For the exclusive use of V. CHRISTIAN, 2022. Page 5 9B21M063 toward the urban and family market segments and promoted brand values. Kombi's two ski-resort retail locations focused more directly on communicating the brand's performance characteristics to skiers." Even with these DTC channels, Kombi continued to work with its retail partners. Kombi notified its retail partners before opening its pop-up shops, including through the distribution of a 20-page presentation on why Kombi's DTC sales were beneficial to the retail partners. Kombi also provided its retail partners with direct sales data from its pop-up and website sales as a way of sharing its insights regarding sales and trends. COMPETITION MEC (www.mec.ca) MEC was a Western Canadian-based retail co-operative (co-op), founded in 1971 as a way for co-op members to purchase expensive climbing gear at discounted prices." Building its association with wilderness exploration, environmental stewardship, and community, MEC sold outdoor gear and apparel from a variety of top brands and, with an in-house design team established in 2003," developed its own branded line of outdoor products. MEC moved manufacturing overseas to support its goal of offering competitive performance," selling MEC products at lower prices compared to other popular brands; for example, MEC sold its Icefield Gloves for $89.95: in comparison, Kombi's Timeless Gloves sold for $94.95 (see Exhibit 9). As of 2020, MEC had 22 stores across Canada." Canada Goose Inc. (www.canadagoose.com) Founded in Toronto in 1957 as Metro Sportswear Lid., Canada Goose was a third-generation Canadian family business.* Primarily a private label winter jacket manufacturer, Canada Goose moved fully into branded jackets and outerwear in 2001 with its Canada Goose line. With a focus on Canadian "luxury" (many of its products were manufactured in Canada), the company went public in 2017. Canada Goose sold DTC through websites and Canada Goose branded stores and sold wholesale to other retailers. In 2019, the company had approximately 2,700 employees and revenues of $830.5 million. Revenues by sales stream produced DTC gross profits of 75.3 per cent and wholesale profits of 48.1 per cent. DTC operating income (earnings before interest and taxes) was 54.4 per cent and wholesale was 37.3 per cent. As Canada Goose grew its retail operations through new stores in Canada and internationally as well as through its websites, DTC sales grew from 28.5 to $1.9 per cent of total revenues from 2017 through 2019.*9 The North Face (www.thenorthface.com) Founded in San Francisco in 1966, The North Face started as a small retailer of climbing and backpacking equipment. By 1968, The North Face was developing its own innovative technical mountaineering apparel and equipment. The quality of its products appealed to mountaineering enthusiasts, and its design flair appealed to more urban markets. Throughout the 1990s, The North Face's apparel became more broadly fashionable among "North Face Collectors," such as rappers, urban school kids, and jacket aficionados." In response, The North Face expanded its brand mantra of "Never Stop Exploring" to include artistic and creative exploration more broadly. This document is authorized for use only by VALIANT CHRISTIAN in MIKM805 SCC SUMMER 2022 taught by Lori Ann Ferrara, Seneca College from May 2022 to Nov 2022.For the exclusive use of V. CHRISTIAN, 2022. Page 4 9B21M063 highlighting family-friendly outdoor winter activities and "winter hacks" around problems such as lost mittens. The website highlighted community and family in ways that reflected the firm's explicitly stated core values of loyalty, humility, and caring." Kombi's leadership consciously reinforced these values by how they communicated the brand, engaged employees, and developed partnerships. Kombi ranked seventh in the 2017 Great Place to Work Canada survey." By 2020, Kombi was primarily a wholesale sporting goods company. All Kombi products were designed in-house in Montreal; manufacturing was contracted to one of Kombi's long-term manufacturing partners, with a particular partner chosen based on the product's characteristics. Kombi employed more than 40 design, marketing, and administration staff in its Montreal headquarters, and eight supply-chain focused staff in its Shanghai, China, office. Kombi's production contracts represented between 10 and 100 per cent of a given manufacturer's total annual production. Kombi Products and Lines Kombi had expertise in product innovation, including being one of the first brands to partner with W.L. Gore & Associates (makers of GORE-TEX) in the 1980s; more recently, it had incorporated proprietary textiles such as PrimaLoft@ and drirelease and its own Waterguard glove membrane technology. developed collaboratively with some of Kombi's suppliers. These textiles supported developing innovations in Kombi products, such