Gloomy Industry Future As Cannondale Completes Auction?
Since completing a successful and speedy auction, Cannondale resumes their operation. Industry insider Eric Van Bockern ponders on the current state of affairs in the bicycle market and has asked some key players how they felt about the economy and ultimately, if America will keep riding. All are ready to keep us firmly planted on our Selle Italia or San Marco.
Earlier this month workers returned to Cannondale’s Bedford, Pennsylvania bike factory to resume production, ending a temporary work furlough after the company filed a voluntary petition for chapter 11 in the US Bankruptcy Court. The manufacturer announced last week a vigorous auction awarded the assets of the bicycle division only to Pegasus of Greenwich, Connecticut, a private equity investment firm with around $800 million under management. The motorsports division has proven to be unprofitable and will not be operated by Pegasus. VP of sales and European operations, Dan Alloway: “The successful auction and the speedy resolution now enables us to focus on bicycle delivery and service as we enter the busy spring selling.” The only hurdle is their price points warrant the bike units be on the shop’s showroom no later than February to insure proper inventory control.
Ray Keener wrote an editorial for Bicycle Retailer, the industry bible, in December 2001. Referring to 9-11, he couldn’t have said it better when underlining the bike industry had showed to be recession-proof but an early recovery was unlikely as consumer confidence was shaken. I’ve seen little change since then. Today, the DOW was up some while KTLA TV reported the very network presenting arguably the first war live; CNN was down quite a bit in paid programming and will cancel Connie Chung’s segment (Oh well!). While the American troops are nearing Bagdad, the two first American casualties of war were flown home this week. Sears wants to sell their credit card division off since their debtors prefer going into delinquency rather than pay off their credit card balance and McDonald shut down no less than seven hundreds restaurants. Not a good recovery.
Steve Pucci, co-founder of Downeast Bicycle Specialists in Fryeburg, Maine adds: “ We have just survived the coldest winter in my memory. The snow never melted… It was very cold and I think that the bicycle retail business suffered through one of the softest spots that I can remember. It was like Canada down here! As I write this the snow is almost gone in my yard outside of Boston and the bicycle retail season has finally kicked off pretty well. I think that the bike business has always been a little countercyclical anyway so the general weakness in the economy has affected business far less than just the poor weather. Now that the good weather has begun to arrive the business has begun to revive. We can all only hope that nothing else happens to tip the fragile economy into further turmoil. We have had what may be a war-related issue that seems to have changed the speed at which products enter the United States. It seems to me that customs/ simple entry is much slower than usual. Maybe this is only anecdotal…we will see by later in the season. This has slowed our receiving department and thereby has slightly affected our shipping.” We’ve asked a few more key players what they thought of the current state of affairs after rounding up the first week of war.
One profitable restaurant owner, co-founder of Giovanni’s of Londonderry, New Hampshire George Alexandrou has this to say: “ My business is the ultimate antidote against recession and its associated stress since we sell good food and portions at an accessible price. What do most people like to reward themselves with?” he asks rhetorically. Trust me when I say I’ve left his place of business several times with a smile and satiated from the best Calzone on the East Coast. Plus if service had an emblem, it’d probably have his face on it. Christopher Zigmont, senior idea guy at Mavic in Haverhill, Massachusetts ( www.mavic-sports.com ) seems to concur: “We are cautiously confident here at Mavic USA. Historically, the cycling market has held it’s own through both economic hard times and wartime. We feel that people will continue to recreate close to home and frequently with their bikes. Commuting should see a small spike too. The winnowing of IBDs in the marketplace is a normal contraction with the financially unstable and overextended shuttering their doors. The healthy ones and the rest of the industry should benefit.”
Since an industry survey showed the average bike store owner was in his third career and averaged forty three years of age back in the early ‘90s, more dealers have taken a business like approach rather than a hobby one. It doesn’t mean they’re not overextended. The good ones somehow find the energy to work countless hours, reduce the staff they trained themselves to a minimum to keep some of the overhead as low as possible, ride with a/their club while promoting the sport of cycling within the walls of their store. Oh, and you’d be best advised to be a good negotiator and adjust the suppliers’ commitment terms so they commensurate with your business program. Those who could do that soon looked at their bottom line and not without a sigh of relief, discovered there product offerings increased while narrowing down bike lines, which is not easy with all the quality steeds out there.
If several industry drivers weren’t informed of the latest on some of the most successfully established brand names within the last two years, business periodicals have to take responsibility in negligent fact reporting. While no one has a crystal ball nor can they perform due diligence, I find it disheartening to have apparently prominent companies reviewed to soon find out they are downsizing, merging or sometimes but not necessarily worse, going out of business. One can remember Mongoose then Schwinn bringing temporary deception. Just as an example, it wasn’t long ago Cannondale was boasting a bright future, fully endorsed by journalism. No, they’re not going out of business. It’s quite possible we overlooked they took a chance in venturing in a motorsport division we cycling fans might be less interested about. Other bike manufacturers might’ve had a moped division half a century ago but few have strategically aligned themselves in a parallel hard good division. It’s hard out there for distributors, manufacturers and bike shops alike and better communication has to be re-established. After all, we are a small family aren’t we?
Tom Andrews, owner of Aries Sports/Northeast Bikes of Newbury, Massachusetts concluded: “Even though we don’t sell Cannondale products, we were saddened to see yet another bicycle company have problems. It was gratifying to see that a seemingly fluid company will now run Cannondale and continue to produce fine products. It will be a plus for the entire industry, which we all know has struggled for the past few years.”
We’d like to thank Christopher Zigmont at Mavic USA, Steve Pucci of Downeast Bicycle Specialists and Tom Andrews, owner of Northeast Bikes of Newbury. Please go and check my favorite wheelsets and hoops on the planet at www.mavic-sports.com . Downeast Bicycle Specialists is a full service bicycle parts and accessories servicing Independent Bicycle Dealers throughout the United States since 1982 and has one of the best sales rep support ever assembled. Northeast Bikes of Newbury is a top service pro-shop specializing in the latest cool soft and hard cycling goods innovations and training tips, shipping anywhere in the United States. Only at 800-501-BIKE!