PUMP, PUMP, PUMP AT SCHWINN
A racer in skin-tight pants, muscles bulging, leaps through the air on a Schwinn mountain bicycle. "No calves, no glory," screams the ad, which will appear this fall in Bicycling, American Bicyclist, and other magazines. It urges riders to "send a message."
The message might be: Schwinn is back. "We're telling the world we've reestablished Schwinn," says Ralph Day Murray, president and chief operating officer. "The ads have an attitude." That's a switch from the old Schwinn, which, instead of an attitude, had an attitude problem--one that almost sent the most famous name in U.S. bikes riding off into the sunset.
Schwinn's new slogan is "Established 1895. Re-established 1994." In January, Zell/Chilmark Fund LP, an investor group, and ski-accessory manufacturer Scott USA, which also makes mountain bikes for Europe and Asia, formed Scott Sports Group and acquired Schwinn for $43 million. They invested an additional $7 million into a downsized Schwinn and this fall will move it from Chicago to bike-crazy Boulder, Colo. The move is "masterful," says William H. Fields, a bicycle-company consultant in Peoria, Ariz. "It's a sign to the bicycle world that it's a new game."
SMUG ALERT. It's also a sign that Schwinn has gotten serious about mountain bikes, which now account for about 65% to 70% of all bikes sold in the U.S. Many mountain bikers learned to ride on Schwinns with such nifty features as built-in buzzer horns. That was back in the 1960s, when Schwinn rode circles around its competition, manufacturing one out of every four bikes sold in the U.S. In the past few years, Schwinn has been a downhill racer, watching sales drop from 1 million bikes in 1987 to a little more than 500,000 in 1991 and perhaps as few as 275,000 this year.
In the old days, buying anything but a Schwinn seemed almost un-American. Ronald Reagan was once featured in a Schwinn advertisement, and Captain Kangaroo was sponsored by Schwinn. Founded in 1895 by Ignaz Schwinn, a German who immigrated to Chicago, the company was managed by his descendants until last year.
By then, it had run into quality and delivery problems after switching to overseas suppliers. But more serious was Schwinn's attitude problem. "When they were asked who were their competition, they said, 'We don't have competition. We're Schwinn,'" says Tom Stendahl, Scott's chief executive.
As it turned out, Schwinn had a pack of savvy rivals. Huffy Corp. and Murray Inc. took over the low-end, mass-merchandise market, where almost 70% of today's bikes are sold. Newcomers Trek, Giant, and Specialized became the leaders in mountain bikes, which Schwinn decided were just a fad. "They didn't talk to Generation X the way other companies did," says Chuck McCullagh, editor and publisher of Bicycling and Mountain Bike magazines.
All that led to some $50 million in losses since 1989, and last year, Schwinn filed for Chapter 11. But oh, what a difference a year can make. Schwinn now appears to be in high gear. It won't disclose projections but says it will make its first profit since 1989, even though lower volume could mean sales of less than last year's $150 million.
FAITH HEALING. If Schwinn can get back up to 20% or so of the specialty-bike market by 2000, which Fields suggests is possible, much of the credit will go to Schwinn's loyal dealers. "We didn't lose share of heart but share of mind," says Murray, explaining that delivery problems forced many dealers to give floor space to competing brands. To recapture that space and reassure dealers, the new management flew around the U.S. last winter, meeting with 800 of its 1,400 dealers, who sell 80% of Schwinn's bikes. Those meetings turned many skeptical dealers into believers. Asked if Schwinn can come back, Michael W. Koch, a Buffalo Grove (Ill.) dealer says: "Chrysler did it, didn't they?"
Now, Schwinn must convince the million or so fanatics who ride 25 to 100 miles a week to buy its $250 to $2,500 bikes. They're a small part of the market, but they have enormous influence on the 10 million serious and casual riders who buy bikes at specialty shops. And they won't be easily swayed.
Denverite Michael W. Busher, 28, learned to ride on a purple Schwinn with a banana-seat and now pedals his Cannondale more than 50 miles a week. "Schwinn used to be the only bike I'd look at," he says. "[Now,] I don't even know where a Schwinn bike store is."
To capture cyclists such as Busher, Schwinn is doubling its ad budget, to about $10 million, and is sponsoring a three-member professional mountain-bike team that has already caught the attention of enthusiasts. At the World Cup in Vail, Colo., this summer, the trio placed in the top 15 among 74 racers. Says Charles T. Ferries, Scott's chairman: "I was up on the hill and could hear somebody say, 'My God, there goes another Schwinn rider.'"
Encouraging words to a man whose company is facing a long climb back.Sandra D. Atchison in Chicago