Martin’s Got No Need to Fret (Anymore)

The U.S. didn’t give birth to the guitar, but when it comes to buying high-end instruments, even the most anti-jingoistic strummers have a clear preference: to buy American.

The great names--Gibson, Fender, Martin--are all from the U.S., and Americans have fine-tuned guitars and evangelized them into becoming an $827-million worldwide business, through such stars as Gene Autry, Elvis Presley and Bob Dylan.

Those artists and many more have played acoustic guitars from C.F. Martin & Co. Founded in 1833, the Nazareth, Pa., company is the oldest continuously operating maker of guitars in the world.

Martin generates revenue of more than $43 million a year and makes nearly 20% of the $800-and-up acoustic guitars sold in the U.S., according to Brian Majeski, editor of the Music Trades, an industry publication. About a third of Martin’s guitars go overseas (especially to Japan), where musicians are just as American-centric.

Just four years ago, Martin was stagnant despite surging interest in the “unplugged” sound. It had a venerable brand and fine products, but staid designs and high prices meant customers were getting older--not good in a business that thrives on youth. Meanwhile, newer and cheaper competitors were gaining share.

Martin has endeavored to turn this around. Its biggest growth today is in a new line of moderately priced guitars, starting under $1,000.

“We hadn’t had an $800 guitar since the ‘70s,” Chairman and Chief Executive Chris Martin said. “This was a big step.”

Martin (full name: Christian Frederick Martin IV) is the 42-year-old scion of the company that his great-great-great grandfather founded the year that Felix Mendelssohn composed his Fourth Symphony.

Unlike other guitar companies, including 50-year-old Fender and 100-plus-year-old Gibson (the two biggest electric guitar brands), Martin has remained family-owned.

Martin’s list prices now start at $850 (retail as low as $600 to $700) and go up to tens of thousands for a custom-made or antique instrument. Classic Martins are prized.

Frets magazine has compared Martin Guitars to Rolls-Royce automobiles and Baccarat crystal. A pre-1945 D-45, Martin’s flagship model, now fetches $150,000 in top condition. Stephen Stills, among other professional musicians, collects new and vintage Martins.

Martin’s greatest peril came from success. In the late ‘70s and ‘80s, the company--after riding the folk and rock boom--nearly went bankrupt from overexpansion.

Frank Martin--Chris Martin’s father, who died in 1993--made a common mistake. He borrowed heavily against what he figured would be ever-increasing guitar revenue. The plan: to become a musical instrument conglomerate.

He acquired several instrument companies, including a banjo maker and a drum manufacturer. Big corporations like CBS Inc. (yes, the TV network) went through the same thing, acquiring and ultimately divesting Fender Musical Instruments and Steinway & Sons. The instrument business is cyclical and labor-intensive and doesn’t--at least at the high end--seem to lend itself to being part of a conglomerate.

Said Chris Martin, “I think if my grandfather hadn’t still been head of the board and there weren’t the emotional attachment, the company might have filed for bankruptcy or been sold.”

Instead, “we tightened out belt,” Martin said. All cash flow went to pay down debt; the acquired companies were sold for a loss.

Today, Martin is healthy and outpacing the market. The overall guitar market is leveling off after several heady years. According to the Carlsbad-based National Assn. of Music Merchants, acoustic guitar sales in 1996 were up just 1% from 1995. Electric guitar sales were down 3%.

“If we had just stuck to the high-end market, we’d be hurting big time. Instead, we’ve grown tremendously. Our growth has been in the [relatively] lower-priced market; we’re now picking up market share,” said Dick Boak, head of marketing and artist relations at Martin.

Martin is also gaining crucial younger players. While $800 is still more than pocket change, the lower pricing has let Martin compete with imports like Asian-made Takamine (made popular by country artists like Garth Brooks) and U.S.-made upstarts like Taylor Guitars (based in El Cajon, near San Diego).

Taylor is probably Martin’s most direct competitor. The 20-year-old firm sold nearly $18 million worth of guitars last year. Boak bristles slightly at the Taylor name.

“We were the nice guys; we’ve never gone directly after the competition,” he said. “Taylor has used our name in their ads. In their newsletters, they’ll say so-and-so traded in his Martin for a Taylor.”

Bob Taylor, co-founder and president of Taylor Guitars, has a different perspective.

“Nobody’s ever done this to them--given them such direct competition,” Taylor said. “Their reality is we’re out to get them, when we’re just doing what we do.”

Boak said the competition has, however, inspired Martin to introduce popular new models. Taylor’s slimmer-necked design has led Martin to create streamlined styles, too. Taylor points out that his company shared some of the technology used in these designs with Martin, as part of an occasional give-and-take between the two firms.

Martin has also introduced a guitar designed for women. It features a shallower body and a slimmer waist. “Acoustic electric” models--acoustic guitars with a built-in amplification pickup--have also become big sellers.

These types of innovations have been among Martin’s few concessions to courting Generation X.

“We typically honor legendary players, who tend to be older, with ‘signature models,’ ” said Boak of Martin’s Eric Clapton and Marty Stuart models. “We are looking at doing things with artists who are suited to the younger generation. . . . I’m interested in the Wallflowers--Bob Dylan’s kid’s band--but we may just have to let them grow up a little.”

Since taking the helm of the company at age 30, Chris Martin has become painfully aware of the burden of history.

“It’s a central part of our mission to preserve our great heritage,” he said. “I don’t want to be the guy about who they say, ‘Gee, it was a pretty good company until he took over.’ ”