New Billionaire Swarovski Surfaces With Crystal Fortune
Outside the Swarovski museum in Wattens, Austria, a giant, verdant head with crystal eyes and a waterfall mouth guards the entrance to 14 underground chambers of precision cut gems, including the world’s largest.
The museum, financed by closely held D. Swarovski KG, the world’s leading producer of cut crystal, embodies the company’s 117-year struggle between its desire to operate in secrecy and its need for publicity. Founder Daniel Swarovski settled in this Alpine town of 8,000 to hide his proprietary cutting technology from rivals. A century later, a splashy push into retailing and designer fashion has made his great-grandson, Gernot Langes- Swarovski, a billionaire.
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“They have established themselves in a high-end market and are still affordable,” said Reinhard Berger, president of Liechtenstein-based investment company Valluga AG, which compiles an annual report on Austrian, German and Swiss wealth, in a telephone interview. “This is luxury for the masses and the key to their success has been the strength of their brand.”
Swarovski Group had revenue of 2.87 billion euros ($4 billion) in 2011, according to its website, up from 2.25 billion euros in 2009. Almost 80 percent of its business is derived from crystal sales, half of which comes from partnerships with fashion designers. Retail sales, a business that has been expanding since opening its first boutiques in 1998, made up the other half of crystal sales. Two other business lines -- precision cutting and lenses -- made up the balance of the revenue.
Ownership of the company is shared by as many as 100 family members, Berger said. According to Orbis, a database of company information published by Bureau van Dijk, the largest stake -- 21 percent -- is held by Langes-Swarovski, 69, who was the company’s public face for 35 years until 2002, and who remains on the advisory board representing family shareholders and influencing strategy.
“Family companies were and are the quality seal of our economic and social system,” Langes-Swarovski wrote in the company’s 2010 Sustainability Report. “Thanks to their flexible structures we are more alert, innovative, quick, flexible and systematic than other types of company.”
Swarovski’s stake, which he controls through the Segnal Beteiligungs GmbH, is worth $1.3 billion, according to the Bloomberg Billionaires Index. He has never appeared on an international wealth ranking.
“Gernot is the major shareholder of Swarovski,” Berger said. “His son now controls daily operations, but in terms of strategy he is the informal head of the clan. They have a smaller group of family members who decide on strategy and he’s in charge of supervising its implementation.”
The company is valued using the average enterprise value- to-sales, enterprise value-to-earnings before interest, tax, depreciation and amortization, and price-to-earnings multiples of two publicly traded peers: Copenhagen-based Pandora A/S (PNDORA), and Athens-based Folli Follie Group. (FFGRP) Enterprise value is defined as market capitalization plus total debt minus cash.
“Swarovski is a family-owned and run business and not obliged to disclose anything beyond the legal and regulatory obligations,” the company said in an e-mailed statement. “Any numbers and valuations from third parties are purely speculative.”
Two decades ago, Swarovski was best known for its collectible crystal figurines and other creations, such as the dress worn by Marilyn Monroe’s as she sang “Happy Birthday” to U.S. President John F. Kennedy in 1962, which was adorned with 10,000 Swarovski gems.
The company began to expand its branding efforts in 1999, by opening retail stores and creating partnerships with fashion brands. Led by Lange-Swarovski’s niece, Nadja, the strategy targeted such designers as Jean-Paul Gaultier and Alexander McQueen, providing them with free crystals in exchange for marketing exposure.
Today, Swarovski has 2,200 retail outlets. Its crystals are attached to garments from brands including Giorgio Armani and Victoria’s Secret. (LTD) Its sponsorship of award shows and parties, and product placement in films, such as the James Bond franchise, has catapulted Swarovski into the top tier of luxury brands, according to Katie Mason, an analyst at London-based strategic branding consultancy XPotential.
The custom creations that began in the 1970s now include such fare as a $128,000 crystal toilet and a $9,000 10-inch Mickey Mouse figurine, and have helped engender a cult following. According to the company’s website, the Swarovski Crystal Society is the world’s largest collector organization and claims 325,000 members in more than 125 countries.
“Almost 50 percent of our business is loose crystal components where we supply the product and the application tools for any creator and creation on this planet,” Langes- Swarovski’s son, Markus, told the Financial Times in April 2010. “It can be something that is very superficial, a very loud expression, or it can be subtle. It can be fashionable or totally unfashionable.”
Langes-Swarovski is a wine lover who bought the 1,200- hectare Bodega Norton estate in Mendoza, Argentina, in 1989. A decade later, he opened Bodega Langes, a 200-hectare vineyard in Changli, China, that he spent $30 million developing, according to the vineyard’s website.
Across the Pacific Ocean, carved into a granite hillside overlooking a Canadian valley, sits Sparkling Hill, a $122 million health spa resort that Langes-Swarovski opened in 2010, according to resort press releases. It boasts $1,000 a night suites, a spa and is decked out with more than 3.5 million Swarovski crystals worth $10 million.
“It’s not for him to have a hotel to make money out of it,” Hans-Peter Mayr, chief executive officer of Sparkling Hill, said by phone. “For him it’s more important to provide something good for people.”
The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York. The valuations are listed in U.S. dollars.
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