Hi Jeff, The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.The...
Hi Jeff,
The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.
The split of those 25.049 units sold 1st half 2024 is 47% sold in NA, 46% EU, 7% other.
To the question where all those bikes are? No clue, I rarely ever see one around here as well.
Holy schlamoly. If Felt sold 24k bikes and no one has seen a Felt in the wild…
How many Stumpjumpers have been sold?? The number has to be inconceivably high.
Hi Jeff, The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.The...
Hi Jeff,
The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.
The split of those 25.049 units sold 1st half 2024 is 47% sold in NA, 46% EU, 7% other.
To the question where all those bikes are? No clue, I rarely ever see one around here as well.
Hi Jeff, The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.The...
Hi Jeff,
The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.
The split of those 25.049 units sold 1st half 2024 is 47% sold in NA, 46% EU, 7% other.
To the question where all those bikes are? No clue, I rarely ever see one around here as well.
Hi Jeff, The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.The...
Hi Jeff,
The slide states the North America bicycle units sold 1st half 2024 is up 65% compared to North America bicycle units sold 1st half 2023.
The split of those 25.049 units sold 1st half 2024 is 47% sold in NA, 46% EU, 7% other.
To the question where all those bikes are? No clue, I rarely ever see one around here as well.
Hey biz thread subscribers, I met with Jeff about a month ago for an Inside Line to discuss the current state of things. It was a rad discussion. The podcast and its copy are below. Enjoy! I know I did.
Today we're joined by Jeff Brines, a long-time mountain biker, Litter Mag and Vital MTB fan. He's also educated and versed in finance. He kicked off a forum thread on Vital MTB that asked "Will more companies be shutting down in the next 12-24 months?" At a year old, the thread has over 100,000 views with nearly 800 replies as news about our industry has broken. We discuss the past and current state of the bicycle industry through his analysis and tools and see if we can figure out where we're headed.
Thank you Vital listeners!
THIS IS NOT FINANCIAL ADVICE.
Podcast Contents 0:00 - Intro, who is Jeff and what are we discussing? 6:11 - Why start a Vital MTB forum post about bike companies shutting down? 11:07 - Why did the *money people* think MTB would make them rich during Covid? 17:30 - Is it just greed and ego? 19:55 - Why did bikes stop selling? 23:49 - Why don't brands save money for slow times? 27:54 - Most of the bike industry is privately held 32:52 - Companies that went under, does the investment money just disappear? 38:05 - Original owners buying a company back, Family Office and Private Equity 46:25 - Private equity and how it works 51:54 - Is going bankrupt expected with venture capital investors? 53:51 - The lunacy of VanMoof being worth $500 million 1:04:23 - What does the bike industry future look like? 1:12:41 - Is there any incentive to get into the bike industry now? 1:15:41 - Is there an ideal company size? 1:17:48 - Will the business world repeat the same mistakes 10 years from now? 1:21:31 - Tools to learn about the bike industry 1:26:10 - Vital audience survey
Thx a ton for having me. Post any questions or call outs here (which is totally fair) and I'll respond. Also, apologies for all the rambling. I was...nervous. 😬
Thanks for putting out the podcast! I'm excited to give it a listen bit by bit over the next few days.
Cool timing, too, because I just listened to a podcast yesterday that talks (briefly) about the financial side of a smaller bike company so that got me super curious about the industry as a whole ("hole?") and how financial folk think about at this stuff.
On the Bikes or Death podcast, Tim Krueger - CEO of Esker Cycles and former Product Manager at Salsa Cycles - talked about a million things including Esker's financial situation after the last 5 years of bike industry boom and bust.
In short: they're doing well and can easily point to the reasons why.
That entire Bikes or Death podcast episode was really good, though. I definitely think it's worth the listen!
Its a little bit comical to see the results of the Gas Gas buy a dirt bike get a free e bike promotion. That has the same feeling as the Kona buy one get one deal. When you are giving something away you are solely trying to get it out of inventory and cut your losses before sending it to the dump or a mass auction for pennies on the dollar.
Also funny how when you make totally junk e bikes no one takes them seriously.
Its a little bit comical to see the results of the Gas Gas buy a dirt bike get a free e bike promotion. That has the...
Its a little bit comical to see the results of the Gas Gas buy a dirt bike get a free e bike promotion. That has the same feeling as the Kona buy one get one deal. When you are giving something away you are solely trying to get it out of inventory and cut your losses before sending it to the dump or a mass auction for pennies on the dollar.
Also funny how when you make totally junk e bikes no one takes them seriously.
That's actually super interesting, I hadn't seen that yet. On the surface it does feel like Kona, but really they could be creating a new customer in a parallel market segment. Tradition motorsport customers could be E-curious but need a nudge to try it out. Kona was all about burning inventory, but Gas Gas could be part blowing out inventory and part investment in future market share.
