Jarden Corp. is on track to cut $29 million in costs in 2008 thanks largely to cost savings it has identified at K2. That cost cutting, moreover, may even bring assembly or manufacturing jobs back to Mexico or the United States.
The company cut $12 million in costs in 2007, putting it on track to eliminate $29 million this year President and CEO James Little told investors and analysts at a presentation last week.
So far, the savings have come from renegotiating contracts and pooling purchasing, but moving forward Jarden expects continuous improvement to lower offshore manufacturing costs at plants making K2 product.
With its $1.2 billion acquisition of K2 last August, Jarden beefed up its Outdoor Solutions unit. The business, which also owns the Coleman, Marmot, Penn, Rawlings, Worth, Shakespeare and Volkl brands, generated $1.70 billion, or 45%, of the companys $4.66 billion in revenues in 2007. This year, it is expected to account for 45% of revenue.
Jarden has slashed K2s transportation costs by up to $800 per container by bringing it under the companys corporate contracts. K2 imported 8,000 containers last year.
In China, Jarden has cut the number of freight forwarding firms K2 works with from 15 to three, saving another $1.2 million. An additional $500,000 was saved by shifting K2 shipping operations from the Port of Hong Kong to the more efficient Chinese port of Yantian. In one instance, it discovered one K2 plant paying 20 percent more for the same resin as another. The company thinks it can shave K2s travel and entertainment costs by up to $500,000 a year.
“Clearly we had a situation at K2 where you had great brands and great marketing, but not great integration,” said Little. “So as we integrate K2 into Jarden, we are also kind of rolling K2 into itself, because its really an unrolled roll-up.”
In 2008, Jarden expects more savings at its Chinese plants, where it is expanding Lean and Six Sigma continuous improvement programs. Still, later this month, it is dispatching a team to evaluate Vietnam, Sri Lanka and other alternative manufacturing sites.
“We dont want all our eggs in one basket,” said Little. “China is looking a lot like Mexico 10 years ago so we are looking at Ski Lanka and, quite frankly, we are looking at Mexico again and the U.S. for assembly.”
On the growth side, the new head of Jardens Outdoor Solutions unit, said he sees the greatest opportunities in apparel.
“Thats a big space and we are very underdeveloped there,” said Gregory Shearson, who joined Jarden two months ago from Pepsico Corp. “There is a tremendous amount of upside we can bring to that part of the portfolio.”
Shearson said current economic conditions are validating Jardens strategy of owning dominant brands in niche markets.
“We are seeing double-digit growth across our core portfolio,” he said. “Where we are selling fastest and most are premium products. It really shows that premium, innovative breakthroughs and authentic leadership positions get recognized by the consumer.”
