It takes a week to fully test the strength of a new bike frame. It took 25 years for Avanti to start pushing into the rest of the world. From home-made BMX frames to a high-tech racing outfit, the bike brand is striding ahead – and now looking to steal more than its fair share of the global market.
A little while ago, Avanti
Bikes founder John Struthers was talking to a friend of his daughter who told
him he was in possession of a very rare asset, something few companies in New
Zealand can lay claim to. Perplexed, Struthers asked what this elusive treasure
“Your own brand,” replied the friend.
She’s right. It’s 25 years since Struthers and his team first launched the wholly Kiwi-owned and operated Avanti brand. As it gets set to take on the world beyond Kiwi and Aussie shores, the ethos and story behind the brand is set to become more important than ever.
It all began in the early 80s when Struthers’ kids got into BMX riding just as the sport was gaining momentum globally. Three decades ago only a couple of expensive overseas brands were available to local BMX enthusiasts, but Struthers’ engineering background meant making do with bikes imported from overseas wasn’t going to cut it.
It was a case of right time, right place, combined with a West Coast engineer whose conviction personified the Kiwi mentality of “why the hell can’t we do it?”.
Struthers had just taken over Sheppard Industries, a rubber merchant business that had a small component of bike accessories. The company was originally incorporated in 1940 by WWI veteran Ralph Sheppard; Struthers bought it in 1980 and rationalised production to wheels, castors and bicycle parts.
Struthers’ youngest son was in cubs with another boy whose father owned a motorcycle shop. The two dads got talking about the possibility of making BMX bikes, which led to a bit of bike-tinkering in an old warehouse that used to be a picture theatre in Auckland’s Ponsonby. Struthers recalls it was very much a “backyard affair”.
Back then, protectionist economic policy and import licensing restrictions prevented the fledgling venture from importing bike components. They had to make everything – the frame, the handlebars – which Struthers said was “a load of nonsense, to be honest”.
Even importing the raw material for the frames was a challenge, and Struthers sometimes resorted to hiding the steel he would need to make the frames inside plastic tubing.
Undeterred, the team pressed on, successfully designing and manufacturing the model 202 BMX bike under its own Supersport brand. After five years in operation, Sheppard Industries was cranking out up to 1400 BMX bikes each year.
The BMX model was taking off, but they had problems getting the protective padding that was mandatory on every bike. Struthers had plenty of closed-cell foam on hand, but he couldn’t find a commercial outfit to successfully mould it to fit the 202’s unique twin top tube. The solution came via the Struthers family oven which, under the close supervision of Struthers’ wife Di, was used by the Struthers children and their friends to mould the foam into shape, sometimes producing as many as 200 pads a day.
“It was a fun time, although dinner used to be pretty late,” jokes Struthers.
Things might have moved on from using the family oven, but the family is still closely involved in the business; two of Struthers’ sons, one daughter and one son-in-law all work in Avanti’s Auckland-based head office.
Sheppard Industries’ venture into BMX territory owed part of its success to impeccable timing and being at the forefront of the BMX craze that was taking off in the 80s.
The decision to begin manufacturing 10-speed road bikes in 1984 also benefited from perfect timing, this time the introduction of the Closer Economic Relations (CER) agreement the year before.
Special CER licences allowed imports from Australia, so the company went about manufacturing its 10-speed road bikes using frames imported from Adelaide-based Leisure Cycles. Six 10-speed models were created in that first year and in 1985, the Avanti brand – Italian for ‘moving forward’ – was born.
The range now boasts 130 different models – not bad when you consider the designs are spawned from a design team of only six in the Auckland office.
Until the early 90s, when steel was the staple framing material used, the bikes were both designed and manufactured in New Zealand. But with the advent of alloy frames, and later carbon, manufacturing has moved offshore to China. All other aspects of the business, including distribution, marketing, finance, supply chain and product design, are based in New Zealand.
It’s a “purely economic” decision, says marketing manager Chris Sutton. Producing carbon in China is much more cost-effective. Avanti attempted its own R&D project to build full carbon bikes in New Zealand using local expertise, but several prototypes later the economic realities of the exercise hit home.
About the same time, the company had the Australian market in its sights, entering it in 1991. While Avanti’s revenue in New Zealand has steadily grown year-on-year, its turnover across the ditch means the Australian market now accounts for 60 percent of overall sales, with far more room for future growth.
