Category Archives: Market

Helicopter venture seen as poor deal

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There was a time when Canadians could dream of a chicken in every pot, two cars in every garage and a helicopter on every oil rig.

But those heady times, which led Canada to invest $275-million to bring helicopter manufacturing to Montreal, now seem about as certain as Quebec’s loyalty to the Liberals.

It is just over a year since the Canadian and Quebec governments signed a mammoth $514- million deal with manufacturing giant Bell Helicopter Textron Inc. of Fort Worth, Tex., and the helicopter market is now a pale version of its former self.

The sluggish market only adds to the problems of what some observers already consider a bad deal for Canada – a deal in which Canada pays the bulk of the risky, up-front costs of the project.

Canada is also contributing $100-million to Montreal-based Pratt and Whitney Canada Inc. to build a new engine for one of the best drones models Bell will be building in Montreal.

One of the most dreary predictions for the Bell project comes from Craig Dobbin, chairman of the board of Sealand Helicopter Ltd., a St. John’s-based company with a fleet of 28 helicopters and one of the few survivors in the helicopter-leasing business.

Mr. Dobbin strongly suggests that Industry Minister Sinclair Stevens reassess the Bell deal, which was signed by the former Liberal industry minister, Edward Lumley. “I believe that this thing requires an awful lot more close scrutiny than has been given up to this point,” Mr. Dobbin said. “I would urge Mr. Stevens to look very closely or we could have another Canadair on our hands.” He fears that if the Bell project ends up being a commercial flop, Canadian taxpayers will end up bailing it out in order to preserve the jobs. Bell estimates that 800 to 1,000 jobs will be created at the Montreal plant.

Mr. Dobbin’s concerns spring from the fact that the Bell plant in Canada will be producing a line of light twin-engine helicopters to compete with several other brands of light twins already on the market.

He argues that, in Canada at least, the market for light twin helicopters is extremely limited. Of his fleet of 28 helicopters, only one is a light twin. He says that although it is an excellent machine, there is so little demand for it that he is trying to sell it.

The problem, he explains, is that because of its two engines it rents for about twice the hourly rate of a single-engine helicopter of the same size. A single- engine rents for anywhere from $350 to $500 an hour, while a similar-sized twin-engine goes for about $1,000 an hour, he said.

The main purpose of a second engine is to provide an extra measure of safety on precarious flights, such as flying to oil rigs over bodies of water.

But even though light twins offer the needed extra engine for flying over water, they are often too small to make it all the way to oil rigs if the rigs are far from land, according to Sealand executive vice-president J. C. Jones.

For instance, he said, a light twin-engine unit is not really able to make it to oil rigs off the coast of Newfoundland, which average about 190 nautical miles, nor those off the coast of Nova Scotia, which are on average 175 nautical miles out to sea.

Instead, it is necessary to use a heavier twin-engine helicopter, Mr. Jones said. Bell is only planning to manufacture light twins in Canada.

Although Bell considers Canada an important market for its new best quadcopter for beginners, Mr. Dobbin is convinced that in Canada there simply is no market for them.

Certainly, few light twins have been used in Canada so far, despite the fact that light twin-engine models produced by other manufacturers have been on the market for more than 10 years. In 1983, Canada had only five of them in its entire commercial fleet of 950 helicopters, according to statistics from the Canadian Transport Commission.

Nevertheless, Jim Schwalbe, president of Bell Helicopter Textron Canada, said Canada is an important market for the new Bell helicopters and he remains optimistic that the machine will sell well.

But Bell’s key hope is the larger U.S. market. There, Bell’s prospects seem unclear. Many industry observers argue that while Bell has a good reputation as one of the world’s major helicopter manufacturers, its new light twin-engine models will not offer any technological breakthrough.

Furthermore, Bell will be trying to force its way into a branch of the helicopter market already dominated by foreign competitors, chiefly Aerospatiale of France and Messerschmitt-Bolkow-Blohm GmbH of West Germany.

Mr. Schwalbe said potential customers have made down payments on about 230 of the new helicopters to be built in Canada. But he concedes that these down payments do not actually mean much since they are refundable with interest.

Petroleum Helicopters Inc. of Lafayette, La., the largest U.S. commercial helicopter company, has made down payments on four new Bell twins. But the chairman of the company, Robert Suggs, said this does not mean that the company necessarily plans to purchase the new models.

His company currently owns 50 light twin-engine units built by other manufacturers and he said he does not really see any advantage to the Bell model. “Not the way they price. They’re going to have to price very low. The competition is already here,” Mr. Suggs said in an interview from Lafayette.

