Salomon Worldwide

views updated

Salomon Worldwide

Metz-Tessy
74996 Annecy Cedex 9
France
04 50 65 41 41
Fax: 04 50 65 42 56
Web site: http://www.salomonsports.com

Public Company
Incorporated: 1947
Employees: 2,820
Sales: FFr4.42 billion (1996)
Stock Exchanges: Lyon Tokyo (through subsidiary)
SICs: 5091 Sporting & Recreational Goods

Salomon Worldwide is going downhill—and they could not be happier. From the foot of the French Alps, Salomon has long held a global leadership position in the design, manufacture, and distribution of ski bindings, with nearly 45 percent of that market; the company is also the world’s second-largest designer, manufacturer, and distributor of ski boots (23 percent of the market), and is a prominent player in the high-end and professional alpine ski market. Together with longtime rival and neighbor Rossignol, the leading ski maker, Salomon has helped to make France the dominant force in the worldwide ski market.

While the alpine ski segment makes up the largest part of Salomon’s winter sports sales, the company has launched itself into the booming snowboarding market, through the design, manufacture, and sale of boards and bindings, and, through its Bonfire subsidiary, acquired in 1995, in snowboarding and ski apparel and accessories. Salomon is also introducing the winter world to a brand new sport with its 1997 introduction of “snowblades,” which the company describes as “on-snow skating.”

After 50 years leading the winter sports business, Salomon has also actively diversified into other seasons, so that the company’s non-winter products have grown to account for half of its annual sales. Salomon’s oldest diversification effort is its Taylor Made subsidiary, the world’s second largest designer, manufacturer, and distributor of golf clubs—woods, irons, and putters—and accessories. The introduction of the Taylor Made “Bubble” shaft line of golf clubs in 1995 has increased significantly Taylor Made’s contribution to—and position in— Salomon Worldwide. By 1997, Taylor Made’s products represented 41 percent of Salomon’s group sales, equal to its alpine ski segment sales.

Through the company’s MA VIC subsidiary, acquired in 1994, Salomon is also a world leader in top-of-the-line and professional bicycle rims. The company has also built a strong position in the hiking world, with a respected line of summer and winter boots. In 1997, Salomon ventured into the world of in-line skating for the first time, designing, manufacturing, and distributing a line of skates targeted at the high-end and amateur and professional racing markets.

In 1997, the company changed its name to Salomon Worldwide to emphasize its diversified, international status. With eight manufacturing plants in France, and 21 subsidiaries in North America, Europe, and Asia, more than 60 percent of Salomon’s sales are made outside of Europe.

A public company, Salomon Worldwide remains controlled by the founding Salomon family, which holds some 39 percent of the company’s stock and more than 56 percent of voting rights. While the Salomon family remains active in the company, leadership of the company’s operations has been provided by president Jean-Fran9ois Gautier since 1991.

Breakthrough Bindings in the 1950s

In 1947, Francois and Jeanne Salomon, of the French Savoy region, joined by son Georges, set up a 50-square-meter workshop in the town of Annecy, near the French Alps, and began manufacturing saw blades and ski edges. By 1952, using equipment developed by Georges, the company turned to automated manufacturing, boosting their output to some 700 kilometers of ski edges per year. During the same period, however, Georges had another idea that would propel the company into world-renown: attaching a spring to the binding of a ski. The new binding, the first quick-release system, uncoupled the ski from a skier’s boot in the event of a fall. The spring-loaded cable release system provided a definite safety feature, boosting not only the Salomon company’s fortunes, but the popularity of skiing worldwide.

By the early 1960s, Salomon took its bindings to the international export market, developing relationships with key winter-sports importers in the major ski markets, while also making the rounds of the industry’s trade fairs. While still a small operation, Salomon was already laying the foundation for its future market dominance. In 1967, the company debuted a new binding, with a cableless heel unit, sparking a revolution in the industry. By 1972, success of the units, under the “Competition” and “All Snow” names, had propelled the company to the leadership in the world ski binding market. With its cable-free binding system as a base, the company would hold its industry lead through the next 25 years. A key component of Salomon’s success would be its intensive research and development efforts, as the company continually perfected its products and won a reputation for top quality.

