For the past 50 years, Jack O’Neill and his family have given the surf industry one of its most-enduring success stories. The tale of how this former window salesman turned his quest to keep warm during his lunchtime surf sessions into a 200-million-dollar business is pure Horatio Alger.
But an equally interesting story follows the brand’s trajectory as it enters this new millennium. O’Neill is working to unify its global brand message while simultaneously growing market share in its domestic accounts. It’s drawing inspiration from its deep roots while focusing on youth. The O’Neill story is a melange of market segments and international territories, clothing and rubber, distributors and family. But ultimately it’s a story built upon the foundations Jack O’Neill laid 50 years ago in the cold surf of Ocean Beach, California.
“Ever since Jack figured out how to surf and stay warm back in 1951,” says Marketing Director Tom Brady, “our goal has remained the same: help people surf better and be more comfortable in the water.”
According to O’Neill Sportswear Marketing Manager Rick Petri, that theme carries over to sportswear as well: “The most important thing O’Neill brings to the surf market is 50 years of quality and innovation. We’ll build on that heritage all the way through our entire product line — whether it’s clothing, wetsuits, or boardshorts.”
Youth is king. You just have to turn on the TV, open a surf magazine, or visit a surf shop to know that. So how does O’Neill — perhaps the original surf brand — stay relevant in this youth-happy market?
“It’s something that we think about every day,” says Kelly Gibson, O’Neill Sportswear’s director of sales and marketing. “The consumers — at least the kids — don’t pay any attention to how old the brand is. It’s a matter of whether it’s cool or not. It’s been a great 50 years, but we’re focused on today’s market and the youth.”
However, Gibson says the clothing line is lucky to have the heritage of the wetsuits to draw from: “When a consumer goes to a rack and looks at Billabong, Quiksilver, and O’Neill, there’s only one brand that’s been offering great products for 50 years.”
Part of the way O’Neill stays connected is through wetsuit designers like John Hunter — employees who spend most of their workweek in the Santa Cruz lineups. “We’ve got to stay in touch with the youth,” says Petri. “Our crew is out surfing with the kids every day. We also get feedback from our great team and a ton of young amateurs.”
Team involvement has always been crucial to O’Neill, and icons like Shaun Tomson and Dane Keoloha did a lot to build the brand back in the late 70s and early 80s.
“It’s the same formula today,” says Gibson. “We need huge icons who are in touch with the kids and who give back to the sport.”
But O’Neill seems to understand that the surfing community has become more complicated. “People today are interested in many types of surfers,” says Brady. “Some say Tamayo Perry is the guy. Others look at Ratboy Jason Collins. We’ve also got Cory Lopez battling to be number one in the world, and a lot of kids are into that. You’ve got competition surfing, aerial surfing, and now monstrous big-wave tow surfing. The brand needs to represent all those facets — even if a single surfer can’t.”
Eyes On The Prize
O’Neill Sportswear U.S.A. has become the number-three surf-apparel brand using a distribution strategy that many rivals would find constrictive. “There’s a huge growth potential for O’Neill clothing in the United States using our current distribution model,” says Gibson. “We don’t need to open the flood gates or open department stores. For example, we quadrupled our business in Val Surf this year. We went in there aggressively talking about the brand.”
Gibson says the reason for this growth is twofold: the renewed strength of the brand and La Jolla Sports, the O’Neill Sportswear licensee, making good on its promises.
“There have been ups and downs with the clothing brand because of past licensees,” says Gibson. “When I started with the company two-and-a-half years ago, the Val Surfs and Beckers of the world told me, ‘You’ve got to earn our trust back.’ We’ve done that. We’ve worked hard to prove to them that we’re for real. O’Neill is really retailing, and we think there’s more real estate we can take over in those types of stores. We didn’t top off with Val Surf this year by any means — it can grow from there.”
The wetsuit business also has growth opportunities, says Brady, albeit on a more incremental scale given the brand’s market position. “As the market leader, we already have a significant amount of market share. But as the surfing population increases, so does our rubber business,” he says. “It’s funny when I hear some of the older Santa Cruz guys getting crusty about all the people learning how to surf. But growing the business and getting people out in the water — especially Santa Cruz on north — is our goal. From day one our product has been about accessibility.”
Says Gibson, “O’Neill is far and away the leader in wetsuits, but our clothing department has come a long way in the last two years. My goal was to get into that elite top-three list — Quiksilver, Billabong, and O’Neill. We’ve done that. We’re a distant third, but our eyes are looking up and we’re ready to gain some ground.
“The bottom line is O’Neill retails,” Gibson continues. “It was a battle to get real estate in the beginning and for people to take O’Neill clothing seriously, but our product line has gotten much better. We’re looking right at Billabong at this point and trying to get more market share. Quiksilver is just this mammoth and their distribution strategy is different than ours as well.”
As TransWorld SURF Business’ retail surveys attest to, O’Neill keeps its distribution tight. “Traditionally, clothing brands opened every surf account that has a pulse,” says Gibson. “O’Neill’s distribution is extremely clean, however, because the hardgoods business is just a different world. We’re in half the amount of accounts as Quiksilver, Billabong, Hurley, or Volcom.”
But in the competitive surf industry, where buzz is so important, is keeping the reigns pulled in so tight a good thing?
“Sure, it’s difficult at times,” says Gibson. “Sometimes I wish I could sell into as many surf shops as a Hurley, Quiksilver, or Billabong. We’d obviously get more volume, but our strategy will pay off in the end for the brand. We can’t have retailers with O’Neill sportswear on their floor but not wetsuits. We don’t want surf shops forced to say, ‘Okay I’ve got O’Neill boardshorts, but you’re going to have to go down the street to buy your wetsuit.” Of course, we have some cases where retailers carry our clothing but not the wetsuits, but for the most part our dealerships support the entire O’Neill brand, and we support them by our distribution policy.”
