For those in the business of selling snowboards, Nov. 24, 1995, is a day that will live in infamy.
Randy Coplen remembers it with the vividness of a nightmare. It was the day after Thanksgiving. Coplen, co-founder of Mervin Manufacturing, which makes Gnu and Lib Tech snowboards, was working in his Ballard office as employees called stores to confirm shipments.
They - and he - got a rude surprise.
"The stores stopped taking orders on that day. They said they were full," recalls Coplen, who co-founded the company six years ago. "It went from being a market that always had a demand that couldn't be satisfied to a saturated, fully supplied market.
"All of the rules changed on that day."
As late as a year-and-a-half ago, the snowboard industry resembled a modern-day Gold Rush: Some 450 snowboard-related companies had appeared, eager to cash in on a cutting-edge sport whose ranks have grown from a few curious teenagers to about 3 million people in a little over a decade. Sales of snowboards, which currently retail for $200 to $600 each, were $600 million on the wholesale level last year, up from $450 million the year before, according to Peter Jacobs, an analyst with the Ragen MacKenzie brokerage in Seattle.
But the salad days for many smaller companies were short-lived. A glut of snowboards in the burgeoning Japanese market, a late winter in the West last year and the muscle-flexing of a few big competitors have quickly winnowed the number of snowboard-related companies to between 200 and 300, by most estimates.
Five companies now control about 60 percent of world snowboard sales. Of those, three - Ride, K2 and Sims - are in the Seattle area, with another, Morrow Snowboards, in Salem, Ore. Burton Snowboards of Burlington, Vt., is the industry leader.
Most companies simply went out of business. Others sold out to the larger competitors, including ski companies that hope to capitalize on snowboarding's popularity as their own sport wanes. Though Alpine skiers still outnumber snowboarders more than 3-to-1, the latter are expected to account for almost 30 percent of all ski-area visits by 2001.
Other changes are afoot. As economics takes hold of the sport known for its bleached-hair-and-tattoo nonconformity, many of the industry's young founders now find themselves out in the cold - replaced by Wall Street types armed with MBAs and a keener eye toward the bottom line. The lesson is hard, but simple: Snowboarding, the sport born in suburban garages and swaddled in flannel shirts, has grown up.
Gaining a foothold
Tim Hollobon hasn't just heard this tale before, he's lived it. The 30-year-old started making snowboards in a friend's garage after the water-ski company he worked for turned away the business.
Soon, Hollobon's Kirkland company, Spiral Snowboards, was making between 300 and 400 boards a year, turning out Japanese brands as well as his own. He regularly turned down Japanese offers to make hundreds more.
Spiral had plenty of company. As late as last year, "Anyone who could get a board made could sell it. That's turned completely around," says Jeff Harbaugh, a consultant and former president of Nitro Snowboards' U.S. distributor.
By late 1995, so many companies were making snowboards that manufacturing capacity outstripped demand - even in Japan, which has 700 ski areas and buys about a third of the world's snowboards. The industry shipped about 900,000 snowboards to Japan last year; only 300,000 to 400,000 of them were sold, says John Stouffer, editor of Transworld Snowboarding Business. Small companies that used easy credit to send thousands of boards to Japan were particularly hard-hit.
Add sluggish sales in the Western United States, and the inevitable shakeout began - with a vengeance no one anticipated.
"The speed of the consolidation has been incredible," says Harbaugh.
Ski companies have been particularly aggressive in attempts to gain a foothold in the industry: In one month last December, France-based ski-maker Salomon Group bought Bonfire Snowboarding, a Portland snowboard and apparel maker; ski-bindings maker Marker International bought part of DNR Sportsystem, a Switzerland-based snowboard and accessories maker, and said it would build a snowboard plant in Utah; and Scott Sports Group, a ski-pole and goggle maker and the holding company for Hooger and Pill snowboards, bought American Snowboard Manufacturing in Burlington.
In the next five to 10 years, estimates are that the top five snowboard makers will control 80 percent to 90 percent of the market.
"It's not that dissimilar to what the ski industry underwent in the '60s and '70s," says Jacobs.
