Swatch and Tiffany Ink Strategic Alliance

The Swatch Group and Tiffany & Co. have signed a 20-year strategic alliance allowing the Swiss behemoth to manufacture and market watches for the Fifth Avenue luxury label.

Under the agreements, Swatch Group will create a Swiss-based watch-making company, authorized to use Tiffany’s trademarks. Exact terms were not made available, but Tiffany will take an undisclosed share in the new watch company’s before-tax profits; and hold one seat on its board of five directors, and seats on both the product design and marketing committees. Swatch Group will wholly own the new company.

The term of the agreement is 20 years, with an option to extend the partnership for an additional decade. Swatch has made clear it will produce a full line of Tiffany & Co. watches, all made in Switzerland. Many of the watch designs for which Tiffany is noted will be continued and new designs will be added.

“Swatch Group is the best conceivable strategic partner for Tiffany’s long-planned re-entry into watch distribution. It is the leader in the high-end watch business with unparalleled distribution capabilities and experience in the luxury segment of the watch business,” said Tiffany’s CEO and Chairman Michael J. Kowalski in a release.

Nicolas Hayek Jr., chairman and founder of the Swatch Group, called the accord “a path-breaking strategic move. The Swatch Group Ltd. and Tiffany & Co. are again setting trends. It allows without any financial capital transaction the maximum utilization of manufacturing and distribution resources of both partners."

The partners plan to distribute the Tiffany watches through Swatch Group’s extensive distribution network, as well as through Tiffany stores. Moreover, Swatch Group affiliates will have the right to establish and operate Tiffany & Co. watch stores in certain markets outside the U. S. The Swiss-American partnership could deepen further, as Swatch may also offer a targeted selection of Tiffany jewelry.

“Tiffany & Co. is a true luxury brand with a long-standing heritage in watches. The two companies will collaborate on design, engineering, manufacturing, marketing, distribution and service,” added Nick Hayek Jr., CEO and President of Swatch Group’s management board, and son of Nicolas Hayek.

Kowalski, who revealed that he and Nick Hayek Jr. began discussing a possible collaboration two companies over a year ago, called the deal “an historic agreement.”

The partners are planning what they termed “a significant marketing campaign,” though once again gave no figures. On Wednesday morning the new allies will stage a press conference in Tiffany’s flagship 727 Fifth Avenue.

Swatch Group is the world’s largest producer of watches and jewelry, with 2006 sales of over 5 billion Swiss francs, or 3.85 billion US dollars. Its stable of brands, which includes Breguet, Blancpain, Omega, Longines, Rado, Tissot, Calvin Klein, Pierre Balmain, Certina, Swatch, Flik Flak and Endura, is produced in some160 production centers, located in Switzerland. Besides its much admired in Europe mini auto, Swatch Group is timekeeper for the majority of the Olympics Games and international sporting events. OMEGA will be official Timekeeper for the Olympic Games in Beijing in 2008 and in London in 2012.

Tiffany & Co, a jewelry and specialty retail specialist, made legendary by the Audrey Hepburn film about breakfast and fast living, boasted 2006 net sales were 2.6 billion US dollars in 2006.

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