Free-Wheeling Skateboard Firm Trying to Roll Into Mainstream
Bruce Freeberg can’t ollie, grind or kick flip. A few years ago, the World Industries president would have been laughed out of the skateboard business by the hot-shot skaters who peddle most premium boards.
No longer. Thanks to the popularity of extreme sports, money is pouring into the skate business. And that is leading to a need for business smarts among the streetwise skaters who dominate it.
Freeberg, 44, arrived at World in February after a stint at Brunswick Corp. where he helped turn seventh-ranked Mongoose into the second-best-selling mountain bike brand, behind Huffy. As vice president-sales, Freeberg expanded Mongoose into discount stores with an economy line that helped boost unit sales 20-fold in 18 months.
At World, Freeberg inherits a loosely run outfit with a devoted following among Southern California preteen boys. Young skaters regularly gather at World’s unmarked Huntington Beach warehouse, begging for free stickers of World icons Flameboy and Wet Willie. The kids usually get the handouts; Freeberg sees it as cheap advertising.
Spreading World’s popularity beyond Southern California will be tougher. Skate shops are scarce outside the region, which accounts for an estimated 45% of premium board sales. And even in the mecca of skateboarding, some shops have refused to stock such crude World products as its “ejaculator” wheels.
Beyond that, Freeberg must shape World into a disciplined business. Chronic product shortages have cost the company potential sales, he said. And a former warehouse employee recently was convicted of stealing goods worth more than $200,000 from 1996 to 1999, according to court records.
Glitches aside, World’s business is growing fast. Sales rose between 25% and 30% in 1999 and should increase by at least that much this year, the company said. Industry sources rank World, a unit of El Segundo-based Kubic Marketing with more than $15 million annual sales, among the top five board labels. Televised competitions such as ESPN’s X-Games and the popularity of superstar skater Tony Hawk have benefited World, along with the entire skate industry.
The International Assn. of Skateboard Cos. expects sales of premium products, including boards, shoes and shirts, to hit $900 million this year, up from $720 million in 1998. Those figures don’t include budget-priced boards sold by such mass merchants as Wal-Mart and Toys R Us. Fully-assembled premium boards typically cost between $90 and $120.
Button-down investors see opportunity in what had been a cottage industry with companies run from garages and financed by credit cards. In October 1998, San Francisco investment firm Swander Pace Capital and New York Life Capital Partners acquired an undisclosed stake in World parent Kubic, a $70-million skate and snowboard company. That followed the 1997 acquisition of Planet Earth by Los Angeles-based sporting goods firm K2.
“It is a promising industry,” said Shawn Hecht, managing director at Swander Pace, whose portfolio includes such consumer products companies as Del Monte Foods. “It has undermarketed, strong brands with high growth potential.”
But first, World must reconcile its underground image with its mainstream ambitions. Under co-founder and former skater Steve Rocco--still Kubic’s largest single shareholder--World frequently pushed the boundaries of taste, delighting rebellious skaters. Designs on boards have shown decapitated babies, crack pipes and the pope on fire; the company’s logo incorporates a playful-looking devil. Last spring, an Orange County couple led a letter-writing campaign against World over a promotion offering a free board to people who “relinquish their souls.”
Gimmicks have hurt distribution of World products at such shops as Aftermath in Huntington Beach, which caters to moms and kids. Yet over-the-top designs are important to professional skaters, including World endorser Chad Fernandez.
“Hard-core skaters are adventurists in every way,” said Fernandez, 23. “They are always going to like shock value and cool, cutting-edge graphics.”
Freeberg nonetheless is cleaning up World’s product catalog. The “ejaculator” wheels are being phased out, as is a sexually suggestive Fernandez signature board. And World’s controversial devil logo will take a back seat to Flameboy and Wet Willie, playful rivals resembling a flame and water droplet whose duels evoke Mad magazine’s Spy vs. Spy.
“We don’t want mom or dad to say they’re not buying it because of what it’s depicting,” Freeberg said. But it is a balancing act, he noted. “You have to be careful. If you’re mainstream too much, you’re not cool.”
A bicycling enthusiast and former college athlete--he played baseball at Cal Poly San Luis Obispo--Freeberg is the right person for World, said his old boss.
“He’s a classic California guy,” said the former head of Brunswick’s bicycle business, Dave Lumley, now CEO of a nutritional products company. “He seems laid back, but he’s a very fierce competitor.”
World’s headquarters is ground zero for California cool. Sales reps in T-shirts and cargo shorts stash skateboards in corners or under their desks. An employee’s dog wanders from room to room. On break, workers ride boards or scooters in the parking lot. World doesn’t make its boards, but applies the designs at Kubic’s factory in El Segundo.
The skate industry is watching to see whether Freeberg transfers the Mongoose strategy to World, which sells through skate shops and sporting goods stores equipped to assemble custom boards. Brunswick, using generic brakes and steel frames, developed a cheaper version of the premium Mongoose mountain bike for Wal-Mart, Target and Big 5 sporting goods stores. Almost immediately, Mongoose lost 25% of its specialty store sales. But gains at mass merchandisers more than covered lost unit sales.
Going head-to-head with low-priced Asian imports created a new set of problems for Mongoose, however. Forced to lower prices and close factories, Brunswick took a $178-million charge against 1999 fourth-quarter earnings stemming from write-downs in its bike business. Freeberg left Brunswick in January.
World won’t market a discount board; such a product would alienate skate shops and extreme skaters who endorse World products, Freeberg said. And his plan for boosting sales relies less on boards than on so-called “soft goods”--clothing, toys and other licensed merchandise.
Freeberg thinks clothing alone could account for 50% of World’s sales this year, up from 30% in 1999. That’s in line with overall trends. The International Assn. of Skateboard Cos. estimates soft goods account for 40% of total sales, up from 20% five years ago.
“At any one time, a kid has one board,” said Freeberg, who has an 11-year-old son. “And a half-dozen shorts, four or five T-shirts and four or five hats.”
But World faces tough competition from larger, better-known brands. Vans has expanded from shoes into clothes through a partnership with retailer Pacific Sunwear. And such popular surf labels as Quicksilver and Rusty are aggressively marketing to skaters.
What’s more, World needs to sharpen its sales operation. Freeberg is training his staff to better forecast sales so World doesn’t run out of popular items. Case in point: On a walk-through of World’s warehouse last month, the slots for two of World’s best-selling board designs were empty. In wake of employee theft, World is tightening internal controls to better track inventory and product returns.
One thing that won’t change is street-level marketing that helped make World cool among boys 6 to 14. Freeberg keeps a supply of stickers in his truck, and dispenses them to young skaters he spots along his daily route. He’s building a buzz, one kid at a time.
