International -- Sports Business
SNOWBOARD CRAZY (int'l edition)
How Europe's ski makers are fighting back
Tucked away in the Swiss Alps, the fashionable resort of Verbier has a reputation for being a skiers' paradise. This year, it's a paradise lost. Amid the stylish skiers, packs of teenage snowboarders in high grunge howl down the runs. "This stuff is, like, way cooler than skiing," says an out-of-breath Thomas Liddiker, a 16-year-old snowboarder from Copenhagen who sports a knee-length black jacket, wrap-around sunglasses, and spiked hair.
In the past few years, snowboarding has gone from being a curiosity practiced largely in the U.S. to a medal event at the 1998 Winter Olympics in Japan. Although snowboarding is nowhere near as big as skiing, participation is growing globally at a yearly rate of more than 30%, according to Minneapolis brokerage Dain Bosworth Inc., with snowboards and gear generating estimated wholesale revenues of more than $600 million for 1995-96.
Now snowboard fever has hit the Continent full force, and it's pitting small upstart U.S. snowboard companies against old-line ski manufacturers, most of them European. That's because the high crossover rate from skiing to snowboarding is eating into the already soft sales of the ski industry. "The snowboard market is cannibalizing the Alpine ski market," says Anne Marie Berrette, general secretary of the French ski giant Salomon. Austrian ski giant Volkl's sales have been flat for the past two years, and Salomon expects its sales to shrink 8% this year. The Innsbruck-based International Snowboard Federation estimates that worldwide sales of snowboards--at an average of $325 a board--will hit more than 1.2 million in the 1995-96 season, up from 540,000 in 1994-95. At the same time, brokerage Hambrecht & Quist says worldwide sales of skis--at about $265 a pair--have dropped from 6.2 million pairs in 1993-94 to about 5.3 million in 1995-96.
VOLKL MINORITY. To survive the American onslaught, Old World ski companies are coming out with their own flashy boards. But they are finding it difficult to appeal to the kids such as Liddiker who are fueling the snowboard craze. Indeed, young "riders" have written off a good many brands that make the skis their parents use--and ski manufacturers realize that. Volkl doesn't dare come out with its own board, although it has been the snowboard manufacturer for hot-selling U.S. brands Sims and Santa Cruz for the past two years. "Snowboarders want to be different," says Volkl Chief Executive Franz K. Julen. "They don't want a snowboard that says Volkl all over it."
Volkl isn't the only ski company hawking its snowboards undercover. Atomic Austria, now a unit of the Finnish holding company Amer Group Ltd., began making snowboards under the Oxygen label three years ago. And Dynastar, a Rossignol subsidiary, recently acquired U.S. snowboard company Original Sin.
The big ski makers already have worldwide distribution networks in place and advanced ski-making technology to help them race against U.S.-made snowboards. But they are still weak on marketing. "It's not enough to have great R&D and a lot of money to invest," says Dennis Jenson, director of marketing at industry leader Burton Snowboards. "You've got to be in tune with youth culture." Unlike ski manufacturers, the leading players in the snowboard industry make more than 30% of their revenues from selling grungy apparel and accessories such as funky goggles. Ride Snowboard Co. even markets a line of condoms called Safe Ride.
However, the battle isn't just between hip snowboard brands and staid ski labels. There are dozens of garage-shop companies with average annual sales of less than $5 million, and analysts say the business is ripe for a shakeout. "A lot of the smaller guys are going to fall off the hill as consumers start choosing the more sophisticated and quality name brands," says Chad A. Jacobs, an analyst at New York's Ladenburg, Thalmann & Co.
As the competition heats up, the winning brands will be those with a strong presence in the U.S. and in the key Japanese and European markets. Building a variety of boards--from racing to acrobatic--will be important, too. And, of course, it will probably help a company's image if it doesn't become boardmaker-of-choice for the old fogeys of the slopes. You know, the 35-year-olds.By Silvia Sansoni in Verbier, Switzerland