“Hey! How Come You’re Still Around?” Conversations With Survivors

It’s old news, of course, that we’ve gotten to the point in this industry where probably north of eighty-five percent of the snowboards sold come from a handful of brands, mostly made by ski companies with the usual exception. And if that concentration is not how we’d like it to be, it’s how it almost always is. Don’t worry; I’m not going to give you the lecture on consolidation again- it’s too late to help anyway.

 But there are a number of small brands still out there when hundreds of others aren’t. How have they done it? Have they found the proverbial “defendable market niche?” Or did they just luck out and find an investor with too much money and not enough common sense? Or maybe, at different times, both.
 
So I’m going to call some of them up and ask something tactful like, “How come you’re still in business?” If they don’t hang up on me, maybe we’ll all learn something.
 
My Guess?
 
Okay, not completely a guess, as I’ve talked to most of these people before over the years and have watched them build their brands and companies. We’re going to find a high level of continuity in management, and a lot of support from shareholders. These are brands that have been around a while.
 
None of them ever thought they were going to be “the next Burton.” They were balance sheet aware, and never tried to grow faster than their financing allowed. They’ve generally figured out how to make money, and are bemused and perplexed when they hear about brands doing 30,000 snowboards and losing money. Advertising, promotion and team riders? It’s a good thing- as long as you can actually afford it. Having happy retailers who sell through at full margin, call for more product, and then can’t get it seems to be their approach to marketing. Oh, and, for some reason, they seem to only want to sell to people who can pay them on time.
 
They have generally discovered a market niche, and it’s typically high end. In one case, they’ve discovered that they aren’t only a snowboard company. Here they are in alphabetical order.
 
Glissade
 
“We’ve been making snowboards for seventeen years,” says Glissade founder and president Greg Pronko. “I think we might be the sixth oldest snowboard brand in the world.”
 
But Glissade no longer sees itself as strictly a snowboard brand competing only against other snowboard brands. They produce a relatively small volume of a few thousand very high-end boards, and don’t want too much volume. What they’ve learned to love is working with materials and figuring out how to use new ones. They have evolved to the point where they earn revenues from materials research and development, and rapid prototyping for other companies in snowboarding and other industries.
 
In spite of these other activities, the Glissade brand is the founder’s true love. But the love that goes into these custom, low-volume boards has a price. One of their decks will set you back a bit north of $500 at select retailers. For a little more, they’ll be happy to make you a custom board. Or you might call them and see if you can get on the list to get one of only twenty-five 195s they make each year.
 
So what have we got? Year around cash flow, a redefinition of their market niche that allows them to compete, no warranty problems, and a product that doesn’t require a big advertising and marketing campaign to check at retail. Oh- and good margins for Glissade and the retailer. 
 
Heelside
 
Heelside started as a boot company before expanding into bindings and, more recently, boards. They are heading into their seventh season. President Jim Ferguson emphasizes the continuity in investors and employees they’ve enjoyed since the company was founded. “Consistency of ownership and management has been key for us,” he says.
 
They have also enjoyed a few other advantages. Jim’s background in making boots went a long way towards getting Heelside started without some of the startup and growing pains that other companies have typically experienced. When they did decide to make boards (interestingly enough, at just about the peak of the consolidation), they purchased high quality equipment for not much money from a factory going out of business and hired the manufacturing team to make Heelside’s boards. Good for cash flow, and good for avoiding mistakes in learning the manufacturing process.
 
Growth is a good thing, but “The numbers have to make sense,” says Jim. “We’ve always lived within our means,” he emphasizes. “We do as much marketing as we can, but keep a close eye on the bottom line.”
 
Evidently Heelside isn’t sure how much being cool will help if you can’t pay your bills.
 
Of the up to 15,000 boards they expect to sell this year (depending on the snow) most will be sold in North America. One thing Heelside has in common with many of the other brands being discussed here is no dependence on the Japanese market for financing. I’m sure we all remember when Japanese prepayment for boards dried up, and one hundred plus brands vanished in short order.
 
Never Summer
 
They were profitable when they were only making 7,000 boards. That was the plan. Now, they’re making more, but maybe not as many as you might expect from a brand that’s been consistently pursuing its plan for ten years. They’re still making money. “Clean distribution, limited supply, unmatched customer service and exclusive territories for retailers,” is the foundation of their market position, explains co-founder Tracey Canaday.
 
