Canadian Cyclist


June 16/98 10:13 am - Bicycle Industry News

Posted by Editor on 06/16/98

Every now and then, we publish excerpts from the Coffrin Group newsletter (with their permission). Here are some of the latest.

-- Answer Products Goes Dealer Direct --

After establishing Giant and Diamond Back as Answer distributors just last fall, Answer Products announced on June 10th plans to go dealer direct in the USA market. The company will use independent reps to sell the Manitou brand of forks and components to USA specialty retailers. (Ed. Note: expect changes in Canadian distribution to follow)


Answer gained considerable OE spec last year, largely at RockShox's expense. Going dealer direct is an aggressive step from a company that is trying to take advantage of RockShox's stagnation.

After costly product recalls of a couple seasons back, Answer has returned with a vengeance. Look for Answer to introduce new components and accessories at an accelerated pace. Expect Answer to try to take bites out of RockShox's market share.

-- Changes At Specialized Bicycles --

In early May Specialized announced that the company had leased a 45,000 square foot facility in Utah to assemble bicycles. In early June Specialized announced that the facility was really closer to 106,000 square feet and that bicycle storage and distribution would also be centralized at this new location. (Ed. Note: we have been told that Canadian distribution is not expected to change much)

The Salt Lake City facility will allow Specialized to fully control the assemble of many of the company's bicycles that retail for US$1000 plus. Assembly was previously performed by an outside company owned by ski industry veteran John Jelinek. Many of the Specialized framesets for these assembled in USA bicycles are built by Anodizing, Inc., a Portland, Oregon builder of aluminum and metal matrix composite (MMC) framesets.

Earlier this month Specialized trimmed its work force by 20 + people, including several long time employees. Among the respected and well known employees now on the job market are: Thom Parks, product development and helmet guru; Mark Yarger, purchasing ace and materials manager for assembled in USA bicycles; Mark Dinucci, a designer of bicycles with classic lines of grace; Spencer Owyang, suspension bicycle and future concepts designer.


It is not unreasonable to assume that Tom Albers, the new President at Specialized, is driving the move to Utah. Moving bicycle distribution to Salt Lake City makes total sense from an operational and logistics standpoint. I.e., it will save the company money.

Warehouse space is available in Salt Lake City for less that 50 percent of the rental rate for comparable space in the Morgan Hill / San Jose, California area. Blue collar labor is less expensive and a bit more available in Utah. Salt Lake offers great transportation corridors into many Specialized markets and will speed delivery to some areas.

Industry insiders report that the two Specialized buildings in Morgan Hill, California, are owned by Mike Sinyard - Specialized founder and Chairman - and are leased by him to Specialized. (Note: Specialized is a privately owned company and is not obligated to release financial information.) If Sinyard were to sell a building now at the peak of Northern California real estate values, it is reasonable to predict that capital gains on the sale of the building would exceed the year's net profit for Specialized world-wide. (Ed. Note: !!!)

Coffrin Group predicts, but has no proprietary information, that:

1. Specialized will announce that the actual size of their Salt Lake facility is not 45,000 as stated in May and not 106,000 as stated in June, but is closer to 195,000 square feet.

2. Specialized will eventually move all blue collar operations - water bottle printing, helmet assembly, parts and accessory warehousing - to Salt Lake City.

3. Specialized's smaller Morgan Hill building will be placed for sale.

The naming of Tom Albers by Specialized as President / CEO says something interesting about Specialized ... and about the bicycle industry. In tough times, operational efficiencies are critical to a healthy bottom line ... and even survival.

Tom Alber's experience and credibility will be reassuring to Specialized's current funding sources and to potential new investors. If Specialized is looking to obtain new equity funding, then a healthy bottom line is critical. Nobody understand that better than Tom Albers, who was formerly CFO at both Huffy Corporation and Trek.

Alber's guidance will make Specialized a stronger company. Albers will increase the professionalism of Specialized's management by requiring an unrelenting focus on the bottom line.

Albers understands that in a flat industry with compressed margins, payroll and operations costs must be controlled. Sinyard and Albers have made the business decisions of moving as many jobs as possible out of state and reducing the number of employees, even in the formerly sacred areas of marketing and product development.