Some industry analysts say that Bell’s sales estimates are simply overoptimistic.

Bell estimates that there will be a total worldwide demand for 250 to 300 light twins a year and that Bell will be able to corner 40 per cent of this market, amounting to about 120 machines a year to be produced at the Canadian plant.

Yet in the past three years, the two leading manufacturers of light twins have between them delivered only a total of 144 light twin-engine helicopters, according to Aerospatiale executive vice-president Philippe Orsetti.

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Sector Group USA brings an expanded line of watch and jewelry licenses to the U.S. market

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After a major yearlong restructuring, 2007 will end up being a crucial year in the life of Sector Group USA.

The New York-based watch and jewelry distributor, a subsidiary of Padua, Italy-based Morellato & Sector, which last year had a turnover of 195 million euros, or $276 million at current exchange, is out to increase its infiltration in U.S. stores, bringing to retailers an impressive array of designer watch and jewelry brands.

We have completely restructured the company this year because we want to aggressively expand the distribution of the brands that existed before, and to launch all the new brands that exist under Morellato & Sector,” says Marco Frison, chief executive officer of Sector Group USA.

The umbrella company that owns Sector is regarded as one of Europe’s leading watch and jewelry companies. In November 2006, Morellato – which began in the Thirties as a maker of leather watch straps and now makes a full line of men’s and women’s watches and jewelry under that name – joined forces with Sector, a popular brand of sporty watches. The new group now runs a hugely successful timepiece and jewelry retail business in Europe, where it operates some 287 multibrand stores under the name Bluespirit.

“The DNA of Sector Group USA is totally different now with respect to what it was before the acquisition,” Frison says. “Before, it was oriented toward independent business, mainly with the Sector brand. Today, the scenario is much wider, because where before we focused just on watchesfrom one brand, today we have watches and jewelry in different positionings and through different brands.”

The alliance also brought together the various licenses held by both companies, including high-fashion name Miss Sixty and red-carpet favorite Roberto Cavalli. Morellato & Sector also recently announced it would launch a collection of John Galliano watches at the Basel Trade Fair in April 2008.

In September, the Miss Sixty watch line was rolled out nationwide, while Miss Sixty jewelry was shown at the JCK show in Las Vegas in June. JCK was also the launching pad for Just Cavalli women’s jewelry. Just Cavalli jewelry for men entered stores for fall 2007. Sector jewelry was also at JCK, and the existing watch collection is being repositioned nationwide. Morellato jewelry andwatches will be introduced to the U.S. for next year. Philip watches, another brand under the Morellato & Sector umbrella, celebrates its 150th anniversary next year, which will coincide with a deeper rollout in the U.S. And Pirelli – the company best known for high-end tires and a famous calendar heaving with supermodels and A-list actresses – is redesigning its signature rubber-strap watch, with new styles coming on line next year.

Massimo Carraro, president and ceo of Morellato & Sector, says the alliance with John Galliano, one of the most prestigious names in couture, would give the company even greater visibility and penetration.

“We are working with him personally on the collection,” says Carraro. “He’s an incredibly creative artist and is very involved with the line.”

The Galliano collection will join the Roberto Cavalli line at the top end of Morellato & Sector’s brand pyramid. Frison says the long-term objective of the company is to have something for every customer at every price point. The Miss Sixty jewelry and watch lines retail from $50 to $190; Morellato will go for $55 to $250, and Just Cavalli from $100 to $300 for both jewelry and watches. Sector will carry pieces from $65 to $900. Roberto Cavalli watches cost up to $1,900 at retail, Philipwatches are priced between $230 to $1,300 and Pirelli between $500 to $2,000. The anticipated retail prices on the John Galliano line will be between $1,200 and $3,000.

Frison adds that he anticipates being in 1,500 doors by the end of 2008 – up from between 600 and 700 now – including majors like Macy’s, Saks Fifth Avenue and Bloomingdale’s, as well as specialty watch and jewelry stores.

“There will be a big difference in our visibility from December of this year,” says Frison. “Next spring will be a real switching point in our business.”

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Status, style score at Basel

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Status and style proved to be the primary focus of watchmakers and jewelers at the 1996 World Watch, Clock and Jewelry Show in Basel, Switzerland. Emphasis was placed on white precious metals such as white gold and platinum in lieu of stainless steel, new accent colors, and vintage-style watches featuring many models with contrasting color faces and Arabic numerals.

