This month marked the end of an era in the snowboard industry when Elan's OEM Snowboard Factory in Furnitz, Austria declared bankruptcy and effectively shuttered its doors. Elan has turned out more than four million high-quality boards since it opened over 25 years ago in 1987, and the bankruptcy has left the factory, along with its 78 full-time workers and 90 seasonal employees, dormant.
While Elan's management did not get back to us for this story, the bankruptcy allegedly resulted from debt (Austrian newspaper Der Standard estimates it at €8.7 million) and an increasingly difficult European export market. The financial drama that led to Elan's closure remains murky with more questions than answers being shared, and rumors are swirling that the factory may come back online in the near future with a new business model and owners.
Despite the confusion, the need to answer several questions is clear to ascertain what this means for the industry. Is this the result of decreasing demand for snowboards? What does the closure mean for Elan's partners including Arbor, Bataleon, Capita, Dinosaurs Will Die, Lobster, and Rome? And how will it impact these brands’ retail customers next winter and beyond?
Is The Sky Falling?
There has been a lot of talk in recent months about snowboarding's decline, and while “decreasing” participation numbers have been blown out of proportion, sales of hardgoods have dropped for the last two seasons, with 2012/13 sales-to-date down double digits from last year's abysmal numbers.
While this may be the case, it doesn't seem that decreasing demand was a factor in the closure of one of the industry's largest factories. Many of Elan's brands, including Lobster, Arbor, and Capita, had been increasing order runs throughout the downturn and had plans to do so again this season.
It also wasn't a question of quality. The brands we spoke to said that Elan’s boards, until the bitter end, were second to none. "We are proud of the products that we’ve produced at that factory over the last 10 years," states Capita Founder Blue Montgomery, who was echoed by every other former customer we spoke with.
"If the [snowboarding] downturn is really happening and not the effect of a couple really bad snow years and five years of a bad economy, then I would not say that was what caused Elan to go out of business," adds Arbor Founder Bob Carlson. "This is more about the difficulties of financing a business in Europe."
Take a tour of the Elan Snowboard Factory:
Finding A New Home
High wages, tariffs, taxes, and currency issues are all hurdles in European production and exports, but none of these issues have changed drastically recently. Instead, they have compounded over the years and Elan's financial troubles, resulting from this and other issues, were no secret to its customers. Nitro, one of Elan's biggest customers, moved all production to Playmaker in 2011. Elan's parent company, which produces Elan Skis in Slovenia and was purchased by that country's government in 2000, saw criminal charges levied against it over cash infusions and "abuse of office" over the past several years.
Key employees from the Elan Snowboard Factory began leaving the fold during the last year, management changed, as did key order terms, and the writing was on the wall that things were not in order. These warnings, as concerning as they were for all involved, had an upside in giving Elan's customers time to tackle the massive task of finding a new factory, and none of the brands we spoke with expect a significant impact going into the 2013/14 winter.
"Short term there's going to be a run on capacity but I think there's enough capacity in the current factories," says Rome Director of Sales Dan Sullivan. "As it plays out, if the economics exist, then someone will build a new factory, but I don't think that's necessary at this point. There's been a problem with overproduction and maybe this is a side effect of that."
Thomas Berger, CEO of Austria's GST snowboard factory, which will be taking on production of the boards Rome built at Elan next season as well as some of Capita’s boards, agrees that short-term production capacity is limited across the industry, and is planning on ramping up capacity for next year to ensure on-time delivery for its existing customers including DC, Stepchild, Flow, Niche, Drake, Jones, and Yes, as it adds Rome, Capita, and APO to the mix.
In the long term, Berger sees a potential upside in this for everyone: "the market has too many production facilities considering the volume [of sales]. There are brands fighting mainly for volume with cheap pricing, resulting in too many closeouts. After many years of decreasing prices it is time to bring board prices back to a reasonable level. This is more healthy for everybody."
While Sullivan was very sad to see Elan go, he's happy to have rekindled the relationship with a known partner at GST, where Rome used to make its boards, and his company was able to get all of its molds from Elan and bring them up to GST. "I'd be scared if we didn't have prior relationships with GST," adds Sullivan. "I'd be scared if we were going into next season with someone we didn't know. We're confident they can meet our production numbers just fine."
Arbor's Carlson, who has moved all of his production to Dubai's new SWS Snowboard Factory, also sees potential upsides despite the woes of losing a strong, veteran partner and the trials of moving factories.
"Long term, I think the impact is a big nothing," explains Carlson. "The need for capacity will drive capacity. The production side will step up and handle the product that was produced at Elan. There are a lot of good factories out there. There are a couple good factories in Europe, a few in China, and a new one in Dubai. I think there will be a natural balancing that will make it almost seamless for the customer."
While Carlson was skeptical about moving to Dubai at first, spending time there has convinced him that this is the right move. "Dubai is a blank site without a bunch of industry hang-ups to overcome," he says. "It is not a low-end place by any stretch of the imagination. At the same time it's not Europe, so all those things that make it difficult to make snowboards in Europe are reduced. It's a place of incredibly well financed dreamers."
The fact that Elan's former employees George Cant and John Colvin, who know the Arbor line inside and out, are running the SWS Snowboard Factory, which is owned by Solico Composites and produces the lion's share of all wake and kite boards, doesn't hurt either. Nor does the fact that SWS and Arbor have signed an exclusive agreement for 2013/14 production to ensure that Arbor's numbers and quality requirements are met.
Yeah For It Distribution, which includes Bataleon, Lobster, and White Gold, has found a home for its production at SBF, the Chinese factory that produces its bindings.
"We were able to anticipate this in-time and tested boards for months from several factories and were most impressed with what we got from them [SBF]," explains Sales and Marketing Manager Anthony Manfredi. "They also happen to produce our bindings, which helps us to streamline our production even more."
Dinosaurs Will Die Co-owner Sean Genovese echoes Manfredi's foresight: "We’ve been in the know on this for a little while, so we’ve been acting accordingly. We’re in final talks with alternative manufacturers. China manufacturing is not an option that we’ve considered. As for us and the rest of the DWD family, it’s business as usual and all systems go!"
Capita is also finalizing its future production and Founder Blue Montgomery says that due to all of the moving pieces, his team is not commenting at the moment on their future production plans as the details are buttoned up.
The theme running through all the conversations we had with brands was consistent. While Elan's troubles are unfortunate for everyone involved, this is far from a death knell for the industry and shake ups can be good to increase innovation and fine tune business models.
"I'm bullish on snowboarding – the future is incredibly bright," says Carlson. "Every few years brands and industries need to have a slowdown to reinvent themselves and make things better. That was going to happen whether Elan went bankrupt or not. Snowboarding's future will belong to the people that are stoked to be here."