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There’s one risk Roman Arnold was reluctant to take when he sold his majority stake in Canyon Bicycles, a German manufacturer that sells €8,000 bicycles.
Arnold avoided private equity firms such as KKR and Carlyle that were touring Canyon and sold a 52% stake to Belgian investment group Group Brussels Lambert for €350 million in 2020.
Arnold’s due diligence was satisfied that GBL was a good owner, but he couldn’t resist taking out insurance. Arnold, 59, has purchased a handful of priceless bikes from Canyon, including one used by former world champion Cadell his Evans.
In an interview from Canyon’s modernist headquarters in Koblenz, Germany, Arnold said, “I said to myself, ‘OK, you never know what will happen to new investors’. His relationship with GBL deteriorated. “I wanted to at least keep some bikes that mean a lot to me,” he added.
The deal gives Canyon the resources to fund the global expansion of the company that defied skepticism 20 years ago by building a business that sells premium bikes online and directly to customers. rice field.
GBL, meanwhile, took control just as the bike industry emerged as a winner from the coronavirus pandemic. Sales of conventional and e-bikes in Europe will grow by 7.5% to reach a record 19.7 billion euros in 2021, according to the European Bicycle Industry Federation.
With sales growing 20% annually from 2016 to more than €640 million in 2022, Canyon aims to reach €1 billion by 2025. This ambition is a far cry from the early days of the death-formed company. The story of Arnold’s father right after he graduated from high school.
A sudden loss prompted Arnold to abandon his plans. Instead of abandoning the idea of joining a German military sports battalion, he instead began an apprenticeship as a salesman and mechanic before taking over a small bike shop his father had set up in his family’s garage. .
He says that the desire to build a life that would have impressed his late father and a passion for cycling, rather than a desire to maximize profits, was what drove him.
“I’ve always done what I love and what I think is right,” says Arnold. He stepped down from the company’s day-to-day management role in 2020, but remains chairman and holds his 40% stake worth €340 million.
The business he inherited, then known as Radsport Arnold, quickly became a successful retailer for major U.S. bike brands such as Trek and Specialized, and Arnold desperately wanted to start his own brand. became. But his biggest gamble was his decision in 1996 to bypass retailers and sell directly to customers online.
He recalls his brother explaining how he bought life insurance over the Internet and how Texas entrepreneur Michael Dell began selling computers over the Web. His ambition to become the Michael Dell of cycling was ridiculed, he says. It obviously doesn’t work.
Using the web as a shop window opened up sales possibilities well beyond Koblenz, a city with many cycling enthusiasts but a population of just over 100,000. Arnold registered the Canyon.com domain name early with an eye on markets outside Germany.
However, the last few years have exposed the perils of being a global company. Canyon has been plagued with shortages of key bike parts due to both surges in demand and supply chain disruptions.
Arnold believes that over the next 10-15 years, the bicycle industry will need to reduce its reliance on Asia as a major production hub. “Supply chains need to change and production needs to be moved closer to the end customer,” he says.
Canyon, led by former Nike executive Nicholas de los Wallace since March, has been exploring ways to move more production to Europe. Many are assembled at our factory in Koblenz, but all frames and many components are imported from Asia.
“You can’t do it all at once. You have to take this step by step,” explains Arnold when the Financial Times met him late last year in a black vintage cycling jersey, pink sweatpants and black hoodie. wore a Canyon baseball cap.
Most of the wheels are made in Switzerland, and Canyon is looking at ways to make some frames in Europe. But Arnold argues that, compared to the rise of organic produce in supermarkets, his chain of regionalized supply also depends on customers.
“If the customer is willing to spend a little more money on the fact that the product is made here, and if the entrepreneur is bold enough to move production here, we will sort it out. You can,’ he says.
Supply chain shortages are Canyon’s current challenge, but the group faces a far more serious crisis. In 2006, 7,500 bicycles were recalled after carbon forks made by an Asian supplier were found to be defective, and a German consumer magazine warned that the bicycles posed a “mortal danger”.
To repair the damage to the group’s reputation and avoid a recurrence, Arnold has declared that all critical parts such as forks and handlebars must be tested individually. We operate our own X-ray machine that scans individual parts. “Each fork has a QR code for her and a computer can pull up a picture of that part,” a safety engineer told his FT on a tour of the Koblenz factory.
That storm was far less than the damage done by the company’s massive cyberattack on Christmas Day 2019.
The company was bleeding cash for a month without assembling or shipping bikes because “our factory could no longer restart and everything came to a halt.” Arnold says. “Fortunately our bank kept the trust. We were very lucky.”
Three years later, Canyon’s ambitions seem undiminished by his near-death experience. Dedicated to making fast, lightweight road and mountain bikes, the company has developed a model better suited for city dwellers looking to ditch their cars. Canyon hopes to increase sales of urban bikes from around 10% to 20% by 2025.
“This is a topic close to my heart,” explained Arnold, adding that he was encouraged when Koblenz’s mayor, a Social Democrat, promised to make the city better for cyclists. . Once a year he invites the mayor to Canyon’s headquarters. “I always tell him a lot, despite some improvements. [for cyclists in Koblenz] We have not yet reached Scratch. ”
Canyon also aims to tap the US market with annual sales of less than €100 million. In a sign of the brand’s potential appeal in the US, basketball star LeBron James acquired a small stake in the company last July.
Arnold said some of his best ideas came from books on self-help management, and the always “purpose in mind” projects that helped shape his approach to decision-making at Canyon. We advise you to start
But the entrepreneur, who won his battle with cancer in 2016 and has led the company for more than 40 years, plans to donate a portion of his fortune to a charity that promotes youth cycling.
Any fears Arnold may have had about Canyon’s new majority owners appear to have faded.He returned some of his most prized bikes.
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