Wednesday, January 06, 2021
Family dispute over reform course
Swarovski is fighting for survival
At Swarovski, things have not been going smoothly for a long time, and the low-cost competition from China is particularly hard on the company. As a result of the Corona crisis, income drops again drastically. A change of strategy and a radical austerity course should help. But there is great internal resistance.
It sparkles in the pond under crystal-covered clouds or from the huge crystal chandelier: Almost everything at the headquarters of the Swarovski crystal empire in Wattens in the Austrian Tyrol glitters and shines. But appearances are deceptive: a bitter family dispute is raging behind the scenes about the future of the company. The 650,000 tourists who flocked to the corporate premises each year have long concealed the family clan’s economic difficulties. But the Corona crisis has exposed the problems surrounding the realignment of the group.
125 years after founder Daniel Swarovski developed a machine that cuts glass so that it shimmers like diamonds, his great-great-grandchildren rule a broad company. Swarovski sells rhinestones for fashion brands, binoculars for hunters, and jewelry and crystal figures from Mickey Mouse to Princess Leia. But managing director Robert Buchbauer, fifth generation of the family business, insists on a drastic change: “We are forced to rethink our entire Swarovski business,” he says at the headquarters in Wattens.
Swarovski’s crystals may have adorned the outfits of celebrities like Beyoncé and Marilyn Monroe and were used by designers like Christian Dior, but according to Buchbauer, they lose their shine with business customers. Crystals from competitors in China sparkle just as brightly – for just one percent of the price. In addition to this already ruinous competition, says Buchbauer, the pandemic has resulted in “huge losses in sales”. From 2.7 billion euros in 2019, revenue fell to around 1.9 billion euros last year. The long-planned, far-reaching cuts have only become more urgent.
Swarovski crystals should become more exclusive again
Buchbauer wants to move away from the wide range of products, manicure sets and cell phone cases with Swarovski crystals. He wants to make the glittering stones more exclusive again; Produce fewer, larger and more colorful products that are sold at a higher price. In addition, 750 of the 3,000 branches worldwide are to close and 6,000 employees are leaving. In Wattens alone, 1,800 employees are said to lose their jobs.
But not everyone in the company thinks that Buchbauer is pursuing the right strategy. They believe that those customers who have already turned to cheaper competition will not pay higher prices. Paul Swarovski, for example, a shareholder and former board member, wants to stop Buchbauer’s plans “before everything goes downhill”. Nadja Swarovski, one of three board members, as well as her father Helmut and her uncle Gerhard have joined him.
In the highly competitive luxury goods industry, Swarovski is one of the few companies that is still fully family-owned. It consists of several limited partnerships – in the unanimous opinion an obstructive structure for today’s international billion dollar business.
Moving to Switzerland?
Buchbauer, who was named Swarovski’s first managing director in April, won the family’s broad approval for his proposal to bring the jewelry empire in Wattens under the umbrella of a holding company. 80 percent of the shareholders voted in favor. But Nadja, Helmut, Gerhard and Paul Swarovski objected to the plan. You want to have Buchbauer’s step canceled – and get rid of him.
The frustration among the employees is great, as union representative Selina Starkz says. In a region that is otherwise dependent on tourism and where Swarovski is the largest single employer, many fear for their future careers. The rumor persists that the entire company is to be relocated to neighboring Switzerland. Unionwoman Stark does not believe in Buchbauer’s strategy: “The super-rich do not need our Swarovski crystals. They can buy diamonds,” she says.