A visit to CI HQ and business update
By TIFFANY MONTGOMERY | October 20, 2010 06:00 AM
Scott Anderson, General Manager of Channel Islands Surfboards.
While I was in the Santa Barbara area last week, I stopped in at surfboard maker Channel Islands’ Carpinteria headquarters and had an informative talk with General Manager Scott Anderson.
Scott, who started working for the company nearly 20 years ago packing boxes, showed me around the state-of-the-art facility, which Channel Islands moved into about three years ago, and he gave me an update on Channel Island’s business.
According to the ActionWatch Retail Panel, Channel Islands has the highest market share and highest distribution penetration in the shortboards category.
Big upgrade
The Channel Islands headquarters are located in an office park in Carpinteria where on a clear day you can see the ocean and the actual Channel Islands off in the distance.
From the outside, the building looks like any other offices. But inside, there is a sophisticated board making operation, thousands of boards in various states of production and a very cool, loft like aesthetic in the area where offices are housed.
(Channel Islands' loft like offices.)
Scott told me this new space is heavenly compared to the company’s old facility, where the roof leaked and there was no storage.
The credit for the new building goes to Burton, he said, who invested in building a new facility for Channel Islands after acquiring the company in 2006.
“The impressive thing is with Jake (Burton) is that he had enough confidence in us as a group to invest this much in board building in California, and in Santa Barbara – not the cheapest place in the world to do business,” Scott said.
( Blanks that will be turned into boards.)
Jake and former Burton CEO Laurent Potdevin understood that Santa Barbara was the company’s roots, Scott said. The nice thing about the acquisition is that the two companies have very similar cultures and can relate to one another.
“It’s hardgoods to hardgoods,” Scott said. “We have a very like-minded philosophy. Whenever we work with Burton, they get it. They get the hardgoods thing.”
Making boards
(Patrick White laminating a board.)
Over time, Channel Islands has brought more and more board making processes in house and refined them, Scott said.
The company uses blanks from Surfblanks America, US Blanks and South Coast Foam & Fibreglass in Australia. Beyond that, the entire board is made in-house. I saw notebooks in the milling area that had pages and pages of entries listing extensive measurements for every board as part of the quality checking process.
Fifty people work at the company in two shifts. Boards are made from 4:30 a.m. until 11 p.m.
All processes meet strict state and federal environmental guidelines, also not a cheap proposition.
( Finished board inventory.)
The amazing thing to me was to see the inventory of completed boards. The hang in tiers, and the rows go on and on – a maze of boards.
The Carpinteria facility services most of the world – the U.S., Canada, Hawaii, Japan, much of Latin America and about 75% of Europe. Channel Islands also has a production facility in Europe that makes custom boards and boards for the team.
Licensees make boards in Brazil and Australia.
The company does not keep a lot of extra stock, however, because boards have about a three-month shelf life before they turn yellow.
The Carpinteria building can hold 3,000 boards, though it has never been that full, Scott said.
The idea is to “build it and turn it – and be smart about what we build,” he said.
Currently, the company is taking preorders for spring and summer and will begin making the boards about two months before delivery. It also makes a lot of custom boards.
(Kelly Slater's Black Flag model.)
I know some surfboard makers make product overseas. Given the low margins on boards, I asked if that is something Channel Islands would do.
Scott said the overseas model doesn’t work for the company because Channel Islands likes to have control over design, and quality and to get to market fast.
He gave the example of Kelly Slater, who lives nearby in Montecito, coming in one night to work on one of his models.
Kelly sat by the designer as they designed the board on the computer, and by the next day, Channel Islands had a model ready for him to test.
Once it got Kelly’s approval, the company can turn around and get it into the market in a matter of weeks.
“We could get more margin in Asia, but we think the best builders are here, and our quality control process is so extensive – we have complete control,” he said.
Business up
Despite the hardgoods market being tough overall, Scott said Channel Islands business has been up every year, and this year, the company is beating its sales goals.
(Channel Islands Sales Manager Mike Cobb and Product Manager Scott Martinson.)
Scott attributes the strength to Channel Islands strong products, but also to a new focus on forming stronger relationships with retailers.
