Fashion designers are using -- and promoting -- Swarovski crystals to embellish gowns and bags.

01:00 AM EST on Tuesday, January 11, 2005

BY TERI AGINS
The Wall Street Journal

NEW YORK -- When NBC broadcast its annual prime-time Christmas special from Rockefeller Center last year, one company got the kind of product-placement positioning marketers dream about -- at the top of the tree.

With millions of television viewers watching, network host Al Roker announced that the 9 1/2-foot crystal star at the apex of the legendary Christmas tree had a new name: "the Swarovski Star." It was the first time in Rockefeller Center's 70-year history that a corporate sponsor claimed that spot.

Swarovski's star turn is just the latest act in the 110-year-old Austrian crystal company's drive to be known as more than a maker of frog figurines and binocular lenses. Led by 34-year-old Nadja Swarovski of the family dynasty, the company in recent years has wooed high-fashion designers and sponsored splashy parties and events to turn ordinary crystals into a fashion statement.

Much like bottled water, man-made crystals -- created from melted quartz, sand, potash, lead and sodium -- and rhinestones were long considered a generic commodity. Few people realized Swarovski's crystals were on Dorothy's ruby slippers in The Wizard of Oz in 1939 and on the sexy Jean Louis gown worn by Marilyn Monroe when she sang "Happy Birthday" to President John F. Kennedy in 1962.

But Nadja Swarovski's branding push is changing the way consumers, and her competitors, think about crystals. Silver hangtags declaring "Crystallized With Swarovski" now adorn designer cocktail dresses, cashmere sweaters, $190 embellished Seven jeans and $900 crystal mini iPods.

Now that the company has moved deeper into trendy fashions, including upscale handbags, it must compete with more of its designer clients. Swarovski also has to work harder to keep up with ever-changing fashion cycles to stay ahead of the pack.

It's a major transformation for the company, which got its start in 1891 when Daniel Swarovski, Nadja Swarovski's great-great grandfather, invented a machine to cut crystal stones to resemble faceted diamonds. His company went on to make exotic crystal beads for French couturiers such as Coco Chanel and Christian Dior.

Over the years, Swarovski expanded into making crystal components for chandeliers, industrial glass-cutting machines and optical scopes for binoculars and guns. In the late 1970s, the company, based in Wattens, Austria, also became known by collectors who bought its figurines and tree ornaments.

But Swarovski was never as famous as its aristocratic rivals, such as Baccarat and Waterford Wedgewood, in the tabletop business. The company had to coach consumers how to pronounce its name: "We tell people to think of the athlete who broke his leg on the slopes -- he 'swore off skis,' " says Daniel Cohen, president of Swarovski USA and a cousin to Nadja Swarovski.

Dismayed by her company's dowdy image, Nadja Swarovski decided it was time for a makeover. One of 30 family members working for the company, she took on the job as head of international communications for the brand in 1998. Raised in Wattens and educated at Southern Methodist University in Dallas, she had worked in New York at art galleries and as a fashion publicist.

She borrowed from the playbook of Evian, which generated buzz with memorable moments such as the time in the early '90s when supermodel Kate Moss strode down Calvin Klein's fashion-show runway swilling a bottle of the French water.

In 1999, the blond and gregarious Nadja Swarovski, who is now based in London, began courting local designers such as Alexander McQueen. Armed with a small promotional budget of $200,000, she offered some designers $20,000 in fashion-show financing and materials as long as they promised to make at least four or five outfits using Swarovski crystals. But these crystals couldn't be anonymous components like zippers or buttons. The designers agreed to credit Swarovski in their fashion-show program and add the silver hangtag to their clothes.

She met with some rejections. Judith Leiber, the upscale maker of $3,000 crystal evening bags who had been one of Swarovski's biggest U.S. trade accounts since the 1960s, said no to adding the hangtag. "Judith Leiber is already such an established name. We don't feel the need to add their name to promote Leiber," says Maggy Siegal, president of Judith Leiber.

