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. Last Updated: 07/27/2016

Watchmakers Keep Up With Times

MTMasters poring over their work at the First Moscow Watch Factory, which is aiming to pull middle-class customers away from famous Swiss brands.
Every minute counted in the drama surrounding the Russian Navy mini-sub that became entangled in cables off Kamchatka in August with seven crew members on board. So it seemed rather fitting when Defense Minister Sergei Ivanov presented the vessel's three British rescuers with Poljot watches as tokens of the nation's gratitude.

Poljot chronometers have been keeping time for the military since 1930. This fall, the First Moscow Watch Factory, which makes the watches, celebrates its 75th anniversary, marking an unlikely evolution from Soviet mass producer to niche manufacturer for Russia's emerging middle class.

The factory was initially established to produce precision timepieces for the military -- and later the Soviet space program. Poljot, which means "flight" in Russian, was the first watch in space, accompanying Yury Gagarin on his historic orbit of the Earth in 1961.

In the Soviet Union's planned economy, the watch industry was a key component of the military-industrial complex, with armies of workers and superlative production numbers.

"Back then, every factory had 2,000 to 10,000 workers producing millions of watches annually," said Ivan Ksenofontov, general director of the First Moscow Watch Factory. Of the 10 major factories of the Soviet era, he said, only three are left: his factory; the Vostok plant in Chistopol, Tatarstan; and the Zarya factory in Penza.

In its heyday in the early 1970s, the First Moscow Watch Factory produced as many as 2.7 million mechanical wristwatches. Though durable, the watches were often clunky and conservatively styled. As a result, a foreign watch -- like a pair of blue jeans -- was a prized possession for the Soviet citizens who managed to get their hands on one.

About 50 percent of the Soviet Union's watches were sold in other socialist countries. Today, no more than 10 percent of Russia's watches are exported, according to Rosinex, organizer of the annual Moscow Clock and Watch Salon.

The switch to capitalism hit watchmakers hard. Like other industries, watchmakers saw generous state subsidies dry up, equipment become outdated and the work force age.

The introduction of foreign watches in the early 1990s seemed to spell the end of brands like Poljot: The wealthy thirsted for Swiss watches, while ordinary Russians went for cheap imports from Asia.

Today, it is estimated that no more than 4 million watches are produced domestically, a fraction of the 20 million watches that are sold annually in Russia.

Many factories closed -- or were forced to adapt.

"There was a complete lack of marketing plan in the early 1990s," Ksenofontov said, recalling how Poljot was at first blindsided during its plunge into free-market capitalism.

Diversifying Poljot's designs was the first step toward shoring up the company's competitive edge. In the past four years, Ksenofontov said, Poljot has produced 200 different models, of which 95 percent are mechanical.

Last year, Poljot was fully privatized, with the state shedding its stake in the factory completely. Ksenofontov refused to disclose the company's ownership structure or annual revenue.

As a fully privatized company, Poljot has severely cut annual production -- from 500,000 as recently as 2004 to 60,000 in 2005.

Vladimir Filonov / MT

Lyudmila Kosarova, a master who has worked at the Poljot factory for 38 years, assembles seven watches per day.

The firm now focuses exclusively on upscale mechanical watches. Ninety percent of parts are made in Russia and 10 percent in Switzerland, Ksenofontov said.

Poljot has begun to target 24- to 35-year-old Russian men with watches showcasing the factory's history and military past.

While the price of the best-selling Poljot watches was about $300 five years ago, Ksenofontov put today's price range at $500 to $3,000. He considers Swiss brands like Tissot and Longines as competitors.

"The Swiss competition is healthy, it sets a standard," he said.

The factory's location in central Moscow pushes salaries and maintenance costs up, forcing Poljot to narrow its focus. The company employs about 450 people, down from 8,000 in the Soviet era.

"There is a big shortage in skilled workers and salaries have increased, so we cannot produce as many watches as before," he said.

Apprentices must spend two years under a master watchmaker's instruction, and that happens "one or two people at a time."

The factory is an imposing gray building whose entrance is tucked away on a side street near the Proletarskaya metro station.

Masters like Lyudmila Kosarova produce seven watches daily in a large room, each assembling and inspecting the timepieces at their own worktables.

"I've been working in the factory for 38 years and love what I do," said Kosarova. "After [1991], things were tough, but some younger workers have come, so I'm optimistic about the future."

Sergei Panchenko, president of Toner, a watch distributor based in St. Petersburg, said that Poljot could face up to the international competition if it was able to win over brand-conscious Russians.

"Changing the mentality of Russian consumers can only come about through advertising and marketing, showing that Russian watches are not worse than -- and are even as prestigious as -- Swiss watches," Panchenko said.

While Poljot saved itself by aiming at high-end customers, the Tatarstan-based Vostok did exactly the opposite, taking the cheap Asian competition head on.

Today, the factory produces about 1 million watches annually, said Marat Khakimov, assistant general director of the Chistopol Watch Factory. Like Poljot, Vostok found its salvation in diversifying its product line.

"We started making more fashionable watches at a mid-level price," Khakimov said. A Vostok watch retails between $40 to $50.

Unlike Poljot, however, the Chistopol factory still employs 4,000 workers in a town of 60,000 and receives considerable help from the government of Tatarstan.

Not all companies managed to survive in their Soviet-era form, however.

The Second Moscow Watch Factory, the maker of the Slava brand since the 1950s, recently stopped mass production and sold its factory space to a bank.

Zolotoye Vremya, which specializes in gold watches using Russian and Swiss parts, broke off from Poljot in 1992, Ksenofontov said.

While both Poljot and Vostok are largely focused on the domestic market, they have also discovered the novelty value of Russian watches abroad.

Poljot's Ksenofontov said that 40 percent of his factory's watches were sold abroad, with Germany accounting for 60 to 70 percent of international sales.

The mere size of Germany's economy is an important factor, he said, as is a long-standing distribution network there.

"Curiosity fuels consumers when they buy Russian watches," said Malcolm Lakin, managing editor of Europa Star, a Geneva-based trade magazine.

But he cautioned that "those who want a $350 watch ... will go for a cheap Swiss watch over a nice Russian watch."