as breathability, waterproofness, wind protection, insulation, moisture management, and touch screen functionality. Kombi sold over 500 different products for men, women, children, and infants in its collections (see Exhibits 6-8). Each collection included a variety of products and price points targeted to different customer segments by activity level and age. Kombi used pricing and labelling to signal quality, including, for example, the strategic decision not to produce gloves below a $25 retail price point. Product Collaboration and Customization In addition to its own collections, Kombi actively collaborated with other firms to co-develop collections of interesting products that fit both companies' brands. These collaborations helped Kombi expand beyond its traditional performance skiing base toward more urban and family-oriented customer segments. Some, like the Snowtime! toques, were new Kombi-branded designs sold only by a particular retailer; others, like the BeaverTails flip mitt, were co-branded products sold by both firms through their respective outlets. Retailing and Retailers Kombi products were sold primarily through more than 1,000 retail stores across Canada, although Kombi sold directly to customers through its website, seasonal pop-up shops, and brick-and-mortar stores at two Canadian ski resorts: Blue Mountain in Ontario and Mont Tremblant in Quebec. Mark felt these direct-to- customer (DTC) activities were important for communicating Kombi's values and connecting with customers. Kombi's first pop-up shop opened in 2017 in upscale Westmount in Montreal. The shop, staffed by relatives of Kombi's employees, highlighted Kombi's family values and family-oriented products. Kombi located another pop-up shop in 2018 in Toronto's historic Union Station (the city's central train station) to highlight the proud heritage and admired history shared by Kombi and Union Station."Pop-up shops were oriented This document is authorized for use only by VALIANT CHRISTIAN in MKMBDS SCC SUMMER 2022 taught by Lori Ann Ferrara, Seneca College from May 2022 to Nov 2022.For the exclusive use of V. CHRISTIAN, 2022. Page 2 9B21M063 ALPINE SKI RACING Companies had been drawn to alpine ski racing since the 1930s for the sport's marketing potential, created by its novelty and large audiences. Ski racing stars like France's Jean-Claude Killy garnered a large following on television and became cultural celebrities," perfect for product placement. Within Canada, legendary racer Nancy Greene wore Kombi gloves when she won gold at the 1967 World Cup.' In 2020, brand sponsorship of athletes and events existed at all levels of sport. For example, family sporting goods retailer Canadian Tire Corporation Ltd. (Canadian Tire) promoted youth sport participation through its Jumpstart program," and outdoor clothing company The North Face sponsored high performance athletes directly." Many countries also supported athletes preparing for global competitions. Alpine Canada, a Canadian non-profit that supported alpine athletes, had declared the goal of making Canadian ski racers number one on the slopes by 2026." CANADIAN IMMIGRATION AND SPORTS Trends in sports participation drove sales in sporting goods, and culture influenced who participated in what sport. Early Canadiana featured images of self-sufficient, proud, rugged people in the northern wilderness." By the 1930s, adventurous Europeans were drawn to Canada's mountain wilderness, where they pushed their limits in skiing, climbing, and hiking. " For the next 50 years, Europeans drove Canada's immigration" and brought with them a love for alpine skiing. By 2016, one in five Canadians was foreign-born, with the majority of recent immigrants coming from Philippines, India, and China (see Exhibit 1).14 In 1992, some 14 per cent of all active adult Canadians engaged in alpine skiing, second only to ice hockey in popularity. Yet by 2010, alpine skiing had fallen in popularity to approximately 6 per cent, behind ice hockey (17.1 per cent), golf (20.3 per cent), and soccer (see Exhibit 2)." Children were more likely to participate in sports than adults, with participation rates in 2010 being 26 per cent for adults and 75 per cent for children." For children, their activities of choice were soccer (42 per cent), swimming (24 per cent), and ice hockey (22 per cent). Less than 5 per cent of active children participated in downhill skiing." In addition, about half of all adult Canadians engaged in active leisure, such as walking and jogging, as part of their daily activity (see Exhibit 3). A different survey suggested Canada's overall ski participation rate was around 12 per cent in 2019" and would likely increase due to efforts by the Canadian ski industry and Canadian government to promote skiing to kids, and to Canada's increasingly urban and multicultural populations." However, even at this higher rate, the