Kings of bling

 

Austria's leading family business, Swarovski Crystal, is booming despite robberies, bomb plots and kidnap threats afflicting the family. Derek Scallycatches up with a phenomenon

Diamonds might have been Marilyn Monroe's best friend, but when she cooed her infamous Happy Birthday, Mr President to JFK, in 1962, all eyes were on her skintight gown as it shimmered with thousands of Swarovski crystals. And remember the shoes that Judy Garland wore in The Wizard of Oz? They wouldn't pass today's trading-standards laws: the glittering stones on her slippers weren't rubies at all but Swarovski crystals.

For more than a century the Austrian name has been synonymous with brilliant cut crystal. The company is a global operation with 19,000 employees and an estimated worth of €4.6 billion. Yet it is still a family operation, and for years the lives and loves of the Swarovskis have provided continental Europe with its longest-running soap opera of glamour and tragedy, feuds and fortunes - and as the company enjoys a 21st-century renaissance the family is locked in a battle over its future.

The Swarovski story begins in Bohemia, the heart of the Austro-Hungarian Empire and a home to world-class glass production since the Middle Ages. In 1883 Daniel Swarovski was born in the Bohemian town of Georgenthal, today in the Czech Republic. He learned the family glass-making trade from a young age but found his life's calling at the age of 21, after a visit to Vienna's first electrical exhibition. Inspired by the industrial giants Werner von Siemens and Thomas Edison, Swarovski developed a machine that mechanised the laborious grinding and cutting process of crystal production.

In 1895, patent in hand, he went into business with his friend Franz Weis. They went on the hunt for a location where they could produce crystal more cheaply than in Bohemia, and away from the region's many competitors. They settled in the Austrian town of Wattens, about 15km east of Innsbrück, eventually using the nearby Wattenbach river to power and cool the grinding machines.

Swarovski's "Tyrolean-cut" stones were soon a hit with belle époque ladies and jazz flappers alike, and the company's crystal stayed in the public eye through two world wars thanks to a mix of high craftsmanship and clever collaborations with Coco Chanel, Christian Dior and celebrities such as Maria Callas.

After the second World War Swarovski's son Wilhelm developed a new series of precision optical instruments, such as scopes for guns and binoculars. Another division, Tyrolit, makes cutting materials for the car industry and contributes a quarter of group sales. Despite these expansions, crystal production has remained the backbone of Swarovski. The company sold 18 million stones last year, generating three-quarters of the company's €2.4 billion sales.

Swarovski's modern success began in 1976, after years of decline, with a chance creation: a crystal mouse key ring produced for the Munich Olympics welcome pack. The demand for the tiny creature - bits of chandelier glued together - was so overwhelming that a Noah's ark of crystal animals followed. Now more than 400,000 people worldwide are members of the company's collectors' club, paying up to €10,000 apiece for limited-edition figurines.

The company is governed by a strict family rulebook imposed by Daniel Swarovski. During his lifetime he gave a whole new meaning to the term "keeping it in the family" by marrying the sister of Franz Weis, his partner. Weis in turn married Swarovski's sister.

When Daniel died, in 1956, his sons Fritz, Fred and Wilhelm inherited 51 per cent of the company; the Weis family held the rest. Their inheritance came with strict conditions that apply to this day: shares in the company can only be sold within the family or inherited by children on their parent's death. Shares of childless family members are distributed equally between the three family lines that survive.

Some 28 family members work in the company; 58 are partners with voting rights; and 150 hold shares. Their wealth has made the Swarovskis a notoriously discreet clan, one that closes ranks when tragedy strikes, as it does with startling regularity.

In November 1993 police were called to the home of Andreas Schiestl-Swarovski, great-grandson of Daniel, after he apparently tried to shoot himself and his wife, Margreth. Both were rushed to hospital; they survived with severe injuries. Andreas landed in a psychiatric facility but was released several months later, when, mysteriously, all charges against him were dropped.

Margreth survived the apparent suicide pact with long-term spinal damage and a painkiller addiction. Last December she died when her Porsche crashed into a tree at high speed. In January Andreas shot himself.

It's not just tragedy that keeps the Swarovski family in European newspapers: headline-maker-in-chief is the family's 42-year-old femme cristalle, Fiona Swarovski. Austria's number-one party girl divides her time between Tuscany, Paris and Capri, and had already been married twice when, two years ago, she snagged Karl-Heinz Grasser, Austria's then finance minister, whose matinee-idol looks earned him the title "Austria's favourite son-in-law".

