Billabong President Paul Naude Kicks It Up A Notch

It’s been two years since a management change shook things up at Billabong and paved the way for Paul Naude to take the reins of this top-tier surf brand in the U.S. marketplace. While at times it’s been challenging, Naude seems to be up to the task and Billabong has roared along as strong as ever.

Headquartered in Irvine, California, Billabong handles the North American market and is a wholly owned subsidiary of Billabong Australia. With more than 120 employees, the company has already outgrown its new office space, and is building out more offices in its already overflowing warehouse.

Ever since the 70s, when he began repairing and building surfboards in South Africa, Naude has remained committed and passionate about surfing. Now, in his first interview since taking over the Billabong brand almost two years ago, Billabong President Naude expresses his candid opinions about environmental issues, competitive surfing, and heading up one of the most respected brands in the surf industry.

TransWorld SURF Business: What are the major issues surrounding the surf industry today?

Paul Naude: On the surf side of the business, I think it’s important for people to really start marketing the activities of the entire industry. That will help develop up-and-coming brands that really create a lot of excitement in the industry.

Then there’s the whole competitive side of surfing in the American market. Everybody knows there’re problems there. It’s too fragmented. There’s no unified front.

Environmental issues are also a very real problem. Last year at Huntington Beach you had a classic example where the industry took a direct hit due to beach closures.

You can say, “Huntington Beach was closed, bummer.” But think about it a little further. Part of the allure of this industry is stoke. If you have beach closures taking place at random and at an increasing level around the country, what are you doing? You’re reducing the amount of water space for people who want to go surfing. You’re basically encouraging overcrowding, killing the stoke, and indirectly driving people away from the market. It’s a bigger issue than people realize.

We initiated a program with the Surfrider Foundation where we print its logo and support its message on the back of every one of our hang tags. We want to encourage the whole industry to get involved, which would give the Surfrider Foundation a little more muscle and would help it be more productive. This is an absolute necessity to the sport and to the industry.

TransWorld SURF Business: What do you think of this industry’s ability to work together?

Paul Naude: You’re stepping into dangerous ground. I’ve got one of the SIMA Surf Industry Manufacturers Association board of directors right next to me Graham Stapelberg.

I’ll say what a lot of people believe — but no one wants to say: I don’t believe SIMA is effective enough. A broader vision is required. However, there are a couple of conversations taking place right now that will lead to people take a closer look at the broader picture.

Organized surfing in the U.S. is disorganized. And the environmental issues are serious. All of these issues can be assisted by a more proactive, bigger-thinking industry organization. Hopefully, people will come together and make that happen.

TransWorld SURF Business: Let’s switch gears. Define Billabong’s customer.

Paul Naude: It remains unchanged. It’s an active, action-sports lover encompassing surfing, skateboarding, snowboarding, and the broad target market that we sell product to. They are twelve to twenty years old — with overflow on either side.

As a company, our challenge daily is to satisfy the needs of the youth market that aspires to action sports and the California lifestyle trends.

Our distribution is primarily specialty store and specialty chain based. Our primary interest is in surf, skate, and snow specialty stores and then in specialty chains. We see no change in that distribution policy going forward.

TransWorld SURF Business: With the girls’ line and snowboard apparel, this is a bigger business than it was ten years ago.

Paul Naude: Even two years ago.

Billabong isn’t a hype-driven brand. That doesn’t mean we don’t have a vibe and don’t work at creating a vibe in certain markets. But Billabong is about great products, great image, and great service. That’s what we strive for daily.

TransWorld SURF Business: On the marketing side, it seems like Billabong is very aggressive with producing new videos, putting on contests like the Billabong Juniors circuit and the new Trestles event this year.

Paul Naude: We don’t consider those issues to be hype. We consider those to be part of our core marketing program, which is absolutely essential.

Hype is fleeting moments of publicity in our book. I don’t say we don’t get involved with those. We do. But we selectively get involved with those.

Our primary objective is to target our marketing dollars at ‘core sports, ‘core-sports advertising, athletes, and other events that are in keeping with strengthening and promoting the brand.

TransWorld SURF Business: Have the challenges changed in the last two years?

Paul Naude: Yes. The challenges we faced eighteen months ago were like being at the bottom of Mount Everest with no ice axe. It was an incredible task.