Australian cycle shops took to the Avanti brand like ducks to water, Sutton says, because the company offered a deep range of bike models. Avanti was also making some massive strides in using alloy for its frames, becoming one of the first bike makers in the world to adopt the material across its range.
There wasn’t much competition either, in what Sutton says was “a relatively cottage industry”. One thing that hasn’t changed over time is the company’s philosophy of taking time and care building retail networks and, for lack of a better phrase, being a bit picky when it came to choosing retailers and distributors to work with. It’s an ethos the company prides itself on and to which it attributes a good portion of its success.
Sutton believes a strong relationship with retail partners is imperative if you want to get your product in front of the public, because in-store purchasing decisions are heavily influenced by the dealer’s recommendation.
It’s also important that the distribution and retail partners understand the Avanti brand proposition, which champions quality over price. Otherwise, maintains Sutton, Avanti risks getting caught in a price war with distributors who are all about racing to the bottom, devaluing the brand in the process.
Stephen James couldn’t agree more. He’s product manager of Avanti’s road bikes and says he wants people to buy the bikes for their quality and the rider experience. Otherwise Avanti gets only a short-term gain, something in direct contradiction to its long-term focus.
Not one to sit on its laurels, in 2003 it branched out and launched its own branded retail chain called AvantiPlus.
Avanti wanted a strong and distinctive national network of independently owned cycling stores in New Zealand and Australia, a one-stop shop concept for the range of Avanti products and other Sheppard Industries brands, such as Shimano and Raleigh.
It hasn’t been all downhill cruising though. Struthers admits that as cycle
retail is a sector largely serviced by independent stand-alone stores, the move
hasn’t been without its challenges. The biggest was to transform the stores
with professionalism and cohesion in mind, without losing the passion and
technical expertise – and the personal touch – of the store owner.
Turnover of $100m
AvantiPlus now has 32 stores in New Zealand and 50 in Australia, with plans to hit the 100 mark in Australasia within the next two years. Financial details aren’t publicly available but Avanti reckons its stores have a better than industry average turnover. Between August 2011 and July 2012 the chain is expecting to report a collective turnover in excess of $100 million.
While Struthers is confident the move has been a successful one overall, he says progress over the past few years has been “constrained” by changes on the shop floor. Sheppard Industries’ 12-year distribution relationship with international bike brand Specialized dissolved last year, replaced by a new distribution deal with US-based Scott.
Specialized presented Sheppard Industries with an opportunity to sell a major stake in the business, but when push came to shove, the deal fell apart due to “a lack of alignment when it came to the ongoing future of the company”, says Struthers.
“We couldn’t get assurances about what would happen to staff and the brand,” says Struthers. “And that was really important to us because we are very proud of the Avanti brand. We were also concerned about what would happen to the relationship with dealers.”
And so the 100 percent Kiwi-owned Avanti story carries on. Plans are now afoot to expand its export market beyond Australia and Sutton happily hitches Avanti’s wagon to a star.
“There’s absolutely no reason Avanti can’t be in the Tour de France, why it can’t be a player on the world stage,” he says.
“The only thing holding us back is us. When you line all the products up, they’re of equal measure to anything in the world.”
The company has made recent forays into Japan and China, and it’s also courting opportunities in Europe. Last year it entered into a joint venture with Singapore-based company Bikeplus, which now sells Avanti bikes in its showroom and online through south-east Asia. Expansion is happening cautiously though, and Struthers is adamant they’ll take it slowly to ensure all the right decisions are made along the way.
“We haven’t aggressively chased exports,” he says. “However, we are well aware that we have a product range that has considerable appeal and we are now taking a more proactive approach to export.”
That “considerable appeal” recently caught the attention of Ross Pearce, a business specialist at New Zealand Trade and Enterprise’s Better by Design programme.
Pearce approached Avanti last year. He says it immediately stood out as a candidate as a famous New Zealand brand that has survived for close to 30 years in a very competitive and tough environment.
When it comes to Avanti taking on the world, he says its location will prove to be an asset.
“Being from New Zealand, an outdoor adventure country, certainly won’t do them any harm when they go to the huge international markets, especially in trail riding and mountain biking.”
Three agencies pitched their ideas as part of the programme and Avanti ended up partnering with Equip, a company headed by industrial designer Peter Haythornthwaite and brand strategist Ray Labone. Avanti is now in the second phase of the six-stage programme.
“As much as it’s challenged us on a whole bunch of stuff, it’s also validated what we already do,” comments Sutton, who’s suitably impressed by the initiative.