That's actually super interesting, I hadn't seen that yet. On the surface it does feel like Kona, but really they could be creating a new customer...
That's actually super interesting, I hadn't seen that yet. On the surface it does feel like Kona, but really they could be creating a new customer in a parallel market segment. Tradition motorsport customers could be E-curious but need a nudge to try it out. Kona was all about burning inventory, but Gas Gas could be part blowing out inventory and part investment in future market share.
More likely the sinking-rubber-raft than trying out the market. Plenty of MX shops already have had e-bike offerings alongside their respective motorcycle brands.
That's actually super interesting, I hadn't seen that yet. On the surface it does feel like Kona, but really they could be creating a new customer...
That's actually super interesting, I hadn't seen that yet. On the surface it does feel like Kona, but really they could be creating a new customer in a parallel market segment. Tradition motorsport customers could be E-curious but need a nudge to try it out. Kona was all about burning inventory, but Gas Gas could be part blowing out inventory and part investment in future market share.
More likely the sinking-rubber-raft than trying out the market. Plenty of MX shops already have had e-bike offerings alongside their respective motorcycle brands.
In my area MX shops started selling eMTBs during Covid and I guess it was working out at some level considering the very high demand.
All my local MX shops selling ebikes are now stuck with them, some of the GasGas bikes are up to 60% off still not moving that much and the new MXC/ECC models are already on sale.
Dealers are in for some fun times trying to move that GasGas/Husqvarna inventory.
I won't gnarcistically plug my own YouTube channel here but I have had the misfortune of having to break this down across every review I do...
I won't gnarcistically plug my own YouTube channel here but I have had the misfortune of having to break this down across every review I do on the moto side, being almost all of us singletrack/offroad/hard enduro riders are on some KTM variant at this point.
The reality is the difference between brands is so subtle, so tiny, it makes a mountain biker's head spin. We literally have a lot more variation within each model of bike (build kits) than you'll find between GasGas/KTM/Husky for a particular engine size. IE, the big difference is color, the shape of the plastics, rim color, and maybe handlebar/triple clamp material/brake brand. Its so subtle, and so immaterial.
There is literally no upside to all the complexity that comes with explaining to an entire market that yes, they are in fact similar and but no, you don't have the same access to product across all dealers. A total supply chain and dealer network mess.
All I can hypothesize is somebody on the management team came from fashion or luxury goods. Its the only logical explanation. Brand equity alone matters in those world. It carries a significantly lower amount of weight when you are selling anything that is technological at its foundation.
It would seem to make more sense to just offer a bit more customization on KTM's alone. Even just different color plastics, bar heights, or swapping spring rates to match the rider's weight or preference.
Its a little bit comical to see the results of the Gas Gas buy a dirt bike get a free e bike promotion. That has the...
Its a little bit comical to see the results of the Gas Gas buy a dirt bike get a free e bike promotion. That has the same feeling as the Kona buy one get one deal. When you are giving something away you are solely trying to get it out of inventory and cut your losses before sending it to the dump or a mass auction for pennies on the dollar.
Also funny how when you make totally junk e bikes no one takes them seriously.
Ha. I also missed this. The irony is e-bikes are absolutely crushing PMG (parent). They contributed negative (~EUR100M)EBITDA last reporting period (if memory serves) while their motorcycle units were actually net positive on an EBITDA basis.
I have no idea what they'll do with the e-bike unit, but they either need to completely retool on the product management front (I'm available - lol), divest in the unit or flat liquidate and shut it down. Selling subpar bikes into a highly discerning market isn't going to work, clearly.
It would seem to make more sense to just offer a bit more customization on KTM's alone. Even just different color plastics, bar heights, or swapping...
It would seem to make more sense to just offer a bit more customization on KTM's alone. Even just different color plastics, bar heights, or swapping spring rates to match the rider's weight or preference.
I can't help but comment on this one because there are a lot of ways to make the dirt bike buying experience better, but the fact is when we go buy a dirt bike for ~$10K we are getting a lot of product for the money. The business needs to be hyper efficient or they lose their already thin margin. This is exactly my argument as to why GasGas/Husky is a net headwind. Its adding to an already complicated supply chain with little outside of brand equity to show for it.
If a company were to add customization, which others have tried (Beta), I'm not convinced the juice is worth the squeeze. You'd have to bring in a master of supply chain management to pull it off in a way that adds value to the customer without lead times getting crazy or sku bloat crushing margin.
Handelbars and suspension springs are cheap and frankly, this is the idea of the dealer. They get you totally dialed. This is where they are supposed to make their margin. The machine is ridable out of the crate, but its dialed with a good shop employee/owner working their magic for your needs and body geometry.
