Canadian Cyclist


November 8/97 22:16 pm - Womens World Cup, Industry News

Posted by Editor on 11/8/97

Women‚s World Cup - 1998 March 29 Sydney AUS World Cup #1 June 7 CoreStates Liberty Classic USA World Cup #2 14 Ottawa Grand Prix CANADA World Cup #3 August 2 Trophée International FRA World Cup #4 September 13 Ladies Tour Beneden Maas NED World Cup #5 27 GP Wilhelm Tell SUI World Cup #6 Note: the Canadian event is listed as taking place in Ottawa since that is where the Canadian Cycling Association is based (the CCA is currently listed as the organizer). The race may or may not take place in Ottawa. Industry News (courtesy the Coffrin Group - Consulting Services & Industry Research) SCOTT USA DISCONTINUES SALES OF BIKES Scott USA of Sun Valley, Idaho announced on November 4 the „discontinuance of sales and marketing of Scott bikes and bike accessories in North America.‰ Scott USA said that the company „will concentrate on their core products‰ of optics and winter sports accessories. This move by Scott USA does not affect the continued sales of Scott bikes in Europe. Scott reports that European bicycle sales were up 23% in the 1996-97 sales year and that year to date sales are well ahead of last year‚s pace. (Note: there is currently no Canadian distributor for Scott. Scott was formerly distributed by Veltec Canada, out of an agreement with Scott USA) COFFRIN GROUP ANALYSIS The reason for this move was simple: Scott‚s sales of bicycles in the USA have been weak and probably unprofitable. Now that Schwinn and Scott are separate entities, Scott‚s infrastructure and overhead costs had to be high relative to its small sales volume. Competitive pressures currently make it difficult to make a profit selling bicycles in the USA market. We are surprised that Scott USA did not choose to either 1) continue selling only bicycle accessories or 2) license the rights to the Scott name. A few years back Scott USA had good accessory and component sales and an image as a supplier of innovative products. Sales of aero handlebars for road bicycles peaked at about US $2.5 million, and Scott had numerous other products that with good designs and excellent aesthetics. The official announcement of Scott‚s departure came from Larry Morton, Vice-president of Scott USA and not from the Chairman of Scott Sports Group. This interesting detail - plus the (rumored) continued equity position of the Zell-Childmark Fund in Scott Sports Group - may mean that there will be additional changes at the firm. CHANGES AT SCHWINN Schwinn Cycling & Fitness of Boulder, Colorado announced on November 6 the departure of Richard Bradham, the head of Schwinn‚s Accessory Division for nearly four years. Questor Partners Fund, a privately held equity fund based in Wisconsin, purchased Schwinn in August of this year at a price said to be approximately US $80 million. COFFRIN GROUP ANALYSIS This change in the Accessories Division may be the first of many changes for Schwinn. Questor has been actively searching for some time for a CEO for Schwinn. We predict that new management at Schwinn will bring a different vision to the company and will significantly change Schwinn‚s marketing and distribution strategies. Questor did not invest $80 million to pursue the same old strategy of the previous owners. Schwinn‚s previous owners paid US $43 million for the company, and they were disappointed in their returns on that investment. Bike sales to only the independent bicycle dealer (IBD) channel - at current margins - cannot generate the desired level of returns. We may see revolutionary changes at Schwinn. Perhaps Questor will use the Schwinn name on products outside of the bicycle industry - perhaps sporting goods, clothing, or even toys. Perhaps Questor will introduce Schwinn bicycle products to new channels of distribution. (Hint: Do not rule out the use of TV infomercials.) We believe that Questor will pursue new ways of leveraging Schwinn‚s strong brand recognition to make the returns on their investment that they will want. Questor, we predict, will recruit new executives with impressive business credentials. Schwinn, however, must maintain its ability to deliver a strong line of bicycles to the IBD channel or it will suffer significant setbacks. The IBD channel is a product-driven market, and Schwinn cannot succeed if it believes talented business people can generate huge sales without superb product. Questor must recruit and retain both strong business people and talented product people to move ahead in the IBD sector. SRAM BUYS SACHS Mannesmann Sachs AG of Dusseldorf, Germany announced that it has sold its Sachs bicycle component division to SRAM Corporation of Chicago, Illinois. Mannesmann Sachs derives 85% of its revenues - about US $2.5 billion - from sales of automotive components. Sachs‚ bicycle component sales for fiscal 1997 were about US $150 million. Sachs has 1,250 employees world-wide. SRAM operates manufacturing facilities for its twist-grip shifters in Chicago, Mexico, Taiwan, China, and Ireland. SRAM also produces limited quantities of derailleurs. COFFRIN GROUP ANALYSIS Certainly Sachs‚ position in Europe can help SRAM. Sachs‚ internally geared hubs, we are told, generate more revenue than any of their other products. With the international bicycle market increasingly looking at Suburban Utility Bikes (SUBs) and other designs besides mountain bikes, we believe the internally geared hub to be of major strategic importance to SRAM. Sachs‚ new derailleurs have met with the best reviews that the company has received in years. Will SRAM/Sachs quickly gain strength and approach Shimano in sales? No, not in the near future. However, SRAM/Sachs now has a broad range of geared hubs, derailleurs, twist-grip shifters, and chains that will allow SRAM to address nearly all aspects of the drive train market. The long-term potential for SRAM/Sachs is certainly interesting. Perhaps SRAM will attempt to take the privately held company public in the not too distant future. We predict huge and costly headaches for integrating a formerly German owned company having French plants with a new management team from the USA. Sachs‚ recently dismissed its USA President, John Neugent. The dedicated and well-respected Neugent headed an unsuccessful attempt at a management buyout of Sachs. The Classifieds, Subscription and Links forms are working once again, so send in your for sale ads, subscription requests and links via the appropriate page. We have a considerable backlog of Classifieds to post, so check back over the next 24 hours to see if anything catches your fancy...


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