“How can you not benefit from five incredibly experienced, articulate and insightful guys coming in and reviewing your business? As long as you’re not precious about it and the CEO is in boots and all – which ours is – then it’s a no-brainer.”
As well as working with Better by Design, Avanti has another card to play in
its global quest: the Pure Black Racing campaign.
The Pure Black Racing initiative, of which Avanti is a foundation partner and shareholder, was founded by America’s Cup yachtsman and Olympian Carl Williams. It’s built on a vision to take a Kiwi team and Kiwi bikes to the world’s biggest cycling stage, the Tour de France, in 2015.
After heading along to the Pure Black Racing campaign launch in July last year, Sutton says Avanti was “totally sold on the idea” because it shared the same vision and after a couple of handshakes, the deal was inked within a week.
More than a typical commercial partnership, Pure Black Racing is an enormously thorough and interactive process between Avanti and the athletes. Avanti, together with other Sheppard Industries brands, works with the management team and the riders on product development on all equipment categories – such as bikes, nutrition, clothing, parts and accessories – through a process that involves team debriefs, team testing and rider feedback.
Sutton says it’s more than your stock standard sponsorship. Instead of Avanti becoming the bike of the team and investing ¤10 million – where the team is provided with tonnes of product but no real belief or passion for it – Pure Black Racing gives the opportunity to be the “antithesis” of that and “build a real story”, based on a Kiwi company and Kiwi team taking on the world.
“All the guys on the team come in here and get product lessons and they’re passionate about the business, the idea, the opportunity and the story,” says Sutton.
So far the team has notched up a bunch of top 10 spots at various races across the US. Its most recent and biggest success came in July this year when the team’s Scott Lyttle won the International Tour de Toona in Pennsylvania.
Collaborating closely with top Kiwi athletes is nothing new for Avanti and it’s a technique that’s been pivotal to the brand’s ongoing success. Currently the Avanti design team is working on its Evo II model, an evolution of Avanti’s Zeus design, which Sarah Ulmer rode to gold at the 2004 Athens Olympics.
At time of writing, the Evo II is in its last stages of development, scheduled for release in September. Ten-time New Zealand Ironman winner Cameron Brown and 2009 track cycling world champion Alison Shanks are both extensively involved in the ongoing design of the model, and industrial designer Jamie McLellan is the architect of its form and function.
Development of the bike is also enhanced through a process called computational fluid dynamics, which draws out points of drag on the bike design. Having isolated drag spots, the team can work on evolving the shape to minimise drag and increase speed.
When it comes to testing the strength of the frame, the Evo II undergoes a decent and lengthy hammering. According to product manager James, frame fatigue testing can take 36 to 48 hours in just one direction. A full test on one frame takes about a week.
“It will go through 100,000 cycles of load in different directions to really simulate hard and rigorous testing, in what is a very short amount of time,” says James.
The final phase of testing involves the A2 wind Tunnel in North Carolina and LSWT wind tunnel in San Diego. While Auckland University has a wind tunnel located at its Glen Innes campus, that tunnel is not powerful enough for the tests, as they require constant 48 km/h wind.
The Evo II is a scarily quick two-wheeled speed machine. Even in its prototype
stage, Cameron Brown cycled the road version, the Chrono Evo II, to victory at
this year’s Ironman New Zealand, and last year Alison Shanks won New Zealand’s
only Commonwealth Games cycling gold medal on the track prototype, the Pista
Sutton says the process of building the Evo II has been “very innovative” and involved a lot of collaboration between the riders and the “development guys” – who are also riders themselves. James believes if you get it right for the athletes, the benefits can’t help but trickle down to the public.
“If we can do it at the highest level and meet the demands of athletes, then everyone else should be easily pleased.”
Riding into a headwind
Like most businesses, Avanti has “faced challenges” with the global financial crisis, says Sutton.
Because Avanti is part of the bigger Sheppard Industries network that includes distribution, wholesale, and manufacturing, the company has benefited from some cushioning from potential economic impacts.
But even a healthy economy wouldn’t wipe out potential threats, particularly with the trend towards online retail.
“The onslaught of online retailers, which are coming in from overseas with low barriers to entry and cheap product, are making it tougher than it’s ever been,” says Sutton.
He says some of these companies offering cheaper product have more than 40 people working on the overall design process.
Yet from a small team in
Auckland, Avanti is creating world-class, top-quality bikes that will stand the
test of time. And that, he says, is a strong point of difference.
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