Its a bit old school, but it works really well in my experience and again, its super impressive how much technology you are buying for $10K when you walk out of a shop with a new dirt bike.
Good podcast Jeff and Spomer, something a little different aka why we are on vital.
Jeff- you start a thread on bike companies closing, but got a stealth mode bike component company coming…playing the game! In a good way. Can’t wait to see what you got cooking.
If your digging into these financials, keep us update as you go as I find this stuff fascinating.
a note on discounts from Deviate via their newsletter this morning
------------------------
Dear Clan Member,
Ben here - one of the co-founders of Deviate Cycles. I don’t often get involved in these newsletters anymore, but I thought this was a particularly interesting time for Deviate and all of our loyal customers (or just followers) deserved a bit of a personal update - something I’m aiming to do more in the future. Sometimes the day to day running of Deviate gets in the way of the thing I like most about this job - and that is engaging with our customers, either through email, phone or going out for a good old fashioned bike ride! Nowadays it’s going to have to take the form of a newsletter to our Clan members - but as I’m sure some of you have experienced if you contact us, I am still often the one to answer the phone or reply to your messages.
The days of driving around the UK in a battered old van demoing the Guide are luckily behind me - that was hard work and in hindsight that gearbox driven beast was a hard sell!! Although we failed to convince any significant number of you that gearboxes were the future - that really did put Deviate on the map. It was certainly an interesting bike and there is not one regret at Deviate that we chose to do something so different as our first bike.
Deviate has moved on and is now one of the best known UK high end bicycle brands. I am so proud of our team for all the hard work they have put in over the last few years. I also owe our customers a big thank you - without your loyal support we would certainly not be here! It has been an incredibly tough couple of years for the bike industry as a whole and for Deviate by extension. The market is heavily discounted and the reality is when you take 30%, 40% or even 50% off a bike there simply is nothing in it for anyone.
The blame for this situation squarely falls in the hands of the biggest brands who projected Covid level demand forward into these years - a demand that was exaggerated by undersupply due to factory closures. Although there is some blame on the factories themselves who told these brands that if they didn’t place big orders they would be at the back of a very long queue. It really was a vicious circle - but entirely predictable in hindsight. Every business in the industry is now suffering the consequences of these actions today and there are certain brands out there who held meaningful reputations as non-discount brands and are now selling stock at outrageous discounts and in my view will never regain that reputation.
The consumer is then caught in the middle. We all love a bargain - but the second-hand market has been completely crushed by these discounts so selling on your bike after a couple of years is now largely pointless. Ultimately, I firmly believe it is good for everyone - including consumers - if high end brands exist to drive the sport forward with R&D and unique designs. Those brands, us included, cannot compete against the world's biggest brands selling their wares below cost price. It’s hard enough to compete when these brands actually need to make a profit. Anyway, moving on from my rants…(although I hope for those of you who are outside of the bike industry that it is an interesting perspective!). The reality is these discounts cannot continue forever and all of us at Deviate and across the industry are all hoping that things will settle down into 2025 and that’s where we have lots of exciting news.
Thx a ton for having me. Post any questions or call outs here (which is totally fair) and I'll respond. Also, apologies for all the rambling...
Thx a ton for having me. Post any questions or call outs here (which is totally fair) and I'll respond. Also, apologies for all the rambling. I was...nervous. 😬
Towards the end of the conversation, it was insightful to note that there are companies who are content at running lean and not getting out over their skis when it comes to growing their business. I think about what Neko and co are doing with their Frameworks project and following a "drop" model sounds like a sensible way to manage working capital and grow in an organic and predictable way.
Makes me wonder what the typical MOQ is from one of the primary frame manufacturers from Taiwan (a la Genios) and if it's a low enough order quantity to encourage a "leaner" company to operate under a similar model.
I am surprised to see that the MTB industry is on par with the golf industry, no pun intended. I feel like golf has much greater mass apeal and has seemingly incredible amounts of outside industry sponsorship within the sport so it's a surprise to me that the industry size is similar.
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some time I wanted to reply...
@Mwood - Thx for the kind words. I'll be sure to keep posting as news trickles in that is material. As to the component company, you are likely to hear more on it in the next ~3 weeks. We're aiming for a "soft launch" right before Thanksgiving. I want to reiterate, its very much on the "small" side of things to start, with much bigger ambitions. We hope people like our flagship product, which we believe offers a lot of value for what it does.
@sspomer - Interesting update. This is one of the only times I can remember a privately held company saying the quiet part outload. He brings up some interesting points, especially around how competitive the queuing within the supply chain really was around COVID. What I feel he misses is just how challenging it is to have 20/20 vision when things are that turbulent and "off script". Regardless, I compltely agree that the big brands can't operate at margins that are below their WACC (weighted average cost of capital) which I feel they've likely flirted with the last few quarters. If Deviate can hang on for one more season, greener pastures are likely ahead.
