Sandoz retains watch assets; Hermes to lift Vaucher stake and secure supply
Bottom Line Impact
Hermes de risks movement supply and unlocks margin and pricing power in watches while Sandoz Foundation stabilizes Vaucher as a strategic independent supplier, shifting competitive leverage toward vertically integrated players and strengthening brand equity through calibre credibility.
Key Facts
4- Sandoz Foundation confirmed it will keep its watchmaking division after a third failed sale attempt; all 3 entities remain under family control effective immediately
- Hermes has held a 25 percent stake in Vaucher since 2006; the new agreement enables a further stake increase, timing undisclosed
- Strategic objective is to secure long term movement supply for Hermes and Vaucher clients during a China driven market downturn; procurement visibility expected to extend 12 to 24 months
- Hermes watches represent roughly 5 percent of group revenue, making reliable access to Vaucher calibres material for category growth and margin accretion
Time Horizons
Key Roles Affected
Executive Summary
Sandoz Foundation has ended its third divestment attempt and will retain full control of its watchmaking division, while Hermes increases its 25 percent stake in Vaucher Manufacture Fleurier under a new agreement. This locks in high grade movement supply for Hermes and stabilizes Vaucher for its client brands amid a softer China watch market, sharpening vertical integration dynamics across Swiss luxury watchmaking.
Actionable Insights
Immediate Actions (Next 30-90 days)
Structure a multi year purchase agreement with Vaucher locking 2025 to 2027 volumes and pricing bands with performance based rebates and on time delivery SLAs
Rationale: Secures supply and margin visibility for the watch category and reduces volatility amid China demand softness
Role affected:CFO Hermes
Urgency level:immediate
Short-term Actions (6-12 months)
Negotiate a path to at least a 33 percent blocking minority in Vaucher with clear board representation and a 5 year exclusive calibre roadmap for Hermes references
Rationale: A 33 percent threshold strengthens governance and protects long term exclusivity on strategic movements while avoiding full consolidation risk
Role affected:CEO Hermes
Urgency level:short-term
Publish a 24 month industrial plan for the watchmaking division with capex, capacity targets, and client mix guardrails that protect third party neutrality while recognizing Hermes priority on new calibres
Rationale: Transparent guardrails reduce client churn risk and support pricing discipline and financing for selective capacity adds
Role affected:Board Sandoz Foundation
Urgency level:short-term
Strategic Actions
Implement a formal allocation framework and dual tier SLA policy distinguishing legacy movements vs new exclusive calibres, and pursue 1 to 2 additional anchor clients to keep any single client below 35 percent of revenue
Rationale: Balances Hermes needs with third party neutrality, lowers concentration risk, and stabilizes utilization
Role affected:CEO Vaucher Manufacture Fleurier
Urgency level:strategic
Risks & Opportunities
Primary Risks
- Perceived favoritism to Hermes triggers client churn and revenue concentration above 35 percent at Vaucher
- China watch demand further weakens, elongating sell through and pressuring order books and pricing
- Capacity bottlenecks on new calibres extend lead times beyond 26 weeks, delaying launches
Primary Opportunities
- Exclusive Hermes calibres enable price mix uplift of 150 to 300 basis points in watches over 12 months
- Five year co development program accelerates movement innovation cycles and enhances reliability KPIs
- Selective capex at Vaucher raises throughput 10 to 15 percent with minimal opex, improving operating leverage