Billabong International CEO Matthew Perrin Explains His Strategy For Success

His looks are deceiving. At 30 years old, Billabong International CEO Matthew Perrin might just be the youngest CEO in the action-sports industry. He’s certainly the youngest CEO to be running a brand the size of Billabong. But as International Marketing Director Graham Stapelberg says, “His youth belies his business experience. There’s no question that he has the brightest, sharpest mind of any individual I’ve had the privilege of working with.”

And while Perrin would be the first to say that the success Billabong has achieved since he became CEO in January 1999 has been the result of a company-wide group effort, you can’t deny that business has boomed since he grabbed the reins.

Compared to 2000, Billabong’s sales revenue increased 68 percent in 2001 to 206-million dollars (U.S.). Earnings before interest, tax, depreciation, and amortization (EBITA) increased 91 percent to 39.5-million dollars. Billabong achieved revenue growth across all its major markets, including Australasia (up 126 percent), Europe (up 50 percent), and North America (up 50 percent).

But as importantly, Billabong made the transition to being a publicly held company while keeping its culture intact. TransWorld SURF Business sat down with Perrin in February, 2002 at Billabong’s world headquarters in Burleigh Heads, Queensland, Australia to find out what attracted him to Billabong and how he intends to maintain the brand’s momentum.

What drew you to the Billabong business? You went from being a lawyer to managing one of the largest surf companies in the world. It certainly represented a big change in your life.

Matthew Perrin:

It was the potential the brand had internationally. Bob Hurley had done did a good job of getting Billabong to where it was in the States, but we thought it had a hell of a lot more potential. We’re starting to see some of that realized now. We’ve now also got wholly owned businesses in Japan, Europe, New Zealand, and Canada. We’re about to start a new one in Brazil, because one of our licensees down there had a few problems that we had to help them out of.

I get the impression Billabong is the number-one brand in Australia. Is that a correct reading of the market?

It’s like most major markets, where the retailers keep their numbers pretty close to their chest. We think ourselves and Quiksilver are the two largest brands in Australia and we’re pretty comfortable that in the Australian market we probably have a good percentage of the sales. But I don’t think it’s as much as people like to beat it up to be. Billabong, Quiksilver, and Rip Curl all have a pretty good market share in Australia.

How mature is the Australian market in terms of potential sales growth and new retailers?

Here in Australia, Billabong’s been supplying roughly 650 accounts now for the past nine years. That number has only really fluctuated by five percent in that nine-year period.

Some of those retailers now are opening new doors, and quite a few retailers are going down the path of taking a 400-square {meter} store and turning it into a 600 or 700-square {meter} store — which is good for the industry. Of all the major international markets, it’s definitely the most developed, but it’s still growing at a pretty steady rate. It’s definitely healthy, but it’s not going to see the type of growth that Europe’s going to see over the next five or ten years.

Quiksilver is the largest brand in the U.S. Why is the competition so much tighter here in Australia?

We’re the first to say that Quik has done a good job in a lot of areas. One factor that makes them bigger than us in the States and in Europe is that they started there a lot earlier than us — they had a head start — and even with their head start they’ve still done a good job.

One of the things they’ve done well in the America is the retail program with their Boardriders stores. That’s worked well for them and they been able to do it without alienating their ‘core customers. They’ve done a tremendous job with Roxy. That’s the second big issue. It really has opened up a new part of the business for retailers, wholesalers, and athletes — it’s been good for the whole industry.

Billabong’s North America business has seen some phenomenal growth since 1999. Was Bob Hurley leaving the brand a huge wake-up call that ultimately helped the brand?

There are a couple of factors as to why the brand has been successful in America since Bob went his own way. The first one is that we happened to get some great people from all over the industry.

Paul Naude is the number-one person we employed, and he’s been instrumental in getting a lot of good, talented people with a strong surf background and culture into the organization. That’s all been a great help to getting the brand to continue its momentum.

The second thing is that we now got ourselves where all our major markets are owned by the one company — Europe, America, Canada, Australia, Japan, and New Zealand.

And that helps you it terms of margins, shared resources, and cash flow?

Definitely. Resource-wise, it’s great to have the technicals there. More importantly in our mind, however, is that our marketing and product development is now fully linked internationally. All those guys are getting the resources and backup from all the other regions. That’s a big help, particularly with marketing and product. We’ve now got the skills, the resources, and the feedback from all those different parts of the world. That’s a big part of why the momentum has continued over the past three or four years.

If you take a look at all the different markets, which area represents the biggest growth opportunity for Billabong?

We think that there are a lot of opportunities out there at the moment. Not particularly in order, but Europe is an opportunity for the whole industry but for ourselves in particular. We think we have the right team, the right marketing, and the right brand image to have a good solid go at Europe over the next five or ten years.