@jalopyj - I completely agree and was surprised myself. I love golf, and am fairly certain the sport is bigger than mountain biking when you add up everything that goes into the sport. The big thing missing from the reported golf number is green's fees, travel, resort type amenities and (probably) softgoods. I'd wager these are the big revenue generators for the sport. Also, a quick google search suggests ~26M people played golf in the US in 2022 whereas 9M people "rode their bike on unpaved surfaces" in the US. I can't find global numbers for MTB. This sounds a bit more realistic.
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some...
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some time I wanted to reply...
@Mwood - Thx for the kind words. I'll be sure to keep posting as news trickles in that is material. As to the component company, you are likely to hear more on it in the next ~3 weeks. We're aiming for a "soft launch" right before Thanksgiving. I want to reiterate, its very much on the "small" side of things to start, with much bigger ambitions. We hope people like our flagship product, which we believe offers a lot of value for what it does.
@sspomer - Interesting update. This is one of the only times I can remember a privately held company saying the quiet part outload. He brings up some interesting points, especially around how competitive the queuing within the supply chain really was around COVID. What I feel he misses is just how challenging it is to have 20/20 vision when things are that turbulent and "off script". Regardless, I compltely agree that the big brands can't operate at margins that are below their WACC (weighted average cost of capital) which I feel they've likely flirted with the last few quarters. If Deviate can hang on for one more season, greener pastures are likely ahead.
@jalopyj - I completely agree and was surprised myself. I love golf, and am fairly certain the sport is bigger than mountain biking when you add up everything that goes into the sport. The big thing missing from the reported golf number is green's fees, travel, resort type amenities and (probably) softgoods. I'd wager these are the big revenue generators for the sport. Also, a quick google search suggests ~26M people played golf in the US in 2022 whereas 9M people "rode their bike on unpaved surfaces" in the US. I can't find global numbers for MTB. This sounds a bit more realistic.
HH everyone!
My guess is off-road cycling absolutely eclipses golf in the rest of the world. Tons of recreational cyclists in Continental Europe for example that ride FSRs vs. golfers. Heck, I don't think I've ever seen a golf course in Germany, France, or Italy.
Regarding the golf comparison, to Jeff's point, there's likely a lot not considered in that number that's ancillary to clubs. But even more meaningfully, considered the price of a new mountainbike vs new set of clubs. No different than the magnitudes of order greater pricing we see in auto vs cycling like Jeff noted in the pod.
Really good job with that episode guys, enjoyed it.
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some...
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some time I wanted to reply...
@Mwood - Thx for the kind words. I'll be sure to keep posting as news trickles in that is material. As to the component company, you are likely to hear more on it in the next ~3 weeks. We're aiming for a "soft launch" right before Thanksgiving. I want to reiterate, its very much on the "small" side of things to start, with much bigger ambitions. We hope people like our flagship product, which we believe offers a lot of value for what it does.
@sspomer - Interesting update. This is one of the only times I can remember a privately held company saying the quiet part outload. He brings up some interesting points, especially around how competitive the queuing within the supply chain really was around COVID. What I feel he misses is just how challenging it is to have 20/20 vision when things are that turbulent and "off script". Regardless, I compltely agree that the big brands can't operate at margins that are below their WACC (weighted average cost of capital) which I feel they've likely flirted with the last few quarters. If Deviate can hang on for one more season, greener pastures are likely ahead.
@jalopyj - I completely agree and was surprised myself. I love golf, and am fairly certain the sport is bigger than mountain biking when you add up everything that goes into the sport. The big thing missing from the reported golf number is green's fees, travel, resort type amenities and (probably) softgoods. I'd wager these are the big revenue generators for the sport. Also, a quick google search suggests ~26M people played golf in the US in 2022 whereas 9M people "rode their bike on unpaved surfaces" in the US. I can't find global numbers for MTB. This sounds a bit more realistic.
My guess is off-road cycling absolutely eclipses golf in the rest of the world. Tons of recreational cyclists in Continental Europe for example that ride FSRs...
My guess is off-road cycling absolutely eclipses golf in the rest of the world. Tons of recreational cyclists in Continental Europe for example that ride FSRs vs. golfers. Heck, I don't think I've ever seen a golf course in Germany, France, or Italy.
golf in germany is an absolute expensive posh sport, space is rare and expensive and thats why there are only so little golf courses
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some...
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some time I wanted to reply...
@Mwood - Thx for the kind words. I'll be sure to keep posting as news trickles in that is material. As to the component company, you are likely to hear more on it in the next ~3 weeks. We're aiming for a "soft launch" right before Thanksgiving. I want to reiterate, its very much on the "small" side of things to start, with much bigger ambitions. We hope people like our flagship product, which we believe offers a lot of value for what it does.
