In the ten years since Giant Bicycle Co. Pty Ltd (Australia) first registered a New Zealand branch office, the company has relied on a third-party agent to perform market development functions across the Tasman. However revenue has flat-lined and direct intervention has been actioned.
Before going into details, a quick backgrounder: Giant Manufacturing Co Ltd (9921 on the Taiwan stock exchange) is the ultimate holding company of Giant Bicycles globally. Beneath Giant Manufacturing lies Gaiwin B.V., a wholly owned subsidiary based in the Netherlands. Amongst Gaiwin s Directors are Mr. Liu Jin-biao (Founder and President of Giant) and Mr. Luo Xiang-an (Giant CEO). Giant Bicycle Co. Pty Ltd (Australia) is in turn a wholly owned subsidiary of Gaiwin and Giant Bicycles Co. Pty Ltd (NZ) is a wholly owned subsidiary of Giant Bicycles Australia Ltd.
Giant Bicycles Australia Pty Ltd was one of several national subsidiaries formed in the years following Giant Manufacturing Co Ltd s foundation in 1972; in Australia s case, this was way back in 1991. Since then, the Australian division has grown into a market leader in perceived brand value and revenue. In 2010, Giant Bicycles Australia Pty Ltd achieved turnover of AUD68.7m (2002 turnover was AUD23.7m), in a national market estimated to be worth AUD1Bn a 7% market share. In the same year, the subsidiary returned a dividend of AUD2.9m to Gaiwin. Disproving the myth there s no money in the bicycle industry , Giant Australia s director, Graeme West, netted a remuneration package of AUD769,115, including superannuation. By all accounts, Giant Australia and the Australian bicycle market has been performing handsomely.
Not so New Zealand. In its first full year of trade (2003), Giant Bicycle NZ s revenue broke through NZD6m. While there is no reliable data pertaining to the value of New Zealand s national bicycle market in 2003, Giant s presence was keenly felt by independent retailers across the country. At the time, the brand s Wellington-based managing agent, Cycletech, had the best proposition going. Relative to other brands, Giant s price:specification ratios were better, its dealer margin was greater and, critically, it could deliver faster even going so far as to pinpoint the exact week a dealer would receive a certain model, colour and size of a pre-ordered bike. Whilst ERP systems with these types of operational markers are relatively commonplace in 2012, such information was revolutionary at the turn of the new millennium. Helpfully, this also finally enabled dealers to run cashflow projections as they no longer had to guess when a truck full of bikes and accompanying invoice would suddenly show up.
Several years later, in 2008, Giant surprised its dealers (there are now 50-60 Giant points of sale, according to the company s website) by announcing a change in its NZ agency; rights were to be transferred to the NZ branch of Australian distributor De Grandi Cycle & Sport (headquartered in Geelong, home of the 2010 World Road Cycling Championships); the exclusive Australian distributor of Pinarello, Opera and Willier, and one of three Australian Campagnolo agents.
Even as the global economic downturn took hold, all systems were go. From 2007-2009, Giant NZ s marketing expenditure increased almost 50% to NZD442,000, but so did gross profit margin; up to 28% from a five-year average of 22%. However, revenue was stubbornly staying under NZD10m and agent commissions had fallen 30% from a 2006 high of NZD1m. 2010, the last year for which there is an annual financial report available* saw revenue recover to NZD10.8m, while gross profit margin dropped back to 26%.
Early this month, Giant dealers in New Zealand received a letter, signed by Graeme West, stating that Giant would be setting up a full subsidiary in New Zealand. It remains to be seen whether this decision is based upon the flat financial performance of recent years a perusal of FY2011 report will be informative or something else. According to industry insiders close to Giant, the hunt for a General Manager is underway and the site for Giant s NZ subsidiary is still to be chosen. As no official positions vacant notices are publicly evident, it seems reasonable to assume the new GM will be headhunted or an inside appointment (perhaps from the Australian payroll) will be made. Interesting times are ahead for the New Zealand bicycle industry.
[*Note: based on previous filings, Giant Bicycle s (AUS & NZ) 2011 annual report could be lodged with the NZ companies office by the end of May 2012]