absolute numbers of skiers was lower in Canada than in many countries (see Exhibit 4). SPORTING GOODS MARKET In 2019, 4,374 Canadian sporting goods retailers (excluding e-tailers) shared CA$6.7 billion" in revenues, 19.1 per cent of which was for athletic clothing and apparel. Brick-and-mortar sporting goods stores accounted for 65.9 per cent of industry sales. Annual industry growth averaged 3.1 per cent from 2014 to 2019 and was predicted to grow around 1.9 per cent annually over the next five years. Average net margin for retailers was 4.5 per cent." Canadian Tire held 31.4 per cent market share, which included markets captured by the company's various subsidiary store banners: Canadian Tire, SportChek, Sports Experts, Atmosphere, and Pro Hockey Life, This document is authorized for use only by VALIANT CHRISTIAN in MKMBOS SCC SUMMER 2022 taught by Lori Ann Ferrara, Seneca College from May 2022 to Nov 2022.1 of 14 ._y Publishing Concordia JOHN . MOLSON SCHOOL OF BUSINESS W21291 KOMBI SPORTS INC.: STAYING AHEAD OF THE CURVE Heather Calvert, Raymond L. Paquin, and Rajshree Prakash wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Westem University, London, Ontario, Canada, NGG ON1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish materials of the highest quality: submit any errata to publishcases@ivey.ca. Copyright @ 2021, Ivey Business School Foundation Version: 2021-06-21 We are a family brand, inside our office and out. We are about warmth, family values, and of course, our Canadian heritage. Mark Pascal' It was early January 2020 and Kombi Sports Inc. (Kombi) was closing its seasonal Toronto, Ontario, pop- up shop after a successful Christmas season. With winter underway, Canadian newspapers were featuring articles on cold weather and winter sports apparel, both tying nicely to the Kombi brand. Mark Pascal, president and chief executive officer (CEO) of the Montreal-based, family-owned firm, had worked hard to communicate Kombi's core values to its customers. In the 1960s, Kombi used its conventional glove manufacturing and design knowledge to produce an innovative alpine ski racing glove, one that provided knuckle protection to alpine racers as they curved around the bamboo poles at high speeds. Through such innovations, Kombi enjoyed niche success in the downhill ski industry well into the 1990s. Though it had since expanded into base layers and winter accessories, Kombi entered the 2000s well known for its performance ski apparel but relatively little else. In 2013, Mark and his father (who was the president and CEO at that time) expanded beyond performance skiing and oriented the Kombi brand toward warmth, family, and Canadian heritage. They wanted Kombi to be "the best-known winter accessory brand world-wide, starting with Canada." To support this vision, they developed close partnerships with chain and independent retailers, which created new retail opportunities for Kombi's expanding product lines. Examples included the 2015 collaboration with chain retailer Sports Experts Inc. to produce tuques (winter knit caps) from the animated movie Snowtime!, a remake of the Quebec classic La guerre des tuques,' and the 2019 collaboration with BeaverTails Canada Inc., a Canadian quick-service restaurant chain, to produce co-branded "Snack-and-Go Flip Mittens." However, by 2019, increasing competition from online retailers had tightened margins and threatened some of Kombi's long-standing retail partners. The retail chain Mountain Equipment Co-op (MEC), for instance, re-evaluated its retail strategy in light of its financial troubles." Kombi clearly had an ability to grow sales by developing close partnerships with retailers, but how could Mark continue to grow Kombi when its key retail partners were struggling? What should he do next for Kombi? This document is authorized for use only by VALIANT CHRISTIAN in MKMBD5 SCC SUMMER 2022 taught by Lori Ann Ferrara, Seneca College from May 2022 to Nov 2022.For the exclusive use of V. CHRISTIAN, 2022. Page 3 9B21M063 among others. Sporting Life Inc., with 12 stores, had 0.5 per cent of the market. While there were some smaller multi-store retailers-for example, Quebec-based SAIL Outdoors Inc. with 12 retail locations and MEC with 21 locations"-most brick-and-mortar retailers had only one or a few locations and often specialized in a particular sport; for example, Montreal's Austrian Ski Shop."This fragmentation highlighted the importance of brand recognition and loyalty. Some retailers developed their own brands to sell alongside other products. About 50 per cent of MEC's sales were MEC products."Canadian Tire created the brands Woods, Outbound, and Frank, which were only available at Canadian Tire."Competitive private label brands were one way that retailers could compete against the increasing power of mass merchandisers and e-tailers, which held 19.0 per cent and 15.1 per cent of the