Ultimately, this loops back to a nagging question: is O’Neill a wetsuit brand that makes clothing? Given the fact that sportswear carries the bulk of O’Neill’s U.S. sale volume, does it ever get frustrating to be primarily known as a wetsuit brand?
“It’s probably one of the hardest things to deal with,” says Gibson, “but the wetsuit program is a great asset and I wouldn’t change that for anything. Our mission, however, is to capitalize on our wetsuit strength. I always go back to Nike and how they changed from a shoe company into this amazing brand. That’s our mission: to turn O’Neill from a wetsuit company into a great worldwide brand — and we’re getting there.”
Taking The Message Worldwide
The curse of O’Neill’s worldwide success is that it represents different things to different people — in the United States, and especially around the world.
“The big opportunity for O’Neill is with global branding,” says Brady. “That’s our real challenge — to make sure that we have consistency in how the brand is presented. Because we have licensees who
are selling to distributors, that message can get diluted really fast.”
Part of this challenge is the structure of the company. “There’s at least three different marketing power centers,” says Gibson. “There’s O’Neill wetsuits domestic, O’Neill International, and then there’s O’Neill Clothing U.S.A.”
Ultimately, CEO Pat O’Neill is the keeper of the company vision. “Everything is approved by Pat,” says Gibson. “Which it should be. It’s his brand.”
But the different power centers also provide benefits to the brand, says Gibson. “O’Neill Sportswear has its own marketing budget because we’re competing with big clothing manufacturers that have large budgets,” he says. “It’s complicated, but at the same time it’s great because we can all focus on what we do best. We ham-and-egg it and that makes the relationship great because we’re not waiting for O’Neill Incorporated to make a decision for us to be successful. We rely on ourselves. In turn, retailers are supported by a wetsuit ad and a clothing ad in the same magazine.”
This “ham and egg” approach probably won’t change, but it’s clear that as communications continue to bring the world together, having a consistent worldwide marketing and product look is becoming an important goal for O’Neill.
“We’re launching an international line of outerwear, and hopefully we’ll see more of that happening for all our sportswear lines,” says Brady. “It all boils down to whether the kid in Biarritz, Bells, or in Huntington Beach wants the same thing. The world’s gotten a lot smaller and things move faster. Kids are seeing what’s happening around the world almost instantly.”
So, how close is O’Neill to reaching this new world-branding order? “We’re a ways off,” admits Petri. “Everything we’re doing now is setting the stage. There are four surf-apparel companies out there that are strong globally: O’Neill, Rip Curl, Billabong, and Quiksilver. Three of those companies have been doing a excellent job with global growth in the past. We’re going in that direction now for the future.”
While global unification of the O’Neill brand may still be a ways off, the company is making some serious strides in that direction. Recently O’Neill International took over distribution in Australia from Joint Services International (JSI), the brand’s European licensee.
“Global branding, and having control of how the brand looks, is very important,” says Brady. “So when the opportunity came up in Australia we jumped at it. There’s a lot of wetsuit companies down there, but we still have a pretty good market share. It’s an incredibly large and powerful wetsuit market and we also see lots of opportunity for sportswear.”
Brady says that while the Australian market is very nationalistic, it’s also influenced more by U.S. trends than those from Europe: “We’ll be working with the clothing line from the U.S. rather than from Europe because it better represents what’s happening down there and what the market wants.”
O’Neill also made a big move this past summer to solidify its base in Japan. “We had two licensees in Japan,” says Brady. “One for wetsuits — which we continue to work with — and another one for clothing. We’ve made some investments in the Japanese market by coming into closer partnership with our sportswear licensee. Unlike in Australia, we didn’t take it over outright. We didn’t need to. It’s more of a move to help with distribution, product, and branding. We really want to make sure that the Japanese market looks and feels consistent with what’s happening in California and Australia.”
O’Neill has a certain personality in the European market, and JSI and O’Neill International have been working closely to cater to European customers while remaining on point with O’Neill’s worldwide brand message.
“We’ve been working really closely with them to figure out who that O’Neill customer is and how we reach them,” says Brady. “They’ve made great inroads with new people in the marketing and design departments who understand the sport and know what’s going on. They see the light and cooperation has never been better.”
On this Golden Anniversary year, it seems O’Neill’s future — and its business — remains dynamic and full of opportunity. “The O’Neill family is making a significant investment for the long-term, and it needed to happen,” says Brady. “Ensuring the brand’s long-term growth and consistency is worth the investment not only in Australia and Japan, but on a global basis. The world’s getting smaller and this drive to take the brand’s message worldwide is really top-of-mind with everybody.”
Sundek, Offshore, Stubbies, Catchit, Lighting Bolt, Hang Loose: the surf industry is littered with the remains of once-promising brands that didn’t make it. O’Neill, however, has bucked that trend and remains as relevant today as it’s ever been. “It’s refreshing to work in an environment where we’re trying to be the leaders and not a follower,” says Gibson, “where we try to be different in what we do, but not walk away from what we are.”
As Brady sees it, “The wetsuit company has been number one here forever, but the real momentum of O’Neill right now is the with the entire brand. People are asking me, ‘What’s going on? What’s the secret mojo you’ve got going on in the back there?’ That’s something we want to continue. We’ve all got our eye on taking the company to the next level.”