Plunging profits caused by the pandemic and Chinese competition sparks a bitter family

Crystal-studded clouds reflected in a pond, an oversized crystal chandelier surrounded by mirrors: The headquarters of the Swarovski crystal empire are every bit as glitzy as you might expect – but the sparkle can’t distract from a bitter family feud over the company’s future.

The disruption caused by the pandemic coupled with stiff competition in China means that profits are forecast to plunge by 30 percent this year, leaving the 125-year-old company with tough decisions to make about its future.

CEO Robert Buchbauer – the great-great-grandson of founder Daniel Swarovski – has a plan which involves sacking 6,000 staff, closing 750 stores, and moving the brand upmarket into more expensive and colourful products.

But he is being opposed by other family members –  Paul, Nadja, Helmut, and Gerhard Swarovski – who accused him of ‘steering the ship towards a reef’.

Buchbauer has the support of a majority of shareholders, but his rivals claim they have enough to force a veto and are willing to go to court over it. In the long run, they want him gone from the company.

‘We are forced to reimagine and rescale our entire Swarovski business,’ Buchbauer tells AFP at the Wattens HQ, framed by a selection of Swarovski-embellished robes. 

Swarovski’s crystals may have adorned the outfits of celebrities like Beyonce and Marilyn Monroe and been used by designers including Christian Dior, but Buchbauer says among business clients they are losing their luster.

Crystals made by competitors in China sparkle just as brightly – for as little as one percent of the price.

To this already ruinous competition, Buchbauer says, the pandemic has added ‘sales shortfalls on a gigantic scale.

Overall revenues for crystals are projected to plummet by 30 percent, from £2.5billion last year down to about £1.7billion this year.

Long-planned, sweeping cuts have only become more urgent, Buchbauer says.

He wants to make Swarovski’s crystals more exclusive, producing fewer, larger, and more colorful products that can be sold at a higher price.

Mass-market products like manicure sets and mobile-phone cases graced with Swarovski crystals may have given the company a wide appeal, but they have no place in the future, he says.

Neither will around 750 of its 3,000 stores worldwide.

The downsizing will also mean laying off about 6,000 employees.

The plans are already underway, with about 1,200 employees in Wattens losing their jobs this year and a further 600 posts expected to go in 2021.

Unless his plans are executed in full, Buchbauer says, ‘we’ll end up among the losers.’ 

Other clan members are convinced that customers who have already been turning to cheaper competitors won’t pay higher prices.

Paul Swarovski, a shareholder and former member of the executive board, says he wants to stop Buchbauer’s plans ‘before everything goes down the drain’.

He’s been joined by Nadja Swarovski, one of three members of the executive board, as well as her father Helmut and her uncle Gerhard.

In the cut-throat luxury goods industry, Swarovski is one of few entirely family-owned businesses left to run as a limited partnership.

Initially, this was a useful structure for a small-scale manufacturer but all sides agree it is now an impediment for the international, multi-billion-euro operation.

Buchbauer, who became Swarovski’s first-ever CEO in April, won approval from shareholders for his own proposal which would bring the Wattens operations under the umbrella of a holding company.