Their whirlwind romance was well documented in the tabloid press, and it was a picture of him kissing Fiona in public that encouraged him to break it off with his girlfriend. Hours later the now ex-girlfriend drove her car into a tree.

Since their very public wedding, in 2005, Karl-Heinz and Fiona have become continental Europe's Posh and Becks, and can be seen in glossy magazines lolling around bare-chested (him) or smoking at the beach while eight months pregnant (her).

Fiona's only family rival for tabloid column inches is her cousin, Nadja Swarovski-Adams. She is the great-great-granddaughter of Daniel Swarovski, and her father, Helmut Swarovski, is group chairman. Based in London, Nadja has become the young and hip public face of Swarovski. She used her society connections and marketing nous to shake off Swarovski's image as a maker of lucrative if kitsch crystal. With the help of the late Isabella Blow, she revamped the brand in the fashion world by making sure the right celebrities were seen in Swarovski creations by Armani and McQueen, Westwood and Treacy.

Nadja's annual "Fashion Rocks" charitable event has become one of the biggest dates in the fashion calendar, and she has pushed Swarovski into the high street with new stores across Europe, including two in Dublin.

In November 2005 Nadja's high profile attracted the attention of two burglars, who broke into her Knightsbridge penthouse and forced the heiress, then nine months pregnant, to open the family safe and hand over an estimated €350,000 in jewellery.

The recent headlines - robberies, bomb plots, even kidnap threats - have shocked older Swarovskis, who all lead quiet lives in Austria, but they reflect the contradiction and growing conflict at the heart of Austria's leading family business: the company is in rude health, with sales expected to reach €3 billion by the end of the decade, but as Nadja and the rest of the fifth Swarovski generation take over, the company has to decide if their high profiles and often outrageous antics are at odds with the discreet Swarovski image favoured by older family members, or if they are its future.

The most pressing question for the company is whether it should expand the luxury-goods segment, to make Swarovski the king of bling, or continue to milk the steady if staid cash cow as a maker of household items and crystal collectables. "Crystal is perfect for everyone in the spotlight. For us, everything is about glamour," Nadja told Austria's Profil magazine recently. But Daniel Cohen, head of Swarovski's US operation, disagrees. On his side of the Atlantic, the company is still best known for its homewares and crystal animals. He told Forbes magazine recently: "Luxury is important, but we earn our money with day-to-day items."

The new marketing push, in particular the new Swarovski stores around the world - including Ireland, has reawakened bad memories for older family members. They remember when Swarovski bought Zale, a US jewellery chain, in 1986. The promised dream venture lost money from the beginning; it was ended in the mid-1990s at an estimated cost to the family of more than €35 million.

Adding to the conflict potential inside the clan is the demand by several high-profile members for the creation of a family foundation, to allow parts of the Swarovski empire to be spun off. "There are 60 to 70 partners, with new ones coming every week. That's a situation in which one cannot make clear decisions any more," Gerhard Swarovski, head of the optical division, told Austrian television.

Younger family members are in favour of unbundling the Swarovski structure to allow lucrative public offerings. Older members are holding back.

Private or public? Shiny bling or napkin rings? A century after Daniel Swarovski went into business his descendants have to decide how hard to squeeze the goose that lays the crystal eggs. u

HOW DO THEY DO IT?

The recipe for Swarovski crystal ranks with Coca-Cola's as one of the world's great trade secrets. The basic process involves mixing the main raw material, silica sand, with secret ingredients and then baking the result in a platinum-coated oven; the metal prevents unwanted chemical reactions. The mixture is stirred carefully to prevent bubbles and add sparkle, cooled and then cut in the patented Swarovski grinding machine.

  • Marilyn Monroe's skintight Jean Louis gown dripping with Swarovski crystals fetched $1.2 million at auction in 1999.
  • A year later a pair of Swarovski crystal-encrusted "ruby" slippers, one of four pairs made for Judy Garland, sold for $660,000.
  • Swarovski supplies the star that perches on top of the Christmas tree at Rockefeller Centre in New York. Last year they started a new tradition in Berlin, unveiling a stunning crystal Christmas tree at the city's new central train station.
  • To mark its centenary, in 1995, Swarovski opened a crystal theme park in the company's home town of Wattens. Today it is one of Austria's top-five tourist attractions.