Coffrin Group believes that Albers will help Specialized survive in a tough market. The USA bicycle industry has flat sales as measured in unit - and declining sales on a per capita basis. Albers' immediate contribution has been to force Specialized to deal with tough issues in a tough way.


The Bicycle Council (TBC) has the function of promoting bicycling to the USA market. Shimano has lead all contributors with a US$100,000 Matching Fund Grant for 1998.


No one can argue with TBC's announced goal of promoting cycling. Executive Director Jay Townley can be contacted at ( Ask to be put on TBC‚s e-mail newsletter distribution list. And, we hope you join TBC.

Coffrin Group believes promotional efforts, like TBC‚s, and advocacy efforts to obtain better roads and trails, must go hand in hand. The growth of bicycling will depend on developing more safe places to ride. That requires effective lobbying of state and national governments.

Other industries, particularly the automotive industry, have long recognized that a strong industry lobby is essential for growth. The USA bicycle industry has been much slower to realize this. (Ed. Note: ditto for Canada)

The Dutch use bicycles for an astounding 28% of all trips! A primary reason is the nationwide network of bikeways that has been developed with government funds, sometimes totaling 10% of annual road expenditures.

The USA bicycle industry (and Canadian) can learn much from the Dutch experience. Contact Charles Gandy at the Bicycle Federation of America at ( for more information on advocacy efforts to improve the infrastructure for bicycling. We urge readers to join industry groups that promote bicycling (In Canada, this means BTAC - contact them at

-- Windows 98 To Harm Bicycle Sales --

Starting today, the Windows 98 operating system from Microsoft can officially be shipped on new personal computers. After market sales of the new operating system will start June 25.


Coffrin Group believes that the release of Windows 98 will negatively impact sales of new bicycles in the USA market, particularly high end products sold to serious enthusiasts.

Enough consumers will spend their limited discretionary dollars on new PC systems and software that we predict a decline 5 to 8 percent in high-end bicycle sales. This downturn in new bike sales should last for about four to six months. (Ed. Note: we actually disagree with this one. Windows `98, and the whole anti-trust thing, has left many people with a bad taste in their mouth about Microsoft. Plus, Win98 has not received strong reviews)

-- Electric Bikes Are Happening Now --

(Ed Benjamin - Ft, Myers, Florida. Benjamin is a free lance writer and sometimes works with Coffrin Group on select projects.)

Sales of electric bicycles in Japan in 1997 claimed a whopping 18% of the money spent on bicycles. Yamaha‚s PAS sales have exceeded 300,000 units since 1993 and Yamaha now has agreements to supply the power plant to five major bicycle companies in Europe and the USA.

Frank Jamerson (, author of Electric Bicycles World Wide 1998, estimates cumulative world wide production from 1993 through 1997 as 659,000 units. Japan, Taiwan, and China are the leading suppliers. Total world-wide production during 1997 alone was 381,000 units.

Jamerson, Lee Iacocca (EV Global Motors), Gary Starr (Zap Power Systems), and others keep predicting 2% of the world bicycle market will be electric by 2000. This would mean 2 million e-bikes in production within two years. Some PRC (China) bike makers are predicting that the domestic Chinese e-bike market may be 15% of total bike sales - or nearly 5 million units - by 2001.

While USA bike companies and retailers are going slow, world-wide unit sales of e-bikes are about to become larger than the total bike sales of Schwinn ... and represent a much larger dollar volume.

Those who are saying that Electric Bikes are some years in the future need to wake up to the fact that Electric Bikes are a few months in the future. The old conventional wisdom of saying that „the batteries are just not there, yet...we will wait a few years‰ is becoming the mantra of the about to be left behind. (Ed. Note: while this may be true in the southern U.S., we have two things holding back electric bike sales in Canada: weather (batteries don‚t work too well in the cold), and provincial transport regulations (some provinces currently classify electric bikes as motorized vehicles - requiring licences). So we expect growth to be slower in Canada. Comments anyone?)


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