I think we’ve assembled a great group of people. I know we’ve beat industry expectations in building this company quickly.

Obviously, this brand had a great image and great history. It was only necessary to pick up the ball and start running with it — the brand was in a very fortunate position at the time.

But we also had the whole industry gunning against us. So we were caught between a rock and a hard place. We had no choice but to get organized as quickly as possible and create an infrastructure and operational model that would satisfy the needs of the market in the same ways it had been serviced before.

That was an incredible challenge and, realistically, it took us a year to get the big-picture issues in place. From Holiday ’99 we started to come into our own in all respects. As a brand we were able to maintain dollar-for-dollar market share — based on the previous high of the brand — in our first year of organization.

That’s really a tribute to the staff and the support we got from the retail community as a whole — which was amazing. We were a new team and were relatively unknown, and people gave us the opportunity and backed us. Our sales are well ahead of expectations. Based on the previous high of the brand as a whole, we’re going to show 40 percent growth this quarter. Summer bookings have gone very well, and we’re about to launch fall.

There are certain areas where we’ve had exceptional growth. There are other areas where we still have some work to do. In terms of new product categories — like juniors — we’re having a good run and we’re serious about focusing on that. The intention is for it to become a business in its own right, with its own personality — which is necessary for the girls’ market.

With wetsuits, which are a key ingredient to all surfers in North America, we’ve picked up the pace and come out with some great products that the market has really responded to.TransWorld SURF Business: Do you think consumers even knew there was a change with the company?

Paul Naude: In Orange County, yes. We have to deal with the Orange County issue daily. There’re people who believe that life begins and ends in Orange County. We tend to have a slightly bigger view of the picture.

There was a ripple effect in Orange County, and that’s where we’ve had our work cut out for us. Which is obvious because it’s the backyard of the industry. Everyone was gunning for us, which is fine and totally understandable.

But I don’t think the youth market at large was aware of the change in management. The kids who are spending dollars at normal retail prices are going to buy product on
its merit and the image it portrays.

It’s been challenging, but we’re not whining about it. We’ve enjoyed the challenge. We’ve put our heads down, tried to fly under the radar, and tried to keep a low profile while we’ve gotten ourselves organized. At the end of the day, we’re pleased with the performance of the company, we’re pleased with where the company is today, and we’re pleased with where the company’s going.

TransWorld SURF Business: You’ve been kind of critical of the industry in general. Do you think there are some positives?

Paul Naude: This industry is healthier today than it’s ever been. It was really strong in the late 80s, but fairly transparent. What we have now is a far more professional industry both on the manufacturing and retail side. The girls’ market has been a phenomenal addition.

There’s great product out there — and not just from the big guys. The small guys challenge us every single day. The cutting-edge kids like new stuff, and that raises the whole level of the game.

Unfortunately, a lot of great companies can’t get over the first hurdle because they’re undercapitalized. The clothing industry is not known for great bottom-line returns, and it’s tough encouraging investors into a start-up. I admire those smaller guys who are fighting for their turf. Without them this market is pretty generic.

TransWorld SURF Business: Do you have an e-commerce plan?

Paul Naude: We don’t have a strategy right now because I think it’s too early still. Our policy is to allow our regular brick-and-mortar retailers to sell over the Internet, provided certain normal retail principles are applied with regard to no off-pricing, correct presentation of the product, no home-made logos.

Everybody knows there’s something there. It’s intangible. It’s too difficult to forecast and too unpredictable. We’re in the same boat. We’re not sure where the ball’s going to land. Right now it’s too early to predict. Even the people who currently are up on e-tailing are projecting conservative growth figures over the next couple of years. The question mark they have is where it’s going to go.

Everyone is dipping their toe in the water, but no one wants to make a mistake. From our point of view, the excitement about the Internet is the media side of it. Our Web site and the marketing opportunities from it is great. It offers the additional opportunity to get the Billabong message out to the consumer.

On the media side, the things that, Hard, you guys, Surfer, and Surfing are doing are amazing. Flame’s going to be able to go down to Lowers, take shots of the best surfers in the world, and be able to put shots up on the site, and have an article and video to go along with it. You’ll be virtually producing a publication daily. That’s extremely positive for the industry.

But with e-tailing, take Levi’s. It’s bigger than this entire industry. It just shut down its e-tailing site. What’s the message there? I don’t want to go down that road.