Morellato & Sector Looks to U.S. Market

Say “jewelry industry conglomerate” and names like LVMH, Swatch Group, or Richemont spring to mind. But a lesser-known group is growing rapidly in both the watch and jewelry markets. Italy’s Morellato & Sector may be the biggest watch and jewelry group you’ve never heard of—until now.

Its goal is to become a leader in the world watch and jewelry market, says Massimo Carraro, president and chief executive officer. It’s already one of Italy’s top three watch and jewelry brands and ranks among Europe’s top 10. It has a growing global network of stores (including a new flagship in New York City) and aims to be a major player in the United States.

The recession hasn’t altered its plans. “In these tough economic times … we want to be part of the lifestyle of consumers who are being forced by financial pressure to be more selective in how they manage their finances,” Carraro told JCK. “Morellato, with its fine products and value, fits today’s market’s DNA.”

The group, based in Padua, Italy, began in 1930 making watch straps. It still sells straps in more than 60 countries and supplies some 40 watchmakers. In the late 1980s, Carraro—an Italian lawyer, politician, and entrepreneur—succeeded his father as co-owner and CEO, and Morellato began diversifying. It added jewelry boxes in 1986 and jewelry in 2000.

In 2006, it bought Italy’s Sector Group, whose brands included Sector watches (long a top seller in Italy and Europe), Philip Watch, and licenses for Roberto Cavalli Timewear, Just Cavalli Time, and Pirelli Pzero watch brands, adding them to Morellato’s proprietary and licensed watch and jewelry brands (Morellato, Molecole, Chronostar, Miss Sixty). The Sector acquisition was so important to the company’s growth strategy that it changed its name in 2007 from Morellato to Morellato & Sector.

The year 2007 witnessed a number of milestones for the group. Besides its name change, it bought Bluespirit, Europe’s largest watch and jewelry store chain (with 287 stores worldwide); set up Morellato India Ltd., a joint venture with Gitanjali Gems Ltd., a major Indian jewelry maker and retailer, to sell M&S brands in India; opened stores in China, India, the Middle East, and Far East; took over Sector Group’s U.S. operation; and won the license to make and distribute Swiss-made watches of fashion designer John Galliano, which entered the U.S. market this year.

M&S has also expanded its jewelry offerings, acquiring the license for young women’s Miss Sixty jewelry (2005), adding jewelry to Just Cavalli and Sector (2007), and debuting Morellato gold jewelry (2008).

Morellato & Sector employs 1,100 people around the world in 18 companies. It has facilities in China, Hong Kong, and Switzerland and 66 Morellato stores worldwide. Sales have quadrupled from 60 million euros in 2002 to over 250 million euros ($315.8 million) in 2008.

Each brand has its own development team, and Carraro says the group intends to establish separate identities for each. He envisions “a well-balanced portfolio” offering retail and consumer customers a variety of options, including many under $500.

The group’s 2006 acquisition of Sector gave it entree into the men’s market and balanced out its fashion watches. The brand has been refreshed with new styles and products, including, for the first time, three well-defined collections: Sector Eagle (unique designs, technical features, and patented movements), Sector Swiss (Swiss-made, with quartz and automatic Swiss movements), and Sector Sport (affordable sport watches). Retail prices range from $200 to $1,500.

Sector’s marketing maintains its longtime “No Limits” tag but now focuses on “people with a dynamic attitude,” rather than athletes of extreme sports, notes Marco Frison, CEO of the group’s U.S. operation. An ad campaign in late 2008, for example, featured a firefighter.

Frison says the United States has the most potential for growth, and M&S wants to become the largest seller of sport and fashion jewelry and watches, in terms of units sold, in the U.S. market. It already claims that title in Italy and says it’s also one of the biggest watch and jewelry companies in Europe.

But the group’s U.S. initiative won’t mimic its European success. “We know the United States is different, so we’re providing Italian taste but customized for the American market,” Frison says.

The name of the U.S. operation changed early this year from Sector Group USA to Morellato & Sector USA. “To show the U.S. trade and commercial communities we’re promoting not only watches, but the entire world of Morellato & Sector,” explains Frison. “Ninety-eight percent of all aspects—from management and distribution strategy to products and advertising—has changed,” he adds.

The group has a showroom at its U.S. headquarters in New York City and recently opened a Morellato flagship store on New York’s Fifth Avenue. To raise brand awareness, it plans at least two more U.S. stores and will place in-store shops in its U.S. retailers.

Most M&S products are sold here, but the leading brands are Sector watches and jewelry (retailing for $200–$1,500 and $65–$195, respectively), Morellato’s “lifestyle” watches and jewelry ($90–$250 and $40–$200), and Philip Watch ($250–1,300). Frison notes that each has a specific U.S. distribution strategy.

About 200 U.S. stores now sell M&S products. Frison aims to have about 1,000 (600-plus accounts) selling one or more of the group’s brands by 2010.