Jarden Corp. helped a French executive acquire the Rossignol brand from Quiksilver in 2008 largely to rein in the ski company’s disruptive business practices, including overproduction and paying athletes exorbitant fees to endorse its skis, Jarden’s CEO disclosed last week.
Jarden CEO Jim Lillie noted that when JAH invested alongside former Rossignol CEO Bruno Cercley and a private equity firm to buy the brand in 2008, it was only selling 600,000 of the 900,000 pairs of skis it made each year and paying its athletes ten times what JAH paid its athletes.
Today, Rossignol makes about 600,000 pairs of skis a year, but sells all of them and spends millions of dollars less on athletes, Lille said. It has gone from losing €50 million a year to making money and become a more rational competitor in the marketplace.
“The reason why we bought them is because it didn't help our ski business to have somebody out there with 300,000 extras pairs of skis,” Lillie said during the William Blair and Co. LLC Growth Stock Conference June 12. Come a bad winter, that's great. Now we can all buy skis at 70 percent off. But that doesn't really help from a competition standpoint of looking to grow the ski business and to make sure everybody is healthy and profitable.”
Jarden disclosed in February 2011 that it had recouped its investment in Rossignol and remains a passive investor in the company.
Lillie said that exorbitant endorsement fees make it reluctant to invest in the golf business, one of the few gaps in the product line at Jarden Outdoor Solutions. The segment, which owns the Coleman, K2, Volkl, Rawlings and other brands, generated $2.7 billion in sales in 2011 and is the world’s largest supplier of sporting hardgoods.
On the sourcing front, Lillie said that wage inflation in China will cause that country to lose its cost advantage over Mexico for U.S. bound products sometime in 2014. As a result, Jarden continues to near shore production. In the last year it has brought production of batting helmets, personal floatation devices and softball bats back to the Western Hemisphere, purchased land in Mexico for appliance manufacturing and is manufacturing more domestically and in Europe to create a more regional sourcing model.
In China it is shrinking its manufacturing platform and investing more in automation.
“I think that companies that aren't planning for the next 10 or 15 years of manufacturing are going to find themselves behind the eight ball fairly quickly as China focuses on self consumption and providing for the masses within China rather than focusing on an export model that's just low cost,” he said.
