Brent Graves – President & CEO
The strong demand for road bikes during the first decade of this century started tapering around 2012, and that led to a weakening of bicycle sales that culminated with significant U.S. industry overstock at the end of 2015. For the next four years the bicycle market struggled to maintain the same level of parts and bicycle sales as the preceding years. Cane Creek was unable to avoid the pain of the industry and had self-inflicted injuries as well in 2016. However, starting in 2017 Cane Creek was able to perform better than the industry as a whole with an 11% average sales increase for three straight years. This was primarily a result of a renewed focus on new product development.
Going into 2020 Cane Creek’s business included more new product, more production, and more sales baked in. Actually, we expected a bigger sales increase in 2020 than we had in 2019. But that plan seemed to go out of the window in March when Covid 19 hit us like a ton of bricks. In just a few weeks we went from an optimistic outlook to contemplating survival. After shutting down for the first half of April, we turned the faucet nearly complete off – we cancelled or postponed nearly all of our orders from our suppliers and only brought in material we needed to fill immediate customer orders. Then as we got into May, sales started taking off and news of retailers selling everything that wasn’t bolted down caused us to reverse thrusters and fast.
From June onward we experienced demand two to four times that of normal and well beyond our original business plan. The increase in demand was (and is) great, but the question was and continues to be how long would it persist. As with most everything else in 2020, we were far off script with the pandemic, and no one knew what was going to happen next. Since our normal lead-times were 60-120 days, we had to make a lot of guesses about how much material we would need months in advance when what the world would look like at that time was more uncertain than ever. We decided to ratchet up our buying and production but continued to fall short of what the market wanted. But that was not the real problem.
The real problem was unfolding further under the surface and not fully exposing itself to us until late in the year. It was that everyone else in the bike industry was facing the same big surprise demand fueled by the pandemic and playing catch-up as well, and this overloaded the supply chain – regardless how much or when one ordered, suppliers could not make enough given their capacity. Increasing capacity takes time and big investment like expanding a factory and buying new forging or casting equipment. Recently Shimano’s European president said that it takes more than a year for Shimano to make a meaningful increase in capacity. To add insult to injury, the rumor in Taiwan (the heart of the industry as explained in last month’s Being Frank) has been that suppliers fear some of the big demand is artificial, a Bubble they like to call it, due to people freaking out and ordering more than is really needed. So the factories are reluctant to make capital investment to increase capacity.
While we at Cane Creek love bicycles and live to create cool products that help make riding more fun for all of us, we are a business too. And that means delivering products to all of you that want to buy them. We certainly do not like telling you that we cannot deliver for X weeks or months, and we are doing everything we can think of to improve the situation. Despite the high demand, many of our products (e.g. cranks and shocks) continue to have steady supply flow. While we may not have a crank to ship to you today, we can provide a relatively good delivery date estimate. However, some products like our Helm 29 fork are sold out for the remainder of this year unless something changes. We know this is very frustrating, and our aim is to be as upfront as possible with you because without you, there is no Cane Creek.