Zoot Sports, the triathlon apparel and wetsuit specialist, was acquired late last week by K2 Sports, a division of Jarden Outdoor. Terms of the transaction were not disclosed. K2 Sports gains one of the hottest brands capitalizing on the triathlon trend that's just getting into footwear and compression apparel. Zoot gains a larger partner to guide it to that next level of growth.
Zoot will continue to be based in Vista, CA, under its existing leadership, led by CEO Brian Enge.
In addition to the K2 brand, K2 Sports also markets Tubbs and Atlas snowshoes, Line skis, Madshus Nordic skis, Full Tilt ski boots, and the Morrow and 5150 snowboard lines.
In an exclusive interview with Sports Executive Weekly, Enge said the company began exploring partnering with a larger company about year ago to support its growth. The process accelerated over the past three or four months as Zoot saw that it would be growing “at a pretty solid rate again” in 2009.
“We have been on a great tear over the last three years,” said Enge. “We've literally grown our revenues five times over those three years and grew 67 percent in 2008. So we just realized kind of at the end of 2007 that in order to continue to grow at the same rate and be able to guarantee quality, delivery, service and all of those things, it would be tough to continue doing on our own as an independent company.”
Enge wanted to find a partner “who understood our mentality.” He especially liked the fact that K2 has a collection of niche brands focusing on serious athletes and selling to specialty – a similar positioning to Zoot.
“They clearly understand what it takes to sell into mom and pops and reach that hard-core sport user,” said Enge. “So really from a philosophical standpoint, it made a lot of sense.”
Enge adds, “The one thing we're really good at is making great product and marketing and selling. They're going to give us more support in those areas and give us access to their testing facilities. So that's a plus. But the real important thing is that they're going to provide that backend support that every good company needs.”
Robert Marcovitch, CEO of K2 Sports, told SEW that although K2 Sports is largely a snow sports company, many of its employees are triathletes so Zoot was “on our radar screen” when it went up for sale. The brand fits K2's criteria for purchasing brands that are market leaders and innovators in their respective category. It also shares K2's focus on the specialty channel.
“We like businesses that really understand their consumer and we like the specialty business,” said Marcovitch. “Eighty percent of K2 Sports' portfolio is specialty retail, if you include accounts such as REI, which Zoot already sells to. So from a mindset point of view, I thought Zoot would fit very well on the operational side.”
While not an exact fit, K2 sees an opportunity. “Psychologically, those guys fit into our business,” said Marcovitch. “I dont want to spend my time fitting a round peg into a square hole. They kind of walk and talk like the product development and sales that are here.”
Marcovitch also said Zoot, with its heavy focus on the first and second quarter, helps balance out K2's snow sports side, which are third and fourth quarter businesses. K2 in-line skates also does a sizeable first quarter business. The deal also gets K2 Sports into the running channel. Marcovitch said the merger may offer synergies on the sales and marketing side, such as sharing design ideas, sales reps or even helping other K2 brands move into run specialty. But he stressed that K2 Sports is “very careful to acknowledge the distinctiveness of each of our brand's business and their distinct channels of distribution.”
Indeed, Marcovitch said that by far the main impetus for the merger was helping Zoot reach its next level of growth.
“They're doing fabulously but you reach the proverbial tipping point where in order to grow the business, you need more muscle financially and operationally and that's what we bring to the table,” said Marcovitch. “What we also bring is a clearly defined policies and procedures that have proven to be successful to our whole business and that can be applied to this business as well. We're very good at doing the mundane stuff. Not that they can't do it, but having us do it that takes a lot of sweat off their back.”
The triathlon category, according to Enge, continues to grow “at a rapid pace,” with participation increasing over 20 percent a year. That will support continued growth for its core apparel and wetsuit lines. Footwear, launched in 2008, “has been significantly more successful than projected.” In March 2009, what Enge calls the “first medically-developed and medically-proven” compression apparel line will be launched from Zoot. Tested last Fall, Enge said many professional soccer, hockey and football players have been calling the company based on the reputation it's been gaining on the market.
Marcovitch said Zoot's team should be able to more fully exploit this growing triathlon opportunity.
“They dont have to be afraid of making commitments to factories and they wont to have to conversation about where to put the stuff when they order it,” said Marcovitch, noting that Zoot had been storing inventory across six garages in Southern California. “We'll allow them to focus on creating innovative product and let them live out their dreams and design product.”