By the late 1960s, the company was expanding. In 1969, it replaced its sales agents in Switzerland with a full subsidiary in that country. Over the next four years, Salomon would establish subsidiaries in Germany, Italy, Austria, and the United States as well, giving the company a local presence in most of the world’s important ski markets. Scandinavia, another crucial market, soon followed, with Salomon subsidiaries appearing in Sweden, Norway, Finland, and Denmark.

Diversification in the 1980s

Until the end of the 1970s, Salomon remained a single-product company, placing itself in a precarious position. That changed in 1979, when the company introduced its first ski boot. The boot’s design and features quickly captured the attention of the market, and by the mid-1980s the company had captured the second place in the world ski boot market, behind leader Nordica, of Italy. In 1980, Salomon unveiled another new product, further diversifying the company: a cross-country boot-binding system, marketed first in France and Sweden, and then to the rest of the world. Cross-country, while profitable, would not become a major Salomon market, however.

Salomon’s early diversification moves had given the company a taste for expansion. In 1983, the company sold shares to the public for the first time, entering the unlisted market of the Lyon stock exchange, and joining the official market as a fully public company the following year. At the end of 1984, Salomon moved not just into a new market, but into a new season, when it acquired Taylor Made, a U.S.-based golf club manufacturer. Founded by golf pro Gary Adams in 1979, Taylor Made achieved early notoriety by being the first to design and manufacture its “woods” with metal heads. Joining Salomon gave Taylor Made the capital—and research and development culture—to continue to develop its golf clubs. And Salomon would benefit greatly from its new subsidiary: from its 1984 sales of US$12 million (worth FFr72 million in 1997 French francs), Taylor Made would grow to revenues of FFrl.8 billion and 41 percent of Salomon’s combined group sales.

The mid-1980s would see a boom in the ski industry as the sport found a new popularity during the strong economy. The Asian market, particularly Japan, was also becoming an increasingly significant source of sales. From 5.6 million pairs of skis sold in the 1983-84 ski season, the worldwide market would peak past seven million pairs in the 1986-87 and 1987-88 seasons. Salomon’s sales climbed strongly, topping FFr3 billion in 1988. The company had also continued to invest in its infrastructure, opening an 8,900-square-meter plant in Chavanod for its boot production in 1987, and an ultramodern, 35,000-square-meter plant in Rumilly for its bindings—and for the production of a new line of products.

Salomon’s sales continued to climb in 1989, nearing FFr3.2 billion. In that year, Georges prepared a changing of the guard, naming Jean-Francois Gautier to succeed him upon his retirement in 1991. Control of the company would remain in the Salomon family, with its 39 percent of the company’s stock and 55 percent of voting rights being placed in a new shareholder group, Sport Développement, led by Georges Salomon and son Bernard. Gautier, then 35, had spent his career in the electrical appliance division of Thomson S.A. He arrived at Salomon just in time to guide the company through an industrywide crisis.

The Slippery Slope of the 1990s

What could be worse for the ski industry than a year without snow? Three years without snow. In both Europe and North America, the last three winters of the 1980s had barely produced snow. Ski sales slipped dramatically, falling to just 5.5 million pairs in 1990. At the same time, retailers, overburdened with inventory, stopped placing new orders. Protected somewhat by its successful golf club subsidiary, Salomon watched the rest of the industry suffer, resulting in a shakeout that would see the collapse of many of its smaller competitors. Even Salomon’s longtime archrival, Rossignol, based in nearby Grenoble, the world-leader in ski sales, was struggling, posting a loss of FFr15 million in the 1989 season. But by 1990 Salomon too saw red, to the tune of nearly FFr350 million over two years. In that year, Salomon’s revenues plunged to FFr2.6 billion. Adding to Salomon’s difficulties by then was the introduction of a rival golf club, dubbed the “Big Bertha,” which stole much of Taylor Made’s thunder and saw the subsidiary’s sales sink by some 30 percent in one year.