Then there’s the whole women’s phenomenon internationally, particularly in North America and in Europe. That’s another great opportunity. Our snow program is really now starting to develop its own brand image and exposure — particularly in Europe. We also want to develop that in America.

Then there’s our acquisition of Element in July of last year. All the Element guys remain in place and it’s been a smooth transition. We think the whole skate-apparel market is underdeveloped in terms of product range, quality, competitive pricing, customer service, sales reps, and the like — everything that the industry is used to. So there’s another area with exciting growth opportunities.

I’ve heard that retailers like PacSun are looking to carry more skate hardgoods brands, but they’re having a hard time being serviced by the existing skate softgoods brands.

To be honest, we’d like it if a couple other people really had a go at the skate-apparel business as well. The skate business has always thrived with three or four highly competitive, emerging brands in the mix. If people are prepared to dedicate their business to skate apparel, it’s going to help the whole industry.

There will always be the guys selling skate hardgoods and they do a great job, but to get some other specialist people who do apparel to back up the whole hardgoods program will do the skate industry a lot of good.

Billabong is primarily known as a surf company. If you get more involved in the skate softgoods market, would you ever do that under the Billabong name?

No. Billabong is always going to have a presence in the skate market, but that’s more of a youth-culture identification issue. We’re not a ‘core skate label, and we’re not going to try to be one. But while we’ll always remain linked to youth cultu
re — and skateboarding — we see the opportunity to become very involved with that market through a ‘core brand such as Element. It does have its roots and background in skate and will always continue to be a skate label.

Billabong has a wide range of product now. You’ve got men’s and women’s apparel, wetsuits, watches, accessories, skate decks, and more. The one thing you don’t have is shoes. Any plans to move into that market?

As a company, we see having a shoe brand as a natural fit to our business. We’d be more attracted to a acquiring a shoe brand rather than developing one ourselves. So we’ll keep our eyes open for opportunities. We’re forever having a look, but that doesn’t necessarily lead to acquisition. But we’re definitely out there with our eyes open at the moment.

If the right brand — one that was established but offered potential for the future — came along, and if we got along well and had the same brand philosophy in terms of distribution and marketing, then we’d be prepared to talk straight away.

Have you gone down the path with one brand further than others? There was talk about your synergies with Globe a while back.

No. We get along well with the Globe guys. We’re all based here in Australia, so we cross paths. We had a yonder there back in 1999 or 2000, but it was really a pretty casual discussion and it’s not going anywhere. They’re doing fine and everyone recognizes that any merge in the future is pretty unlikely.

In the U.S. there are mainstream brands like Gap and Abercrombie and then there are the surf brands, and there’s a big gulf between the two. I don’t see that here. Are you the Australian equivalent to Gap or Abercrombie based on the strength of surf culture in Australia?

We’d never compared ourselves to Gap and Abercrombie. Here in Australia, the surf stores and the whole surf market do represent a big portion of youth retail spending. It’s not hard to understand why. Eighty percent of the country lives on the coast, the climate’s perfect, and you can go to the beach virtually about twelve months around in just about every part of the country.

So in Australia, while you still have Gap and Guess, they have a much smaller market share here than what they have overseas, and the surf stores — which include the surf brands — have a much higher proportion of market share than what they have in any other market.

There are definitely pockets economic weakness, whether you’re talking about Japan or even the U.S. What’s your impression of the health of all the different regions?

Unfortunately, Minami {Sports} just filed {for court protection} in Japan, and that’s not good news for anyone. Outside of that, the industry itself is pretty solid. I can only talk about our business and how we see the future, but we’re pretty optimistic about Japan for the next three to five years, so that market’s okay.

Europe is the one offering the most potential at the moment. It’s very healthy. There are plenty of expansion and plenty of growth opportunities there. Australia is the same as it’s been for a number of years. It continues to go along with it solid steady pace. There are no pressing issues here. We haven’t seen any credit issues or anything here in Australia.

So that really leaves you with America, and 2001 wasn’t a good year for the surf industry in the States. The whole weather pattern there through the spring and summer threw everyone for a bit of a toss, and everyone knows what happened through the second half of the year.

There’s quite a few people out there feeling pain at the moment. A lot of small brands are feeling pain. A lot of retailers have credit issues. But we’re hoping and planning that 2002 will be the year we get back on track as an industry. We think people will start spending advertising dollars again, and that people will start pre-booking and getting confident. If we get some weather happening, it could be a pretty good year. So whilst at the moment it’s a bit rocky, 2002 will be a great opportunity for us to turn it all around.

Have the problems the U.S. market experienced in the second half of 2001 been an opportunity for Billabong to consolidate its position?

It’s not good for anyone when consumers aren’t spending and retailers are struggling. We’ve definitely seen our smaller brand — Von Zipper sunglasses — have a lot tougher time than Billabong and Element. It’s not easy for any of them — let’s stress that — but our smaller brand has struggled more.

