LVMH ambitions to target the titans of the watch industry haven’t been a secret. After appointing Frederic Arnault, son of Bernard Arnault, as CEO of LVMH Watches in January, the younger Arnault has already set about making big changes to the French giant’s watch division.
The latest target is Rolex. Rumors swirled this week that LVMH was in discussions with Formula 1 to have one of its watch brands, Tag Heuer, become the official timekeeping sponsor of the uber-popular European racing circuit. Rolex has been the official timekeeper of Formula 1 since 2013.
If it were to happen, it would be a major coup for LVMH and Tag Heuer and a blow to Rolex, which has ridden the popularity of Formula 1 as it has exploded both in Europe and the rest of the world. Formula 1 viewership in the U.S. nearly quadrupled between 2018 and 2023, according to one estimate. Rolex, in turn, has seen its prices nearly triple since 2011. Nike pulled off a similar coup in April when it outbid Adidas to be the official sponsor of Adidas’s hometown soccer team, the German national team.
The rumors of the partnership, or at least internal discussions that LVMH is facilitating between Formula 1 and its subsidiary Tag Heuer, were confirmed on LVMH’s second-quarter earnings call on Tuesday, when Jean-Jacques Guiony, LVMH’s CFO, was asked directly about the rumor’s veracity.
“I won’t comment on Formula 1,” Guiony said. “I mean, there are some discussions, but it’s not something I can elaborate on as we speak — nothing is decided. Obviously, the press knows much more than I do. It’s normal. I’m just a CFO. I cannot really comment.”
The Formula 1 sponsorship is one of the more prestigious spots that a watch brand can have. But luxury watch brands have a long history of sponsoring big sporting events and leagues, according to Rustin Yasavolian, CEO of the Atlanta jeweler Masina Diamonds, which also sells pre-owned Rolexes. And despite LVMH’s vast financial backing and resources, unseating a storied brand like Rolex will be difficult.
“Rolex is synonymous for being associated with high society sports like golf, tennis, motorsports and equestrianism,” he said. “Although LVMH is taking all the right steps in trying to seal the sponsorship with F1 and get their brands associated with this luxury industry, it’s going to take more than this sponsorship.”
Eugene Tutunikov, CEO of SwissWatchExpo, concurred. The main obstacle, he said, will be outbidding or outmaneuvering Rolex, which commands some of the biggest deals and sponsorships in sports. For example, it sponsors major tennis events like Wimbledon and the U.S. Open.
“Tag has, without any question, an authentic claim to this sponsorship based on its long history in automotive racing,” Tutunikov told Glossy. Tag is already a sponsor of major races like the Monaco Grand Prix and motorsport teams like Oracle Red Bull Racing. “The opportunity to take it is based on Rolex relinquishing it. No brand, including LVMH, can compete with Rolex when it comes to negotiating a sponsorship deal, from brand alignment to budget.”
Rolex’s revenue is around $10 billion annually, much less than LVMH’s more than $80 billion, though LVMH has many interests outside of watches including fashion, leather goods, hospitality and restaurants. Rolex has the far greater claim to legitimacy in the luxury watch market thanks to its decades of exclusivity and heritage.
But Ernan Haruvy, a professor at McGill University and former director of the McGill Marketing Institute, said that LVMH, and Tag Heuer in particular, are smart to aim their watch ambitions at sports, where Tag already has a strong legacy sponsoring tennis tournaments and championship-winning golfers. There’s always been a strong overlap between motorsports and watches, both because timekeeping is an integral part of the sport and because there’s an overlap of high-income earners who enjoy both.
“Tag Heuer does not need to be on par with Rolex,” Haruvy said. “It occupies a different market niche than Rolex, and only needs to be dominant in its particular market position vis-a-vis LMVH’s other luxury watch brands such Bvlgari, Hublot and Zenith.”