Company Perspectives:

The mission of Salomon Worldwide is to offer all sportsmen and sportswomen friendly products which inspire confidence and facilitate sports practices thanks to their technical and forgiving qualities.

Even as the snow returned, Salomon was confronted by a new crisis, this one of the economic variety, as the world slipped into a recession that not only cut deeply into ski and ski equipment sales—particularly in Japan—but also saw the drop in the dollar and the yen, doubling the impact of the crisis as Salomon’s U.S. and Japanese sales had become important sources of revenue. Salomon was forced to cut back, laying off 600 of its 3,000 employees. But by 1993, the ski industry seemed to be on the rebound—aided by the U.S. economy’s return to growth—and the worst was over.

Yet, even during these crisis years, Salomon had continued to invest heavily in its research and development as it prepared to diversify its operations still further: in 1990, the company, after spending some FFr350 million in development costs, launched its own line of high-performance skis. Produced in the Rumilly factory, Salomon’s skis caught the attention of the skiing world. Selling some 75,000 pairs in their first year, Salomon’s skis would top 300,000 pairs by 1993—still far behind Rossignol’s 1.6 million pairs, but an impressive debut nonetheless.

In 1991, the company made a new diversification move, expanding its summer category with the addition of its line of hiking boots. Continuing Salomon’s reputation for innovation and quality, Salomon’s hiking boots would quickly establish a presence in the high-end categories, reaching some FFr75 million in sales within two years. Salomon moved to increase its hiking boot capacity by acquiring Italian boot manufacturer San Giorgio in 1993. The following year, Salomon moved further afield, purchasing the famed bicycle-rim manufacturer MAVIC (Manufacture d’Articles Velocipediques Idoux et Chanel), a company founded in 1890, and the first to produce aluminum rims (in 1926). MAVIC would add some 200 employees and FFr200 million in sales to the Salomon group.

With ski and ski equipment sales back on track—and including a new line of skis for the rising “carving” market—and a strong diversification drive underway, Salomon’s next leap in revenues would come from Taylor Made. Taking a lesson from the “Big Bertha” scare, Taylor Made had gone back to the drawing board and come up with its new “Bubble” shaft clubs—a product that found immediate success in the golfing community. From sales hovering around FFr700 million, Taylor Made’s revenues climbed to FFrl.15 billion in 1995, and again to FFrl.8 billion in 1996.

Salomon was not quite finished with its diversification strategy. In 1995, the company acquired Bonfire, a US-based make of apparel for the snowboard market, and announced its intention to enter the snowboard and snowboard boot segments—the wintersports industry’s fastest-growing—in 1997. Salomon was also readying the launch of its own line of in-line skates, launched in 1996 and geared toward the amateur and professional racer. In 1997, Salomon also debuted its “Snowblades,” announcing the creation of a brand-new sport. The company likened using Snowblades, which resembled shortened skis with a length of 90 centimeters (three feet), to “on-snow skating.” The industry seemed to agree: in 1997 the Snowblade was named the most innovative product at the Salon International de Grenoble. In keeping with its diversification, in 1997 Salomon changed its name to Salomon Worldwide in order to give more emphasis to each of its brand names.

Principal Subsidiaries

Salomon SA; MAVIC SA; MAVIC Sports SAS; Catidom SAS; Salomon North America Inc. (U.S.A.); Taylor Made Golf Company Inc. (U.S.A.); Bonfire Snowboarding, Inc. (U.S.A.); Salomon Canada Sports Ltd; Salomon & Taylor Made Ltd. (U.K.); Salomon Sport AB (Sweden); Salomon Norge A/S (Norway); Salomon Sports Finland OY; Salomon & Taylor Made Co. Ltd. (Japan); Salomon KBO (Korea); Salomon Italia SPA; Salomon Sangiorgio SPA (Italy); Salomon Romania SRL; Salomon GmbH (Germany); Salomon Osterreich GmbH (Austria); Salomon Schweiz AG (Switzerland).