Swatch to Manufacture Tiffany Watches

The Swatch Group and Tiffany & Co. announced Sunday a strategic alliance to develop, produce and distribute worldwide Tiffany & Co. brand watches. The agreement was reached after a year of discussions.

The term of the agreement is 20 years and may be extended for an additional ten years if certain conditions are met.

As part of the agreement, Swatch will incorporate a new watch-making company in Switzerland, authorized to use Tiffany’s trademarks and operate under the Tiffany name. Tiffany will earn from the company’s pre-tax profits.

In addition, Tiffany will have one out of five seats on the board of directors, and seats on both the product design and marketing committees. The Watch company will be wholly-owned by Swatch Group.

The Tiffany & Co watches will be distributed through the Swatch distribution network - including affiliates, Swatch retail facilities and third party distributors, and through Tiffany stores.

In addition, Swatch affiliates will have the right to establish and operate Tiffany & Co. watch stores in certain markets outside the U.S. The watch stores may also offer a targeted selection of Tiffany & Co. jewelry.

The watch company will support distribution with a significant marketing campaign. According to Tiffany's chairman and CEO Michael J. Kowalski, “Our advertising and that of the new watch company will be fully integrated.”

Calling it a “historic agreement,” Kowalski said Swatch is the best conceivable strategic partner for Tiffany’s long-planned re-entry into watch distribution.

Nicolas G. Hayek, chairman and co-founder of The Swatch Group, said the agreement is a path breaking strategic move, adding, “It allows without any financial capital transaction the maximum utilization of manufacturing and distribution resources of both partners.”

No further financial details were disclosed, however the two companies will host a press conference in Tiffany’s flagship New York store on Wednesday to provide additional details about the arrangement.