: That is what the meeting I was just in was about. We have just very quietly launched Ateliers deMonaco. We are the largest shareholder and we have provided the tourbillon technology. Our partners are a young watchmaker who previously worked for Patek Philippe and a marketing person who comes from Procter & Gamble. The business will be independent and run separately from Monaco. It will be a larger watch with a modular case, based on titanium with gold attachments. We are using the same case maker as Richard Mille and Vacheron Constantin, and using high quality materials, such as black onyx for the dial, which is very beautiful. The design is inspired by Monaco, which as you know has been the inspiration for great artists such as Picasso, Chagall and writers such as Hemingway. We’ll combine the design inspiration with the high technology and craftsmanship of Swiss watchmaking, and we think it will be very special. In our first year we will make about 30 pieces, all limited editions and the goal is to grow to no more than 150 pieces a year, with an entry price point at 88,000 Swiss francs.
ET: What do you see for the future?
Peter Stas: If you are talking about the immediate future, the goal is to get through this year and 2010; I think it will continue to be difficult times. Right now the retailers have too much stock, and I don’t think that is going to get better before the second half of 2010. Shops have such a heavy burden of inventory, but we are getting our finger behind it, and focusing them on the best sellers. We know our watches sell, so we are guiding them to order the ones which they know will sell, but it is still a difficult process.
In the longer term, the company is 95 percent owned by me and my wife, and the only debt we have is the mortgage on this building (our headquarters), so we don’t have banks chasing us down for repayment.
Of course there is always the question of selling and being part of something larger, but the question is for what? First of all, we both like what we do. We have a very nice house. We have two cars. We go on vacation where we want. What are we going to do with more? At the same time, we have two children, 12 and eight, so if they are interested in getting into the business, that would be great, and if not, we can always sell.
ET: Many watch companies have collections that cover classical, sport, high complications and so forth. However, you’ve chosen to have a brand for each. Why?
Peter Stas: I think everyone went totally crazy. You see classical brands launching sports watches and sport watch brands launching classical watches. There was no brand cohesion in my opinion. And everybody was increasing prices 20 to 30 percent per year, which when the times were good, maybe you could get away with it. I’ve always believed a brand has to be consistent and that’s the way we have built the company.
ET: Were there any lessons you’ve learned starting a company from scratch?
Peter Stas: One of our breakthroughs in 1994 was called the Heartbeat. Making a mechanical watch was more expensive than quartz, but the only way to see the movement was to have an open case in the back at that point. We opened the main plate at the balance wheel and then created an opening on the dial so you could look inside. It was a huge hit and really launched us, but the lesson we learned was there were only six of us in the room, and no lawyers, so we didn’t patent or copyright anything. Within six months, there were at least a half dozen companies that had copied us.
ET: Do you have any advice for fellow business owners in the current environment?
Peter Stas: Try to look at all of your processes and see where you can innovate, whether if through marketing, public relations, manufacturing, etc. You have to be creative, and you don’t necessarily have to spend money, but look to do things your competitors are not doing. And of course, you need to have a healthy dose of cost-cutting, but make sure that you keep the focus on innovation, and prepare for the good times to come.