Taking a break on a crumb-sprinkled couch in his factory's sparsely furnished lobby-cum-employee lounge, Spiral's Hollobon considers himself fortunate: Last December, Massachusetts-based Earth & Ocean Sports, which also makes wakeboards to tow behind powerboats, bought his Kirkland company.
"If I hadn't sold out to Earth & Ocean, I probably wouldn't be around," he says.
Hollobon is doubly lucky. He's also retained his job overseeing the plant's operations for Earth & Ocean, which recently bought Flite Snowboards and has begun making them in Kirkland.
Thirty miles east at Ride in Preston, not everyone has been so fortunate. Company co-founder Jamie Salter resigned as president and chief executive officer in May, when the company announced a reorganization. Bob Hall, a veteran of the ski business but a newcomer to the snowboarding industry, was tapped to head Ride. Hall brought in Bruce Manke, a former colleague from Salomon, to lead Ride's winter sports and administration divisions. Tim Pogue, Ride's president and co-founder, was named to head the design and development division. He resigned in mid-October.
Jacobs uses a sports-car analogy to explain the new emphasis on business fundamentals that has swept the industry: Founders Pogue and Salter built a great sports car, but neither of them knew how to drive it, he says. Professional drivers now have been brought in to steer. Unfortunately, that leaves no more room in the front seat. The same is true elsewhere: Four of the five largest snowboard companies have undergone senior management changes in the last year.
Investors take note
Investors have watched the changes in the industry with interest.
As a maturing company, Ride's growth rate in sales has slowed. Sales grew by nearly five times in 1994 and tripled in 1995. But this year's sales of nearly $100 million will be only a third larger than last year's $75 million. Profit tripled in 1995, to $6 million, but is expected to fall just shy of that by the end of this year.
Rumors that the Japanese market was getting saturated on the wholesale level, combined with Ride's acquisitions and readjusted estimates by analysts, caused the stock to tumble last December. Shares fell from a high of nearly $35 to about $8 in July, where the stock continues to trade.
Morrow is heading into its traditionally strongest quarter, having already surpassed its combined profits for the past three years. This year's expected profit of $2.7 million will more than triple last year's figure. But after an initial public offering last December that drove the value of its stock as high as $16.50, Morrow is now trading at about $11.
Snowboarding continues to grow, but with the competition intensified, snowboard companies have had to become more adept marketers. Those that once targeted a consumer who was almost exclusively young, white and male, now realize they must embrace trends within the sport or fall behind.
Women, for example, now make up almost 30 percent of all snowboarders. Another growing segment is older snowboarders and "cross-over" skiers. Appealing to these groups often requires a different approach, whether in advertising or snowboard design.
Spiral, for example, has toned down the flashy graphics on its snowboards to enhance their appeal to older snowboarders and to parents buying for their children. The company's Flite boards, meanwhile, have retained their graffiti-style graphics as a way for the company keep its important ties to the hard-core-snowboarder segment.
Establishing a name in the snowboard industry is especially important for ski companies because snowboarding has long been seen by its young practitioners as an "antidote" to skiing.
Since it first began making snowboards eight years ago, K2 has wrestled with whether to sell its snowboards under a name not so connected with skiing, says Brent Turner, K2's vice president and general manager for the snowboard division. But that will become less important as emphasis increases on perfecting innovations, such as step-in bindings and "torsion forks," that will make snowboards jump higher, Turner says.
Some estimates place revenue for K2's snowboard division at $36 million this year, up from $26.1 million last year.
"We're probably 10 times the size that we were four years ago," Turner says, adding that K2 will sell well over 100,000 boards this season.
Most of the myriad smaller companies are not expected to survive as the industry matures and other well-funded players such as Nike enter the fray. However, those who find a particular niche probably will be OK, says consultant Harbaugh.
Mervin Manufacturing is one company that has already gained its niche. Its Lib Tech snowboards, which sell for between $375 and $550, are so well-regarded among hard-core snowboarders that the brand has become one of the most coveted on the mountain - even though privately held Mervin has never advertised.
Company sales grew 60 percent last year, to $11.5 million, and Coplen says he expects sales to grow 40 percent this year and 20 percent next year.
Harbaugh isn't surprised by that success.
"I think there will always be room for companies that are new and innovative," he says.