Nadja Swarovski had better luck when she zeroed in on influential but cash-starved designers such as Zac Posen and Proenza Schouler in New York, beginning in 2002. Then 21 years old, Posen had barely scraped together family funds to launch his fashion business the year before. He eagerly signed. "I always liked crystal -- I just couldn't afford it -- and I wanted to be in the forefront of embellished fashions which were just coming in style," he says.

Swarovski's technicians helped him learn how to sew heavy crystals so that they wouldn't tear or sag the fabric, he says. In Posen's spring 2003 runway show, 4 of the 36 outfits featured Swarovski crystals, including a shimmering minidress worn by supermodel Naomi Campbell, which he dubbed "Firefly." Posen credited Swarovski at every turn. "I consider them a big part of launching my career," he says.

Nadja Swarovski was quick to recognize that Posen was becoming one of Seventh Avenue's hottest new talents. Party organizers said she spent about $150,000 to host a party for him after last year's spring show with 600 guests at the Four Seasons restaurant, installing a special crystal chandelier and huge vats filled with crystals. Posen was among the revelers who stepped into the vats to dance, while other partygoers scooped up the crystals and stuffed them into their pockets.

Proenza Schouler, another hot American designer upstart, also signed on with Swarovski, putting crystal accessories and beadwork trim on outfits in its fall 2004 runway show. But the design team was uneasy about overly publicizing the association. "Nothing is worse than when it is too obvious that there's a corporate sponsor, and we didn't want to come across as a sellout," says Lazaro Hernandez, one of Proenza Schouler's two partners. "We only did one piece -- a tank top -- that was entirely of crystals, so it wasn't too obvious."

In the end, a half-dozen stores placed orders for the $3,000 crystal top.

Nadja Swarovski also worked feverishly behind the scenes, underwriting the high-profile Council of Fashion Designers of America's annual awards and sponsoring other parties and events attended by fashion luminaries.

She opened six showrooms, dubbed "creative service centers," in cities such as New York, London, Milan and Paris. The New York office is a supermarket of crystal, one whole wall fitted with dozens of narrow drawers stocking more than 350,000 variations of crystals in every shape, color and size. The centers also help designers learn how to apply the crystals to their fabric.

Her timing was fortuitous. Starting with the year-end celebrations of the millennium, fashions had shifted to more colorful, glittering clothes with sequins and beading such as the rhinestone-buckled baguette handbag by Fendi. Other brands were finding that the Swarovski stamp was bringing added value. Over the holidays, the crystals on a $135 Anne Klein watch weren't simply mentioned as "crystals" or "Austrian crystals," but as "Swarovski crystals."

In an era of casual lifestyles, $125 crystal goblets produced by venerable brands such as Baccarat, Waterford and Tiffany have been hurt severely by $12 stemware from China. Sales of crystal ware declined 4.2 percent to $710.8 million in 2002 from $740.9 million in 1998, according to trade weekly Home Furnishings News.

But since 1997, sales of Swarovski jewelry, figurines and other products have doubled to about $2 billion last year, according to Cohen. The company, which has 430 stores worldwide, plans to add 15 Swarovski stores in the United States next year, he says.

Now the competition is aping the strategy. Next year, Waterford Wedgewood plans to announce a crystal tabletop collection designed by a famous, so-far-unnamed fashion designer, according to Peter Cheyney, spokesman for Waterford Wedgewood USA. "We obviously understand the impact of designer names," Cheyney says, noting that the company has licensed a popular tabletop collection with wedding-gown designer Vera Wang since 2002. "We will do more with designers because there are good business reasons to do it," he says.

French crystal maker Baccarat tried to snare the Rockefeller Center star, but was trumped by Swarovski's aggressive bid. Baccarat says Swarovski paid about $1.5 million. Swarovski and Rockefeller Center declined to comment.

Instead, Baccarat scrambled to secure a consolation prize. The lit-up "Baccarat Snowflake" is currently hanging over the intersection of Fifth Avenue and 57th Street in New York. The company hired actor and fashion icon Sarah Jessica Parker to flip on the switch.