@sspomer - Interesting update. This is one of the only times I can remember a privately held company saying the quiet part outload. He brings up some interesting points, especially around how competitive the queuing within the supply chain really was around COVID. What I feel he misses is just how challenging it is to have 20/20 vision when things are that turbulent and "off script". Regardless, I compltely agree that the big brands can't operate at margins that are below their WACC (weighted average cost of capital) which I feel they've likely flirted with the last few quarters. If Deviate can hang on for one more season, greener pastures are likely ahead.
@jalopyj - I completely agree and was surprised myself. I love golf, and am fairly certain the sport is bigger than mountain biking when you add up everything that goes into the sport. The big thing missing from the reported golf number is green's fees, travel, resort type amenities and (probably) softgoods. I'd wager these are the big revenue generators for the sport. Also, a quick google search suggests ~26M people played golf in the US in 2022 whereas 9M people "rode their bike on unpaved surfaces" in the US. I can't find global numbers for MTB. This sounds a bit more realistic.
HH everyone!
I used to dive into participation numbers back when I was running Evergreen MTB Alliance (long time ago, so take this for what it's worth). The problem with MTB numbers was that they often classified a whole whack of not-actually-MTBing as our sport. Think hybrid bikes with sorta fat tires, Walmart/Costco "mountain bikes", people who rode a rail trail once, etc. You really need to look at the source data closely to have any idea WTF they're actually reporting.
In today's market I'd bet my rear rotor that shitty, not suitable for trail, e-"MTBs" are skewing the numbers heavily. You know the ones; the RAD bike with 4" floaty tires that people use to cruise bike paths or commute (always seeming to get flats).
Golf is easier to define, much less of a spectrum.
Golf is in decline, at least in the USA, and MTB is on the rise, but I'd still be shocked if participation #s and total $$ for actual MTBing are even close to that of golf.
Fox reported earnings today. I just pulled up the report but a few things stand out right away...
Bikes: On a sales basis, the Specialty Sports Group (Bike) was up 108% y/y to a total of $150M on the quarter. That's a lot of forks, shocks and seatposts, eh? As to what this signals, I can't quiet say as of yet. It certainly would appear to be a good thing, but I want to read a bit more and listen to what management has to say before I really comment as to the sentiment of the release.
Overall: Other segments were down y/y. I don't have access to my old StreetAccount subscription so I can't tell you what the street was looking for with respect to any of the numbers, but considering the stock is off over 6% in post market trading and was off 2% over the course of the day, the company didn't hit the mark. On that note, the stock is off about 45% YTD vs the S&P 500 which is up 22%
More: I bet the conference call has some good tidbits. Until I can read a transcript, I'm probably going to skip listening but if anyone wants to nerd (way) out here you go. They'll ask you for some information when you try and listen, but its public for all.
I used to dive into participation numbers back when I was running Evergreen MTB Alliance (long time ago, so take this for what it's worth). The...
I used to dive into participation numbers back when I was running Evergreen MTB Alliance (long time ago, so take this for what it's worth). The problem with MTB numbers was that they often classified a whole whack of not-actually-MTBing as our sport. Think hybrid bikes with sorta fat tires, Walmart/Costco "mountain bikes", people who rode a rail trail once, etc. You really need to look at the source data closely to have any idea WTF they're actually reporting.
In today's market I'd bet my rear rotor that shitty, not suitable for trail, e-"MTBs" are skewing the numbers heavily. You know the ones; the RAD bike with 4" floaty tires that people use to cruise bike paths or commute (always seeming to get flats).
Golf is easier to define, much less of a spectrum.
Golf is in decline, at least in the USA, and MTB is on the rise, but I'd still be shocked if participation #s and total $$ for actual MTBing are even close to that of golf.
„In today's market I'd bet my rear rotor that shitty, not suitable for trail, e-"MTBs" are skewing the numbers heavily.“
I can confirm this, at least in Europe. Anytime I drive on one of the roads towards tourist destinations between Germany and Italy the vast majority of bikes on the cars are Cubes and KTMs with the occasional Trek Rail or Husqvarna. Usually 150-160mm of travel, fully kitted out with racks, fenders and enough lamps to light up a small town. That’s what the sales person told them they need, and then it only gets ridden on bike paths and the occasional fire road.
Sometimes you see dad bikers riding the flow trails at bike parks with them, but very few people in my local bike community below 40-50 actually ride an ebike.
Is that just Fox or are they lumping Marzocchi, Race Face and Easton into that number too? Is there another brand under the bike umbrella that I'm forgetting?
….on my way to buy Pierer stock cus our boi Jeff is smart n stuff
Perrier has been criminally unvalued since the La Croix fad of 2018. Primed for a big rebound.