With the watch field becoming increasingly crowded, fashion and prestige captured the traffic at the mammoth World Watch, Clock and Jewelry Show here last week.

Exhibitors gave the buyers several new trends to lure a consumer hungry for luxury products and names. Here’s what the buyers saw:

* White precious metals like platinum and white gold becoming more prominent as makers traded up from sportier stainless steel.

* New accent colors including pink and rose gold, and even copper.

* A variety of vintage-style watches, many with Arabic numerals and contrasting color faces.

Further underscoring the growing role of fashion, men’s watch makers were making specific models for women, rather than just downsizing their men’s styles. In jewelry, key looks went in two opposite directions — dainty, small designs and bold, graphic pieces.

The eight-day fair, which closed Thursday, featured 2,433 watch and jewelry exhibitors, nearly 80 percent of which came from outside Switzerland. Exhibitors from Italy and Germany, mainly jewelers, accounted for more than half the total. Buyer attendance figures were not available at press time, but organizers assessed the turnout as about the same as last year, or roughly 80,000.

Some exhibitors said they they felt business was a bit slower this year, particularly with European customers from markets like France and Germany, where retail business is still sluggish. Many added, though, that they saw an increase in buyers from Southeast Asia, a trend being witnessed at many other recent trade shows in Europe, and throughout the fair, watch-makers with some sort of cachet talked about strong business.

Retailers confirmed the growing inherent appeal of the luxury product, both in jewelry and watches.

“The return to precious stones rather than semiprecious is prominent,” said Stephen Magner, vice president of watches and jewelry for Neiman Marcus.

“We are also seeing a lot more fashion, with pastel-colored stones, like peridot and pink tourmaline,” added Timothy Braun, Neiman’s fine jewelry buyer.

As for the switch to white gold and platinum in watches, Magner said it reflected that “customers like the look of stainless steel, but they want the gold.”

“White gold, white metals and square watches,” were among the key elements recapped by Carolyn Kelly, fine jewelry buyer for Saks Fifth Avenue. She added that while the Swiss franc is still high against the dollar, the the franc dropped 20 percent this year in the dollar’s favor. While price doesn’t determine Kelly’s buying choices, she said the better exchange makes for easier buying.

As for the appetite for status and brand identity, Christian Viros, chief executive officer of Tag Heuer, put it this way: “We need people to be able to say, `Ah, yes, this is a Rolex, that’s a Cartier.’ The industry has experienced a period of fast growth. The enthusiasm for watches led to new brands coming to the market — like mushrooms after the rain. But these will disappear because they are only selling product and not an image as well.”

“This is not to say that we are only selling image,” Viros continued. “You also need a high-quality product. People are worried about the future and are looking for `refuge’ brands that have a trustworthy image,” he added, noting that Tag Heuer headquarters, foreign subsidiaries and distributors spent $18 million on advertising and marketing last year. This year, Tag Heuer is adding sponsorship of the prestigious Whitbred around-the-world yacht race to its roster of sports marketing agreements.

Select distribution is another key point, Tag Heuer executives noted. The watch company has progressively reduced its number of doors in the U.S. from 3,000 about 10 years ago to 1,000. U.S. sales continue to grow, however, and will end this up around 15 to 20 percent higher than last year, said Fred Reffsin, president of Heuer Time & Electronics Corp., the U.S. subsidiary.

The pull of fashion was demonstrated at the display of Gucci watches, made in Switzerland under license to The Severin Group based in Irvine, Calif.

The Gucci stand was packed, and despite the trend to white gold replacing stainless, the interest there was largely due to the new stainless steel “G” watch, inspired by designer Tom Ford’s Gucci G motif. The watch, which comes in three sizes for men, women and juniors, is priced to retail at $895 with the steel bracelet, or $695 with a black patent leather strap. A spokeswoman said that the watch will be the focus of the company’s watch advertising campaign due to appear in the next few months.

The watch licensee has been enjoying the fruits of Gucci’s corporate restructuring and current popularity, noted company executives. Severin Wonderman, chairman, gave credit to Ford, noting that the designer understands “what Gucci is all about. It’s gotten back to being fun.”

Asserting that the watch license was a mainstay while Gucci was going through some rough times a couple of years ago, Severin said that the Gucci watch brand is racking up a retail volume of about $500 million.

Watch competition is particularly tough in the low-to-moderate sector of the market. Oris, of Holstein, Switzerland, is banking on its sporty image and it’s focus on stainless steel, mechanical automaticwatches to boost its sales, according to Mark Wasserman, president of Oris USA.