Historically, Channel Islands just kept its head down and focused on making better surfboards, figuring the rest would take care of itself, Scott said.
While it is still very focused on making the best boards, being acquired by Burton allowed the company to invest in some new positions and infrastructure.
“Before, the product guy was also the guy tarring the roof when it rained, and the guy running the truck and running sales,” Scott said. “Everyone did everything.”
(Big tubes carry dust and particles outside from the milling areas and shaping bays.)
For the first time, the company has a dedicated sales manager, a production manager, a head of marketing. Everyone can focus on his or her job instead of running out to plug a leak in the roof.
“The end result is better product and relationships with retailers – we’re not just answering the phone and reacting,” Scott said.
Now, Channel Islands can spend more time in stores working to make sure key retailers have the right type of inventory and the right amount of inventory. It can really take time to talk with retailers, Scott said.
(The archive of "magic boards" riden by team riders through the years. Sometimes current riders will go through the boards and find features they like, which will then be incorporated into their boards.)
Company founder and legendary shaper Al Merrick is still involved in Channel Islands as a consultant, and comes into the office a few times a week when he is in town. He recently helped shapers perfect a special kind of rail on a board, and also acts as company ambassador at events and with athletes.
Margin builders
Because hardgoods are notoriously low margin, and Burton has made a lot of infrastructure improvements, I did ask Scott how that all shakes out financially.
(Dane Reynolds' traction pads.)
He said one way the company is increasing overall margins is expanding into accessories and apparel, which are more profitable.
While the company has dabbled in the area in the past, over the past two years there has been a more concerted effort.
Channel Islands is now selling leashes and traction pads, with packaging designed by team rider Dane Reynolds.
It also is making board bags and some travel bags, including a lightweight board bag that attaches to a suitcase with wheels, thus eliminating the needs for wheels in the board bag. That offering goes to market in March.With apparel, Channel Islands is making a very limited selection of T’s, fleece and hats, but doesn’t plan on becoming a full-blown apparel brand, Scott said.
Retail base
I asked Scott how Channel Islands’ customers have held up during the recession.
(Scott goes through new boards waiting to be picked up by team riders: "Here's Tanner's, Dusty's, Kelly's...)
“Not too bad,” he said, noting he could count on one hand the number that have closed.
But, the company has pretty narrow distribution, Scott said, about 100 to 120 accounts, all specialty accounts with a large hard goods offering. The biggest company accounts include Huntington Surf & Sport, Surfride, Jack’s and Surf Station.
Trends, hot sellers
Scott said board trends include the move to shorter, wider boards, which is being seen on tour and in board sales.
In fact, the short and wide Dumpster Diver, a Dane Reynold’s model, was the best selling board for Channel Islands last year, replacing the nine-year reign at the top for The Flyer.
A new Dane Reynolds model called the Neck Beard - the name is somehow related to San Clemente, though Scott did not want to go into details – will be released in April.
Other upcoming releases include:
A more environmentally friendly Rob Machado board called Motorboat, made with a Green Foam blank, UV cure and resin and a recycled fin, on Nov. 15.
( a drawing on Rob Machado's new Motorboat model.)
The Warp, a Shaun Tomson model, slated for January.
The Semi-Pro, a Kelly Slater model, also slated for January.
Remix from Dusty Payne in February.
And Cheese Stick from Yadin Nichol in March.
(The production office.)
The company also usually has special releases in summer and at holiday.
Staggering the releases helps shops manage inventory and creates excitement as surfers come in looking for something new, Scott said.
New Technologies
I asked Scott if there were any big new technological advances for surfboards on the way.
He said after the Burton acquisition, Channel Islands worked with Burton engineers to look at new advances in materials, manufacturing, recyclables, etc.
The end result, however, was that while they learned a lot during that process, Channel Islands boards are driven by its team of athletes. And the athletes are competing on the boards, and don’t really want wholesale change.
Instead, there will likely be incremental change – currently, some different fin and stringer materials are being tested, etc.
“You’re not going to put electric cars on NASCAR overnight,” he said.
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