Look who's talking about dampening now!
Holy schlamoly. If Felt sold 24k bikes and no one has seen a Felt in the wild…
How many Stumpjumpers have been sold?? The number has to be inconceivably high.
24k bikes sold with only 47% sold in NA, this explains why no one are seeing them.
Giant sold 6.6 million bikes worldwide in 2017 just to give you an idea.
Or, in the matter of commerce.....
Hey biz thread subscribers, I met with Jeff about a month ago for an Inside Line to discuss the current state of things. It was a rad discussion. The podcast and its copy are below. Enjoy! I know I did.
Thanks to Maxxis Tires | FOX | Jenson USA for supporting The Inside Line
Today we're joined by Jeff Brines, a long-time mountain biker, Litter Mag and Vital MTB fan. He's also educated and versed in finance. He kicked off a forum thread on Vital MTB that asked "Will more companies be shutting down in the next 12-24 months?" At a year old, the thread has over 100,000 views with nearly 800 replies as news about our industry has broken. We discuss the past and current state of the bicycle industry through his analysis and tools and see if we can figure out where we're headed.
Thank you Vital listeners!
THIS IS NOT FINANCIAL ADVICE.
Podcast Contents
0:00 - Intro, who is Jeff and what are we discussing?
6:11 - Why start a Vital MTB forum post about bike companies shutting down?
11:07 - Why did the *money people* think MTB would make them rich during Covid?
17:30 - Is it just greed and ego?
19:55 - Why did bikes stop selling?
23:49 - Why don't brands save money for slow times?
27:54 - Most of the bike industry is privately held
32:52 - Companies that went under, does the investment money just disappear?
38:05 - Original owners buying a company back, Family Office and Private Equity
46:25 - Private equity and how it works
51:54 - Is going bankrupt expected with venture capital investors?
53:51 - The lunacy of VanMoof being worth $500 million
1:04:23 - What does the bike industry future look like?
1:12:41 - Is there any incentive to get into the bike industry now?
1:15:41 - Is there an ideal company size?
1:17:48 - Will the business world repeat the same mistakes 10 years from now?
1:21:31 - Tools to learn about the bike industry
1:26:10 - Vital audience survey
Check out Jeff's slideshow presentation here (Google Slides)
Vital MTB Audience Surveys (scroll to bottom of page)
https://wtfhappenedin1971.com/
Thx a ton for having me. Post any questions or call outs here (which is totally fair) and I'll respond. Also, apologies for all the rambling. I was...nervous. 😬
Thanks for putting out the podcast! I'm excited to give it a listen bit by bit over the next few days.
Cool timing, too, because I just listened to a podcast yesterday that talks (briefly) about the financial side of a smaller bike company so that got me super curious about the industry as a whole ("hole?") and how financial folk think about at this stuff.
On the Bikes or Death podcast, Tim Krueger - CEO of Esker Cycles and former Product Manager at Salsa Cycles - talked about a million things including Esker's financial situation after the last 5 years of bike industry boom and bust.
In short: they're doing well and can easily point to the reasons why.
That entire Bikes or Death podcast episode was really good, though. I definitely think it's worth the listen!
Sounds like I've got some listening to do soon...
Its a little bit comical to see the results of the Gas Gas buy a dirt bike get a free e bike promotion. That has the same feeling as the Kona buy one get one deal. When you are giving something away you are solely trying to get it out of inventory and cut your losses before sending it to the dump or a mass auction for pennies on the dollar.
Also funny how when you make totally junk e bikes no one takes them seriously.
That's actually super interesting, I hadn't seen that yet. On the surface it does feel like Kona, but really they could be creating a new customer in a parallel market segment. Tradition motorsport customers could be E-curious but need a nudge to try it out. Kona was all about burning inventory, but Gas Gas could be part blowing out inventory and part investment in future market share.
More likely the sinking-rubber-raft than trying out the market. Plenty of MX shops already have had e-bike offerings alongside their respective motorcycle brands.
In my area MX shops started selling eMTBs during Covid and I guess it was working out at some level considering the very high demand.
All my local MX shops selling ebikes are now stuck with them, some of the GasGas bikes are up to 60% off still not moving that much and the new MXC/ECC models are already on sale.
Dealers are in for some fun times trying to move that GasGas/Husqvarna inventory.
It would seem to make more sense to just offer a bit more customization on KTM's alone. Even just different color plastics, bar heights, or swapping spring rates to match the rider's weight or preference.
Ha. I also missed this. The irony is e-bikes are absolutely crushing PMG (parent). They contributed negative (~EUR100M)EBITDA last reporting period (if memory serves) while their motorcycle units were actually net positive on an EBITDA basis.
