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Transcript

Linking Global Business to Success

Louis Garneau: I also opened up the United States because the prime minister at the time, Brian Mulroney, had said that there would be free trade between the United States and Canada, free trade in which there would be a straight-line decrease in customs over 10 years. I thought that was a good thing but I found it wasn’t going fast enough. That’s why I went to the United States. I think that if you want to do business in the United States, you have to have a company in the United States, at least have an office. I had decided that I really wanted to get involved and respond as an American and really get established there.

After that, I also wanted to open up a company in Europe because the European market was growing, so when there were talks of a common European market, when Europe became a union, I said I’m going to go to France and open an office or make an acquisition. So we decided to make an acquisition in France, we joined forces with French businessmen and said that from France we would be able to deliver to all of Europe because customs were being dropped, because it was becoming a common market. I said to myself, I succeeded in the United States so I’ll do the same in Europe. But it was a little more complicated than that. For me, it was a failure.

I had joined forces with people who were probably not the right people and we had a partnership that was maybe 50-50, and after a year and a half I had to sell back my shares and leave France, and I came back to Canada. We lost money, yes, we lost money at the time. Maybe we shouldn’t have done it that way. After, we worked with independent distributors on the European markets, and I would say that it worked out quite well. It meant we didn’t even have a factory, which we didn’t need, no need for a warehouse and, in the end, no need to finance all of the stock for the European market.

So instead we chose to work individually with a German, a Frenchman, an Italian, and because it’s easier to have…to work, I think, with independent distributors who buy the products from us and then I deliver them instead of trying to finance, especially a small company, it’s…you can’t ask it to support stock for a dozen countries and collect on accounts, take care of credit, sales, storage, financing. So I suggest having independent distributors for markets that are very far away.

The U.S., if you remember what I said earlier, my plant is 2¾ hours away from my office. So it’s very, very close. I can go there and back in one day. But Europe, you have the time difference, delays, so the farther away you are, the more I recommend having distributors or super distributors capable of taking charge of a network. At the same time, distributors know better than a Canadian how business is done in Italy, how business is done in Germany, they know the language, they know the culture better, they know their market better than we Canadians. We have products manufactured in Poland, we don’t own the plant in Poland, but it manufactures for us. Listen, today we have over 50 suppliers in China. We have one plant in Poland subcontracted to manufacture clothing for us, but the biggest subcontract we have right now is China, and we just recently opened a plant in Mexico. There again, we wanted to take advantage of government programs, of free trade between Canada, the United States and Mexico under NAFTA. So one year ago we opened a plant. We have 31 employees and plan to expand to around 50 employees. So Mexico is helping us. We have, for medium production, Mexico, for large production, Asia, and for high value-added production we manufacture in Canada and the United States because we even have 85 employees in the United States.

So our business model has been adjusted, it has changed. The business model has changed a lot, I would say, and the great thing about Louis Garneau Sports, it’s our…the strength of our team, our strength in assessing markets and our ability to adapt. So whereas before we used to be 100% a manufacturer, today we are 50% a manufacturer, we are a designer, distributor. We still manufacture, our model is somewhat of a hybrid but we adapt. But it’s not because we want to have a different business model, it’s just that we have to adapt. Government rules are changing. There’s talk about market openness, globalization. There’s talk about free trade agreements, so every time something happens at the global level, we look, we examine and we say, What should we do? Do we open a plant? Are we better off working with a distributor? Do we buy Asian products and deliver them directly to our clients around the world?

So our model is extremely complex but it’s, I would say, not so much complicated as complex, so it’s…you have to have a lot of knowledge, you have to be very careful in the way you operate, and we decided to choose the planet, planet Earth, as the market for Louis Garneau Sports, and that suits us very, very well.