“We are not a recognizable brand. Most people have `kind of’ heard of us,” Wasserman said, “We want to be known as a fine automatic watch that’s reasonably priced given the Swiss manufacture.”

Oris introduced several new watches at Basel, including the Big Crown Chronograph, featuring an oversized crown, like those used on old pilot watches. The larger crown enabled pilots, wearing heavy gloves, to manipulate their watches more easily. The chronograph is a combined chronograph and chronometer, Wasserman noted.

Oris currently has 70 accounts in the U.S., a number Wasserman hopes to raise to 100 by the end of this year. Oris watches retail from $400 to $2,000.

Among the watchmakers out to change their image of being strictly dedicated to men’s styles was Audemars Piguet, based in Le Brassus, Switzerland. All the vitrines of Audemars Piguet’s booth featured women’s watches, even though women’s time-pieces represent less than 20 percent of unit sales.

“For the last three years, we have started to take the energies and talents of the firm to work on developing ladies’ watches,” said Larry Kreilser, chief operating officer of Time Products, North America, the U.S. distributor of Audemars Piguet and Blancpain in the U.S., and several other luxury brands, including Piaget and Vacheron Constantin in the UK. Like other traditional men’s watch makers, AP wants to better balance sales in favor of women because they buy more watches than men. These companies also want to show they have the know-how to make women’s watches.

Audemars Piguet launched Opera, a gold bracelet watch with a diamond bezel and lugs, featuring ruby and sapphire cabochons, to retail at $24,000. Opera, along with the Carnegie watch launched last year, will be part of a major retail push with Neiman Marcus next fall, which will even feature trunk shows, Kreisler said. Neiman Marcus’s Tim Braun confirmed these plans.

“We want to show women how to accessorize their fashions with luxury watches,” Braun said.

Other watch companies courting the women’s watch business included Blancpain, with a new retro military watch called Fly Back, introduced for men and women; Omega’s continued push with the Constellation watch, using supermodels Cindy Crawford and Elle Macpherson as spokeswomen; Breitling’s perpetual jeweled watch, and Jaeger-Le Coultre with a women’s diamond Reverso.

Bulgari, which showed its watches outside the Basel show halls in a historic mansion nearby, also offered more women’s watches, featuring colored precious and semiprecious stones.

Jewelry at Basel has a lower profile than watches, but it’s a growing segment. The jewelry manufacturers, along with component makers and stone traders, are housed in a smaller show down the street from the main European watch hall.

“Platinum is definitely strong, but the main thing I noticed is that the U.S. jewelry makers are so far behind the Europeans in terms of design and technology,” said David Connally of David Connally Inc., a jewelry manufacturer from Marbledale, Conn., visiting the Basel show for the first time. “The Europeans are also able to make their goods combining good prices with quality and style.”

The trend toward small-scale jewelry was seen at such jewelers as David Yurman, whose bold, silver cabled looks were shrunk down to more delicate dimensions.

“We have introduced scaled-down, more simple looks. Our neckwire is in a much smaller width,” explained Kate Harrison, director of product development for the New York-based designer’s company, who said the hope is that the small sizes will attract a younger customer.

Wellendorff Haute Couture in Gold, from Pforzheim, Germany, also went to smaller dimensions. Best known for their silk-cord-inspired necklaces and bracelets, Wellendorf showed reduced silhouettes, daintier chokers and bracelets in white gold.

In contrast, there were strong graphic looks like the wide rings in pink gold featuring big inset dots in white or black enamel from Maria Grazia Cassetti, of Florence, Italy. Link bracelets in large honeycomb or other geometric patterns, with matching earrings and other accessories, were shown by companies including Chopard and Italian maker Alessandro Biffi, featured in the World Gold Council’s trend showcase.

Statistics presented by such organizations as the World Gold Council and De Beers Central Selling Organization helped give the mood a lift, pointing to increased sales for gold, platinum and diamonds in most markets last year. Demand for gold in the U.S. was up 6 percent, while in the UK, gold sales rose 13 percent; in Italy, 5 percent, and in France, 3 percent. Sales declines were experienced, however, in Germany and Greece, as well as several Southeast Asian markets.

Platinum sales reached a world record of 1.49 million ounces, up some 40,000 ounces compared with 1994. The sharpest rise was in North America, which posted an increase of 18 percent.

Sales for diamonds also scored record levels, according to De Beers, posting an increase of 6.6 percent, with the strongest increases in the U.S., Japan and Southeast Asia.

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