I have no idea what they'll do with the e-bike unit, but they either need to completely retool on the product management front (I'm available - lol), divest in the unit or flat liquidate and shut it down. Selling subpar bikes into a highly discerning market isn't going to work, clearly.
I can't help but comment on this one because there are a lot of ways to make the dirt bike buying experience better, but the fact is when we go buy a dirt bike for ~$10K we are getting a lot of product for the money. The business needs to be hyper efficient or they lose their already thin margin. This is exactly my argument as to why GasGas/Husky is a net headwind. Its adding to an already complicated supply chain with little outside of brand equity to show for it.
If a company were to add customization, which others have tried (Beta), I'm not convinced the juice is worth the squeeze. You'd have to bring in a master of supply chain management to pull it off in a way that adds value to the customer without lead times getting crazy or sku bloat crushing margin.
Handelbars and suspension springs are cheap and frankly, this is the idea of the dealer. They get you totally dialed. This is where they are supposed to make their margin. The machine is ridable out of the crate, but its dialed with a good shop employee/owner working their magic for your needs and body geometry.
Its a bit old school, but it works really well in my experience and again, its super impressive how much technology you are buying for $10K when you walk out of a shop with a new dirt bike.
Good podcast Jeff and Spomer, something a little different aka why we are on vital.
Jeff- you start a thread on bike companies closing, but got a stealth mode bike component company coming…playing the game! In a good way. Can’t wait to see what you got cooking.
If your digging into these financials, keep us update as you go as I find this stuff fascinating.
a note on discounts from Deviate via their newsletter this morning
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Dear Clan Member,
Ben here - one of the co-founders of Deviate Cycles.
I don’t often get involved in these newsletters anymore, but I thought this was a particularly interesting time for Deviate and all of our loyal customers (or just followers) deserved a bit of a personal update - something I’m aiming to do more in the future.
Sometimes the day to day running of Deviate gets in the way of the thing I like most about this job - and that is engaging with our customers, either through email, phone or going out for a good old fashioned bike ride! Nowadays it’s going to have to take the form of a newsletter to our Clan members - but as I’m sure some of you have experienced if you contact us, I am still often the one to answer the phone or reply to your messages.
The days of driving around the UK in a battered old van demoing the Guide are luckily behind me - that was hard work and in hindsight that gearbox driven beast was a hard sell!! Although we failed to convince any significant number of you that gearboxes were the future - that really did put Deviate on the map. It was certainly an interesting bike and there is not one regret at Deviate that we chose to do something so different as our first bike.
Deviate has moved on and is now one of the best known UK high end bicycle brands. I am so proud of our team for all the hard work they have put in over the last few years. I also owe our customers a big thank you - without your loyal support we would certainly not be here!
It has been an incredibly tough couple of years for the bike industry as a whole and for Deviate by extension. The market is heavily discounted and the reality is when you take 30%, 40% or even 50% off a bike there simply is nothing in it for anyone.
The blame for this situation squarely falls in the hands of the biggest brands who projected Covid level demand forward into these years - a demand that was exaggerated by undersupply due to factory closures. Although there is some blame on the factories themselves who told these brands that if they didn’t place big orders they would be at the back of a very long queue. It really was a vicious circle - but entirely predictable in hindsight. Every business in the industry is now suffering the consequences of these actions today and there are certain brands out there who held meaningful reputations as non-discount brands and are now selling stock at outrageous discounts and in my view will never regain that reputation.
The consumer is then caught in the middle. We all love a bargain - but the second-hand market has been completely crushed by these discounts so selling on your bike after a couple of years is now largely pointless.
Ultimately, I firmly believe it is good for everyone - including consumers - if high end brands exist to drive the sport forward with R&D and unique designs. Those brands, us included, cannot compete against the world's biggest brands selling their wares below cost price. It’s hard enough to compete when these brands actually need to make a profit.
Anyway, moving on from my rants…(although I hope for those of you who are outside of the bike industry that it is an interesting perspective!).
The reality is these discounts cannot continue forever and all of us at Deviate and across the industry are all hoping that things will settle down into 2025 and that’s where we have lots of exciting news.
Towards the end of the conversation, it was insightful to note that there are companies who are content at running lean and not getting out over their skis when it comes to growing their business. I think about what Neko and co are doing with their Frameworks project and following a "drop" model sounds like a sensible way to manage working capital and grow in an organic and predictable way.
Makes me wonder what the typical MOQ is from one of the primary frame manufacturers from Taiwan (a la Genios) and if it's a low enough order quantity to encourage a "leaner" company to operate under a similar model.
I am surprised to see that the MTB industry is on par with the golf industry, no pun intended. I feel like golf has much greater mass apeal and has seemingly incredible amounts of outside industry sponsorship within the sport so it's a surprise to me that the industry size is similar.