retail market, respectively, and were likely to grow.2 In 2019, Canadian sporting equipment wholesaler revenues were $3.9 billion with an average net margin of 3.7 per cent. Although revenue growth was slow due to low-price, high-volume supply contracts, demand was expected to increase in line with retail growth, which also included the possibility of manufacturing products under retailers' private label brands. E-Commerce Wholesalers and retailers both created an online presence to compete with e-tailers. For wholesalers, this offered direct customer interactions and increased margins by bypassing retailers. However, retailers and e- tailers could offer greater shopping case as by providing customers a single sales point for multiple brands, and due to higher customer volumes, they could sell the same products at a discounted price (see Exhibit 5). Pop-Up Stores versus Brick and Mortar Branded pop-up stores-temporary storefronts opened for only a short period of time-had also gained popularity in recent years. These took many forms, including both traditional storefronts and mobile units, with firms using the pop-up stores to test new markets and build brand awareness. "While pop-up store costs varied because of shorter lease terms and likely lower sales staff requirements, conventional retail costs for premium retail locations were typically around 10 per cent of revenue for rent and 3 per cent for utilities." KOMBI Kombi began in 1911 as the Gold Glove Company, based in Montreal, Quebec. Founded by Isaac Gold, the company was renamed Gold Glove Lid. in 1945 and became Kombi Sports Inc. in 1989." Danny Gold, Isaac's grandson and an active Montreal skier and ski organizer," developed Kombi's iconic ski glove with knuckle protection and had it made by his grandfather's company, taking over the family business in 1961.34 Danny developed and patented many ski apparel innovations, including padded ski garments, gloves with attached heater packs, and the iconic gloves worn by celebrated Canadian skier Nancy Greene.3 In 1969, Danny recruited Edward Pascal, a chartered professional accountant, to join the firm. Edward later purchased Kombi from the Gold family. Mark, Edward's son, joined Kombi in 1998 and was appointed president and CEO in 2018.36 In 2013, the Pascals re-oriented Kombi's brand around the qualities of family, warmth, and Canadian heritage."This included redesigning the company's website (KombiCanada.com) and adding a new blog This document is authorized for use only by VALIANT CHRISTIAN in MKMBDS SCC SUMMER 2022 taught by Lori Ann Ferrara, Seneca College from May 2022 to Nov 2022.For the exclusive use of V. CHRISTIAN, 2022. Page 6 9B21M063 The brand had multiple product lines with different price points and performance characteristics. Its Summit Series and Steep Series lines were designed for extreme sports and conditions." By 2019, The North Face products were sold in over 5,000 stores across 50 countries." In 2000, the brand was purchased by the publicly owned VFC Group (which included other brands such as Jansport, Kodiak, and Smartwool). $4 Swany America Corporation (www.swanyamerica.com) A private company known for its innovative Toaster Mitts," Swany America was created from a 1987 merger between Elmer Little & Sons (founded in 1893) and Swany Corporation." The company enjoyed early niche success in the 1980s with Freezy Freakies, children's gloves that changed colours with the ambient temperature. In 1990, Swany oriented primarily toward the high-quality ski glove market, focusing on textile technologies and functional glove designs. It was a relative latecomer to the performance segment, but the company gained brand awareness by selectively sponsoring and partnering with ski professionals and winter sport athletes in the United States, Canada, the United Kingdom, and Switzerland. In recent years, Swany had expanded its glove lines to other "mountain culture" activities such as mountain biking. Swany was sold online through its own website and through retailers across the United States and Canada. Of Swany's 120+ products, only nine were neither gloves nor mitts." CONCLUSION Kombi had successfully leveraged its history of innovation and Canadian identity to expand beyond performance ski products and into urban and family market segments. Yet its reliance on retailers weighed heavily on Mark, the company's CEO, given the changing retail industry. Mark considered a couple of key questions: What avenues of growth could Kombi pursue when its retail partners were increasingly struggling? Where should Mark focus Kombi's efforts to build the brand into the "the best-known winter accessory brand world-wide, starting with Canada"? For the development of this case, the authors gratefully acknowledge the support of the Bob & Raye Briscoe Centre in Business Ownership Studies, John Molson School of Business, Concordia University