That’s a natural reaction from retailers, but we’re not out there to cruel the young, emerging guys out there {during the downturn}. The industry needs energy and vibe coming through from the younger brands. We’re fighting for as much market share as we can get, but we’re not looking to box the young guys around at the moment.

What’s you take on the skate market and its affect on surf brands?

You’ve got to separate the hype around skate and the actual size of the market. We’ve got a pretty good feel for how big the skate apparel and skate hardgoods markets are, and they’re a hell of a lot smaller than a lot of people think.

If you compare the U.S. skate-apparel market to the U.S. surf-apparel market, the surf market is by our estimates ten to twenty times bigger. So while there’s a lot of energy and vibe coming out of skateboarding at the moment, it’s not out there gobbling up a lot of surf’s market share. There are great opportunities for growth in the skate market, but that’s not necessarily going to mean that those revenue dollars are going to come from surf. However, the Abercrombie’s and Gaps of the world are going to have a lot more issues with the increasing strengths of both the surf and skate industries.

An increasing trend we’re going to see is that of new stores that have a strong floor plan for both surfing and skateboarding, whereas historically the skate guys were in the corner. You’ll probably also see more new skate stores than surf stores in the future. You’re going to see a lot quicker growth with skate, and overall that’s pretty healthy for the entire industry, to have both surfing and skateboarding moving forward and being strong.

Which segment of Billabong’s business is growing fastest?

Well, the whole industry knows that girl’s is growing faster than men’s. For us, we’re excited more about the international opportunities we’ve go. That’s the number-one priority for the whole brand. We’ve got markets now through Europe, Japan, America, South America. There’s a bucket of potential there {in South America}.

Girls is exciting for our whole industry. What’s particularly exciting for us is the potential of Element, to really keep it ‘core, keep its distribution clean, but focus on customer service, products, and competitive pricing. We think it’s really got long-term potential.

How much of Element sales are hardgoods versus softgoods?

Most of the major skate brands traditionally have been about 70 percent or more through hardgoods. Obviously that’s still the case with Element today. Naturally we’ll look to correct that as we go forward. We’ll still focus heavily on the hardgoods program, because that’s where the brand drives a lot of it image from, but that split can change pretty dramatically.

The brand’s been very healthy, so our strategy is pretty simple: let’s keep the brand on the same course with distribution, product, hardgoods. Let’s just improve the apparel products and their offerings and customer service, and that’s going to make it easier for the retailer to do business. It will be good for them and good for us.

How important are teamriders and WCT rankings to your business? Is it possible to track an increase in sales when one of your guys wins a world title or places high in the rankings?

We don’t really like to say that a guy winning a world championsh
ip means that we’re going see a sales increase of five percent. You’d be kidding yourself if you said that.

But we’ve always had a strategy from Gordan Merchant all the way down the company, that you need to be thinking about the next new wave of surfers coming through, and whilst we still have Occy and Luke Egan and Shane Dorian — all these guys who’ve been around doing a good job now for a lot of years — we’ve now focused heavily on who we think is going to have a go in the next five years. We think we have the right guys there with Andy Irons, Joel Parkinson, Taj Burrow. We think we’ve got the three best young guys who are on the WCT at the moment and guys who will be the future of surfing over the next five years. But we’re already starting the process again with our juniors program, the fifteen and sixteen year olds.

What does The Billabong Odyssey give you that you can’t get elsewhere in terms of marketing?

It’s a new concept and a ‘core concept as well that we’re prepared to get fifteen guys and send them to the most remote locations on earth purely to chase waves. These guys are amazing athletes. There aren’t too many guys who will fly halfway around the world to almost freezing temperatures and get out in the middle of the ocean in gigantic waves at a place no one has ever surfed before. So it just adds a ‘core aspect to the marketing and the brand that shows you that you are genuine, and that you’re looking for unique and extreme avenues. That appeals to a lot of people. Everyone can relate to going out in to the middle of the ocean trying to find 100-foot waves.

Is there anything the surf industry as a whole should be doing differently or better to grow the sport surfing?

It’s always a hard question, and a lot of people stick their hand up and say there’s twenty things we’re not doing. My personal view is the industry has done a bloody good job to grow as it has done. It’s grown in the past ten years arguably faster than any other industry — definitely retailer industry — going around. So it’s pretty hard to criticize.

A couple of the big challenges we face now is getting the industry back up and going in the States. That’s working out well. The other thing the industry needs to be focused on is the whole pro tour and making sure it gets the right exposure through the right channels over the next few years. That will be one of the key elements needed to keep the industry growing.

The industry itself needs to control those channels. We all know that the industry has a certain way of producing media footage, videos, et cetera, that we’re comfortable with. We need to control that, where it’s shown, and how it’s portrayed. But we’ve all done a great job getting the surf industry to where it’s at, and we shouldn’t loose sight of that.