The average wholesale price is higher than most brands, but Never Summer uses a layered, precured, pretensioned fiberglass that, according to Tracey, costs about three times as much as the glass in a traditionally made board. They also make their sidewalls out of sintered ptex. The result, according to Tracey, is a construction that makes the board more durable and responsive and gives the retailer something to sell.
 
Never Summer, located in Colorado, doesn’t sell a single snowboard in Japan. Zero, zip, nada, the big goose egg. So clearly when the Japanese market crashed, it didn’t hurt them much. Might even have helped their competitive position. Would they sell some boards there? Sure, but they haven’t been approached by the right potential partner and don’t want to be distracted from their retailer focus.
 
There’s little discounting at retail, and typically few Never Summers left over at the end of the year. Scarcity does much of the marketing for them. Want to buy a Never Summer? Better go find one now (October 3) and expect to pay full retail.
 
There are only four or five managers at the company, and two of them are owners. They are careful where they spend their dollars. For example, all new accounts are COD, no matter who they are. “This is our retirement,” says Tracey.
 
I’d be careful too.
 
Option
 
“We’re modest in our goals and live within our means,” says Option President Geoff Power. “We have really good people who don’t have stars in their eyes.”
 
Option was started in August of 1992. Geoff gives a lot of credit to the company’s investors, who have always taken the long term view, don’t need a return to live on, and have been willing to help the company over some rough spots or to take advantage of opportunities. One of those opportunities was the acquisition of the snowboard apparel company NFA at a time when lots of apparel companies were available for purchase. NFA has been able to grow and transition nicely in the direction of the street ware/lifestyle market. 
 
There was never a big dependence on Japan, so when that market cratered, it didn’t have as much impact on Option as on its competitors.
 
Option has done many of the same things as the other smaller, successful, brands mentioned in this article. They are careful with distribution. Their product cost is above the average but also, according to Option, better made. Customer service is critical. They like to be paid by the people they sell to, and control their marketing expenses consistent with their overall financial plan and capabilities.
 
It seems to be working.
 
Silence
 
One of these days, I have to remember to ask BK Norman, the lead dog at Silence, what BK stands for. Silence is nine years old. Their story is a bit different from the other brands mentioned above, but BK has been there for the whole ride. Continuity seems to be important.
 
When Silence was started, it had the good fortune to be owned by a guy who, in terms of his understanding of the snowboard business, had more money than sense. He had a whole lot of money. Like a real lot. He spent it on Silence. After all, snowboarding was hot. So they could build up the brand in a few years, go public and all retire rich. Seems like I’ve heard that story somewhere else before.
 
Never mind. Anyway, BK kept going “Uhhhhh, I’m not quite sure we can sell as many boards as you want,” but who was he to turn down all this marketing money? It’s just too much to ask a snowboard guy to do. The marketing money got spent. As BK had foretold, not as many boards as the inflated corporate plan required were sold. It was a financial mess, but the literally millions of dollars spent on advertising and promotion created brand awareness.
 
Silence has changed hands twice. The first time, it was sold to A Sports which also bought Avalanche. Now, a new investment group has picked up both Silence and Avalanche, and is working closely with BK, Dale Rehberg and Maureen ter Horst to run the brands the right way. “I always managed to find a new investor before things really cratered,” was the way BK put it. “A lot of money was wasted on huge corporate business plans that never came true. Now, we are concentrating on building our business on a grass roots level working closely with our retailers all over the world.
 
So now, well financed and with a realistic business plan, BK uses the brand awareness created in Silence’s early “drunken sailor” spending period to make some money.
 
The Japanese distribution has been kept intact over nine years. The distributor didn’t go bankrupt and the market was never over supplied. BK has stayed focused on building and selling snowboards. Most of the business is to specialty shops, but that is changing gradually. Because of the wider awareness the brand has and the presence of Avalanche, he can expand his distribution a bit more than some other smaller brands without damage. “We’ll keep Silence true to its history as a specialty shop brand and expand the distribution for Avalanche,” he says.
 
I Think I See a Pattern
 
These brands have quite a bit in common. Continuity in management would seem to be high on the list. Financial acumen with a balance sheet focus is up there too. Growth was kept consistent with their financial capabilities, and an awareness of whom their customers were. They focused on the bottom line, not the top. They tend to have their own factories. They spend a lot of time thinking about their distribution.
 
Anything there that should surprise us? Nah. Any small company that successfully competes against much larger brands has to have an answer to all those issues.