The president and CEO of Dorel Industries Recreational/Leisure segment said he is spending 50 percent of his time investigating acquisition targets.
Robert Baird said he is focusing his search on higher margin parts and accessories companies and bike brands that will help the company expand its presence overseas, particularly in Asia, which now accounts for less than six percent of its nearly $1 billion in annual sales.
“We are very active very, very active – with acquisitions right now,” said Baird in a presentation during Dorel Industries investor day last week. “We lost a couple of very big ones over last 18 months. I’m pumped about some of the things we are working on right now.”
Dorel Recreational/Leisure is one of the world’s largest bicycle suppliers. Its Pacific Cycle unit is the largest provider of bicycles to Walmart and Target, while its Cycling Sports Group focuses on selling Cannondale, GT, Mongoose and Schwinn bicycles and Sugoi and Cannondale apparel to independent bike dealers, or IBDs.
The crown jewel of the business has been Cannondale, which has doubled its sales since Dorel acquired it in early 2008. Baird said Cannondale “is on fire,” thanks to pro cycling victories and the success of the Super Six Evo road bike, Scalpel 29er mountain bike and an e-bike that has been praised by cycling magazines in the Netherlands. Cannondale recently announced it would launch its own pro-cycling team in January.
Dorel Recreational/Leisure has increased gross margins by 52 percent since 2009 by reining in its supply chain and spending its marketing dollars more effectively. For instance, it has cut the number of bike frame vendors in half to seven and greatly reduced the Cannondale team, which had swelled to 400 by the time Dorel bought the company in 2008.
Since 2009, the segment has doubled what it spends to market its products and increased R&D spending by 60 percent. In every instance, consumers have responded by buying more Cannondale, Schwinn and GT bikes. Baird estimated the company has increased its share of the IBD market from 4 to 12 percent in the U.S. and from five to nearly 10 percent in Western Europe. Only in the last year has the company begun investing in marketing Mongoose, a BMX brand that generates about $100 million in annual sales.
“It is the last one in the portfolio to get marketing love, but it is responding,” said Baird.
Dorel has also had success pushing up price points in the mass channel.
“We now have Schwinn products at Wal-Mart in the mid-400s and they used to cap out at $299, so we are pushing price points up behind innovation,” Baird said.
To increase velocity of sales at Wal-Mart, where store employees can be few and far between, Dorel is experimenting with an iPad customers can use to determine what bike and accessories they need. The hope is to not only increase units per transaction but margin, since helmets, jerseys and other accessories carry higher margins.
EDITOR’s NOTE: Baird put on a high energy – and at times combative performance during his presentation. When asked about a competing product from Specialized Bicycle, he responded: “The owner of that company is called Lord Voldemort to me, but he is actually good for us because he makes a lot of enemies in the industry.” The reference was to Specialized Founder and President Mike Sinyard, who has been criticized for pressuring his dealers to drop competing brands. Baird went on to describe Specialized’s aggressive recruiting of Cannondale engineers. One wishes Baird, a competitive hockey player with 25 years of martial arts experience, could participate in more conference calls, but it’s not hard to imagine why Dorel CEO Martin Schwartz limits his appearances.