TORONTO, Ontario (BRAIN) — The head of Dorel Industries’ bike division laid out an aggressive plan to double sales and triple net profit in the next five years as he spoke to company shareholders and financial analysts during an investor day meeting Tuesday in Toronto.
Dorel’s bike portfolio includes Cannondale — the group’s diamond according to speaker Bob Baird — GT, Schwinn, Mongoose, Pacific Cycle, Guru, IronHorse and Sugoi, along with a few other small brands. With 11 quarters of growth, 52 percent profit gains since 2009 and bike-related revenue is closing in on $1 billion, Dorel’s priority now is to keep the momentum going.
“We doubled our spend on marketing in the past four years because we’re a brand building company,” Baird said. “We’re going to keep the trajectory going. Our R & D spend is up 60 percent, you’re going to see that number increase.”
Gross margin is one way Dorel measures success, Baird said. That number was 22.6 percent in 2009 and had climbed to around 25 percent for the first half of this year.
“Our intent long term is to keep driving that up,” he added. “It’s critical to the future of the business.”
That goal is driven by a company philosophy to spend only where it can measure the return and getting better pricing from suppliers and cutting costs wherever possible. That means fewer, bigger, better partners. Dorel has reduced its frame suppliers from 14 to seven in the past four years, consolidated apparel suppliers and brought down the number of sponsored athletes from a high of 400 when it picked up Cannondale in February 2008.
Success stories like the Cannondale SuperSix Evo, the Scalpel 29er and Cannondale’s e-bike, which has doubled sales expectations in Europe and will likely soon debut in North America, are also key to continued growth, Baird said.
On the mass merchant side, where Pacific Cycle is the market leader, Dorel is experimenting with iPad sales assist programs in Wal-Mart, Target and Canadian Tire to solve the common problem of a lack of staff in the bike aisle. The Apple gadgets guide consumers through purchases and upsell higher margin items like helmets and jerseys.
For IBDs, the biggest initiative is Retail Lab, a partnership program where retailers set up dedicated Cannondale sections in their stores with company fixtures and signs. Dorel is also pushing its new Guru Fitting System, a retooled version of Guru’s automated fit bike that launched at Interbike, which is already in high demand, according to Baird.
In a Q & A session following Tuesday’s discussion, an audience member asked about the difference between Guru’s fit system and Retül, the fit system Specialized invested in last month, prompting a rather animated response from Baird about Specialized founder Mike Sinyard’s business practices and the superiority of Dorel’s fit investment over that of Specialized.
“They reacted quickly with a company that does $2 to $3 to $4 million. Guru crushes it. You saw that at Interbike,” Baird said referencing the difference in booth traffic at Guru and Retül. “People are clamoring for that thing, which I love because I can charge a lot.”
Mongoose is also on tap for investment, as it has sat on the back burner while the rest of the brands in the portfolio have felt the “marketing love.”
"We’ve been investing for about eight months and it’s responding. We’re very pumped. Stay tuned. It’s over a $100 million business that will grow. Faster.”
Cannondale, the star of the show with business that has doubled since Dorel bought it in February 2008, the future is about the recently announced Cannondale Pro Cycling team, a World Tour squad that launches Jan. 1. The jump to a title-sponsored team requires a larger investment, but Baird said it is a primary driver of business, and set his sights on winning the yellow jersey with the new team in place.
Baird pointed to acquisitions as a pivotal part of the five-year growth plan, and said Dorel is “very, very active” in seeking potential buys, a task to which he devotes about half his time. Although Dorel lost a couple big purchases in the last 18 months, Baird anticipates geographic expansion will likely come by picking up new brands.
“We’re in less than 90 countries, less than 6 percent is in Asia Pacific. We’ve doubled Europe in four years and we can double it again. Part of that is a P & A brand extension,” he said.
More information: Investor presentation.