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Tokyo–Japanese watchmaker Citizen Holdings Co.’s recent acquisition of Bulova Corp. is expected to rally Citizen’s U.S. sales at a time when mid-price watches might be poised for a considerable comeback. The transaction, which involved the purchase of all of Bulova’s stock from parent company Loews Corp. for $247 million, makes Citizen an unassailable watch leader in the $200-$600 price range worldwide, analysts say.

The deal, made final in mid-January, is likely to have the greatest impact in North America, where Bulova has been a well-known brand for nearly a century. With this acquisition, the Tokyo-based Citizen gains control of not only the Bulova name, but also those of its three other brands: the popularly priced Caravelle, sporty Accutron and entry-level luxury line Wittnauer.”We have no plans to make any changes in Bulova watches regarding their reviews on bulova watches, basic pricing, styling or brand names,” says Toshio Tokura, managing director of Citizen Watch Co. “We have every intention of continuing to develop the brands and company from the current base. The Bulova demographics and target retailers will remain essentially unchanged, but Bulova’s executive group will make any necessary adjustments to their strategy–only as the market dictates.”Nor will the Bulova acquisition alter Citizen’s strategy, Tokura says.

The two watch companies will continue operating separately and independently, and the distinct differences that existed between Bulova and Citizen as brands, and in terms of product offerings, will continue. “Those differences will continue, and each brand will have its own unique selling proposition,” Tokura says. Still, many observers wonder whether the merger of these two giant companies–both so firmly associated with mid-priced quartz watches, with Bulova among the oldest brand names in the industry–is indicative of both a consolidation and a contraction of the watch business.

Tokura is taking a wait-and-see attitude, but notes that Citizen will continue to pursue a growth strategy. “This acquisition fits Citizen’s long-term strategy of building our portfolio not only by continued organic growth but through acquisition,” he says. “We don’t have any specific plans for further acquisitions, but we’re always open-minded with regard to future possibilities.”Tokura says that there was a certain amount of industry consolidation long before Citizen decided to acquire Bulova. “Whether or not there is further consolidation in the watch industry will depend on a broad spectrum of companies,” he adds. At least one analyst predicts that the combined forces of Citizen and Bulova will lead to heightened activity in a submarket that’s already likely to be more competitive in 2008.

Pam Danziger, the president of Stevens, Pa.-based Unity Marketing, suggests that the “mass affluent” demographic (consumers with annual household incomes between $75,000 and $149,000) is likely to cut back on luxury spending this year amid signs of an economic slowdown–which might be a boon to Citizen.

“A more affordable luxury watch brand is likely to appeal to these consumers who lack the confidence in the current economic environment to trade up to one of the super-premium brands,” she says.However, Danziger warns that the overall prospects for the watch market may be bleak, citing Unity’s latest study of the jewelry and watch market, which found that among younger consumers, interest in watches is waning. “Short-term, the outlook is positive,” she says. “Citizen will gain stature, but luxury watches are swimming up-stream against a strong current. Young men are starting to reject the old-fashioned idea that you need a watch to be grown-up.

They’re more likely not to wear a watch, and use their PDAs or cell phones to get the time.”She points out that TAG Heuer will even come out with a cell phone. (TAG confirms the release will happen this fall), and says other brands may follow and youth-targeted watch products will fare well. “Citizen is well positioned to do this, particularly with its Eco-Drive models, which are powered by light instead of batteries,” Danziger says.

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