While it is widely known how a handful of brands perennially struggle to meet demand, it is worthwhile understanding the extent of their extraordinary position. “The demand for Rolex, Audemars Piguet, and Patek Philippe is not going to diminish, whatever people say,” Müller says, referencing more recent market corrections in pricing.
Each of these three brands has steadily been ramping up production by tens of thousands of watches a year. The demand, it seems, is still greater, and likely to outpace supply for the foreseeable future. Müller says, “In 2022, Audemars Piguet went from producing 45,000 to 50,000 watches. That’s already a lot. Their plan is that within the next five years they will more or less grow to [produce] between 60,000-70,000 watches.
“Patek Philippe is also expected to keep increasing production. For Rolex, the issue is to keep demand and supply in balance, but they also have the issue of growing their production capacities. Whatever people say, it’s not that easy to produce 100,000 or 200,000 watches or more a year, even if you’re Rolex. However, it is something they’re now investing massively in. My latest estimate, which will be published in the [upcoming] Morgan Stanley report , is that they increased output by more than 10% last year.”
This has in turn fed the trend of “premiumisation” – the practice of increasing the profit margin per unit. “In recent years we have seen brands steadily increasing prices, thereby increasing profit margins,” Müller says. “These profits are being reinvested.” Even within the group of profitable brands, Rolex stands apart. “Of course, any other brand would dream of being in the virtuous circle or positive dynamic that Rolex is in,” he adds.