* Quercize, Lambert and Kern seen as CEO candidates
* Challenges looming at Cartier and Montblanc
* Chairman Rupert takes sabbatical from September
By Silke Koltrowitz
ZURICH, July 12 Richemont boss Johann
Rupert has promised to switch off his phone when he takes a
break from the company in September.
For the South African billionaire it will mark the start of
a year-long sabbatical. For his younger managers, it will mark
the start of a 12-month competition to show how well they can
steer the world's second biggest luxury goods group in his
absence - and possibly, ultimately, replace him.
"It's a test to see if he can remain in the background. He
has a good team in charge and if it works well after a year he
could decide to withdraw from day-to-day business for good," an
industry insider said.
Rupert carved the group out of his father's tobacco empire
25 years ago. He has been chairman since 2002 and twice stepped
in as CEO too, from 2003 to 2004 and 2010 to March 2013, to
guide the firm through tough economic conditions. He plans to
return as chairman after his break.
Officially, Richemont will be run in his absence by three
wise men: Bernard Fornas, former Cartier chief who will be in
charge of the brands; Richard Lepeu, who will handle back-office
matters and logistics; and Gary Saage, who will oversee
But Fornas and Lepeu, co-chief executives since April, are
already in their 60s and not seen as succession material. All
eyes will be on a group of recently appointed younger managers,
who face their own challenges within the brands they now run.
"It's in Rupert's interest to have competition between the
brand heads to single out the best man. He has De Quercize, he
has Lambert, he has Kern, who is very ambitious," said Gregory
Pons, editor of watch news website businessmontres.
Stanislas de Quercize, 56, formerly of Van Cleef & Arpels,
heads Cartier since January. He will have to solve one of the
biggest problems in the luxury goods market: how to develop a
brand and preserve its exclusivity when it is has become so big?
Then there is former Jaeger-LeCoultre head Jerome Lambert,
43, at Montblanc since July, who has to make a success of the
brand's diversification into watches, jewellery and leather
goods to make up for the dwindling size of the pen market.
Meanwhile, IWC head Georges Kern, 48 - lacking a recent
promotion - has to improve the performance of his smaller watch
brands Roger Dubuis and Baume & Mercier, which are languishing
behind the group's other brands.
One industry insider said that setting similar challenges
for members of his staff was Rupert's style: "He puts them in a
competitive situation and they have to impose themselves to make
Industry experts agree that Richemont will most likely hire
its next CEO from within in order to have a leader who
understands the group and its hierarchy.
"The watch industry does not like recruiting leaders from
other industries even if they have been successful," said
Jacques Amey, senior partner at recruitment firm Korn/Ferry.
In addition, say analysts, Richemont has a far greater
choice of good candidates inside the company than outside.
"They have a very deep talent pool. This is a great asset -
this industry lacks experienced management on which companies
can count. Richemont is displaying an excellent capability of
promoting management from within, rather than buying at inflated
prices from outside," said Exane BNP Paribas analyst Luca Solca.
Richemont declined to comment on its hiring process. The
company's board appoints senior managers but it is dominated by
Rupert, who holds 9 percent of Richemont's capital and 50
percent of voting rights.
Rupert has said he trusts the team he has put in place in
his absence. But the challenges they must solve
At Cartier, the group's cash cow, Quercize must lift sales
of entry-price steel watches, which dragged growth in the
watches segment overall to 8 percent for the full year to March
- half the pace of growth seen in the jewellery segment. Though
Cartier is one of the world's top jewellery brands, it also made
almost 2 billion euros in watch sales in 2012/13, according to
Vontobel estimates - nearly a fifth of group sales.
Analysts said Quercize was likely to quickly address the
problem, related to weak demand in China and Europe, by creating
new models, as the last memorable launch was years ago.
The Frenchman, who declined to comment for this article,
joined Richemont in 1989 from Procter & Gamble and held
positions at Alfred Dunhill, Montblanc and Cartier before taking
over Van Cleef in 2005.
"He has done a sensational job at Van Cleef that was only
just breakeven a few years ago and is now the No.2 contributor
to group earnings with a margin similar to Cartier," Vontobel
analyst Rene Weber said.
Another industry source said Quercize was in pole position
to become group CEO in about five years time. "He's the natural
heir. He won that internal battle when he aced out Lambert, Kern
and (Piaget CEO) Metzger for Cartier."
Lambert, meanwhile, faces big challenges at Montblanc, which
is "at a crossroads," Bernstein analyst Mario Ortelli said.
Richemont is trying to turn the No.1 luxury pen maker into a
watch, jewellery and lifestyle brand but is having trouble
imposing the "male" brand in the female-dominated leather goods
market, and big stores are squeezing margins, Ortelli said.
Montblanc sales grew only 6 percent in the full year and its
operating margin fell to 15.7 percent versus group operating
margin of 23.9 percent.
Lambert and Kern joined Richemont in their 30s and first
proved their worth at Jaeger-LeCoultre and IWC before Rupert
gave them additional responsibilities. When Richemont's small
watch brand Lange & Soehne was hurt by the financial crisis,
Lambert was appointed to help its new CEO, Wilhelm Schmid, to
put it back on track. Similarly, Kern has been working with
Baume & Mercier CEO Alain Zimmermann since 2009 to solve that
Even though German-born Kern has not yet "made it to the
next level", as a rival watch executive puts it, he will have to
be reckoned with for the CEO job. He appears to be making
headway at Baume & Mercier, the group's only watch brand whose
results did not improve in the year to March: A recent
partnership with Chinese retailer Chow Tai Fook might
help the brand become an alternative to Swatch's Longines in
China, Bernstein's Ortelli said.
The coming year offers a rare case study of how a major
global brand functions without its biggest character. One thing
everybody agrees on: If something really goes wrong, Rupert's
phone will be switched back on in no time.