Some really good posts here the last 12 hours. I'm sick AF, which will make my already rambly writing even worse, but being I have some time I wanted to reply...
@Mwood - Thx for the kind words. I'll be sure to keep posting as news trickles in that is material. As to the component company, you are likely to hear more on it in the next ~3 weeks. We're aiming for a "soft launch" right before Thanksgiving. I want to reiterate, its very much on the "small" side of things to start, with much bigger ambitions. We hope people like our flagship product, which we believe offers a lot of value for what it does.
@sspomer - Interesting update. This is one of the only times I can remember a privately held company saying the quiet part outload. He brings up some interesting points, especially around how competitive the queuing within the supply chain really was around COVID. What I feel he misses is just how challenging it is to have 20/20 vision when things are that turbulent and "off script". Regardless, I compltely agree that the big brands can't operate at margins that are below their WACC (weighted average cost of capital) which I feel they've likely flirted with the last few quarters. If Deviate can hang on for one more season, greener pastures are likely ahead.
@jalopyj - I completely agree and was surprised myself. I love golf, and am fairly certain the sport is bigger than mountain biking when you add up everything that goes into the sport. The big thing missing from the reported golf number is green's fees, travel, resort type amenities and (probably) softgoods. I'd wager these are the big revenue generators for the sport. Also, a quick google search suggests ~26M people played golf in the US in 2022 whereas 9M people "rode their bike on unpaved surfaces" in the US. I can't find global numbers for MTB. This sounds a bit more realistic.
HH everyone!
My guess is off-road cycling absolutely eclipses golf in the rest of the world. Tons of recreational cyclists in Continental Europe for example that ride FSRs vs. golfers. Heck, I don't think I've ever seen a golf course in Germany, France, or Italy.
Regarding the golf comparison, to Jeff's point, there's likely a lot not considered in that number that's ancillary to clubs. But even more meaningfully, considered the price of a new mountainbike vs new set of clubs. No different than the magnitudes of order greater pricing we see in auto vs cycling like Jeff noted in the pod.
Really good job with that episode guys, enjoyed it.
golf in germany is an absolute expensive posh sport, space is rare and expensive and thats why there are only so little golf courses
I used to dive into participation numbers back when I was running Evergreen MTB Alliance (long time ago, so take this for what it's worth). The problem with MTB numbers was that they often classified a whole whack of not-actually-MTBing as our sport. Think hybrid bikes with sorta fat tires, Walmart/Costco "mountain bikes", people who rode a rail trail once, etc. You really need to look at the source data closely to have any idea WTF they're actually reporting.
In today's market I'd bet my rear rotor that shitty, not suitable for trail, e-"MTBs" are skewing the numbers heavily. You know the ones; the RAD bike with 4" floaty tires that people use to cruise bike paths or commute (always seeming to get flats).
Golf is easier to define, much less of a spectrum.
Golf is in decline, at least in the USA, and MTB is on the rise, but I'd still be shocked if participation #s and total $$ for actual MTBing are even close to that of golf.
Fox reported earnings today. I just pulled up the report but a few things stand out right away...
Bikes: On a sales basis, the Specialty Sports Group (Bike) was up 108% y/y to a total of $150M on the quarter. That's a lot of forks, shocks and seatposts, eh? As to what this signals, I can't quiet say as of yet. It certainly would appear to be a good thing, but I want to read a bit more and listen to what management has to say before I really comment as to the sentiment of the release.
Overall: Other segments were down y/y. I don't have access to my old StreetAccount subscription so I can't tell you what the street was looking for with respect to any of the numbers, but considering the stock is off over 6% in post market trading and was off 2% over the course of the day, the company didn't hit the mark. On that note, the stock is off about 45% YTD vs the S&P 500 which is up 22%
More: I bet the conference call has some good tidbits. Until I can read a transcript, I'm probably going to skip listening but if anyone wants to nerd (way) out here you go. They'll ask you for some information when you try and listen, but its public for all.
„In today's market I'd bet my rear rotor that shitty, not suitable for trail, e-"MTBs" are skewing the numbers heavily.“
I can confirm this, at least in Europe. Anytime I drive on one of the roads towards tourist destinations between Germany and Italy the vast majority of bikes on the cars are Cubes and KTMs with the occasional Trek Rail or Husqvarna. Usually 150-160mm of travel, fully kitted out with racks, fenders and enough lamps to light up a small town. That’s what the sales person told them they need, and then it only gets ridden on bike paths and the occasional fire road.
Sometimes you see dad bikers riding the flow trails at bike parks with them, but very few people in my local bike community below 40-50 actually ride an ebike.
Is that just Fox or are they lumping Marzocchi, Race Face and Easton into that number too? Is there another brand under the bike umbrella that I'm forgetting?
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