16100 Jacqueline Court
Morgan Hill, California 95037
Telephone: (408) 778-0500
Fax: (408) 778-7001
Web site: http://www.customchrome.com
Wholly Owned Subsidiary of Global Motorsport Group, Inc.
Sales: $70 million (2004 est.)
NAIC: 336991 Motorcycle, Bicycle, and Parts Manufacturing
Custom Chrome, Inc, is the world's largest independent supplier of aftermarket parts and accessories for Harley-Davidson motorcycles. Controlling approximately 20 percent of the aftermarket, the company is second only to Harley-Davidson itself. The more than 21,000 products offered by the company include replacement parts, custom parts, and accessories and apparel, which are distributed to dealers nationwide from warehouses in Louisville, Kentucky; Harrisburg, Pennsylvania; Visalia, California; Jacksonville, Florida; and Dallas, Texas. The company generates the majority of its revenue through the sale of its own products, ranging from transmissions to leather chaps, which are marketed under brand names such as RevTech, Premium, Dyno Power, Santee, Regency, Chrome Gear, and C.C. Raider. It also serves as a distributor of products offered by other manufacturers, such as Dunlop, Champion, Hastings, and Accel. Custom Chrome is a subsidiary of Global Motorsport Group, Inc., a holding company it created to facilitate expansion. Global Motorsport Group is owned by investment firm Stonington Partners.
Custom Chrome was founded in 1970 by Ignatius "Nace" Panzica, a 27-year-old mechanic who worked at a new car dealership and enjoyed racing and fixing up motorcycles. As an extension of his hobby, Panzica, along with three of his friends, opened a motorcycle accessory store in downtown San Jose, California. The new store, which they named Coast Motorcycle Accessories, was designed to meet the growing demand of the many riders they knew who customized their motorcycles with homemade parts not available on the market. The fledgling shop at that time had not yet limited itself to Harley-Davidson products but carried parts and accessories for all brands of motorcycles. The company's first order, in fact, was for Honda motorcycle bars. The most popular requests in the early days of the small shop, though, were for 16-inch rear wheels and spoke kits.
Panzica's original plans were to operate the business as a one-person shop, with the other three working only part-time, around the schedule of their full-time jobs. As vice-chairman and cofounder Ty Cruze explained to Business Journal , "I just started at the shop as a part-time job and then bought in as an investor. It was just through us being enthusiasts that we found we could purchase things at prices better than most dealers could . . . and it just grew." The success of the business prompted Panzica to alter his plans. Two years later, he diversified his retail store operation into wholesale parts as well, becoming a distributor as the dealer industry grew. In an attempt to reach Harley riders outside of the California region, Panzica and his friends came up with the idea that would define the company's marketing strategy for the next 25 years. Working on a kitchen table in one of their homes, they created a Custom Chrome catalog, publishing the first edition in 1973 and providing the advertising tool that made future growth possible.
By 1975, Panzica's modest expectations for his one-person motorcycle parts shop had been surpassed. That year the company generated one million dollars in sales. The original store could no longer hold the inventory his growing customer base demanded, and the company leased a 5,000-square-foot warehouse down the street to make room for a wholesale operation. As the population of Harley riders (who as a group are noted for their obsession with making their bikes distinctive) continued to grow, the need for further expansion arose. In 1978, the company again moved its operations, leasing a 10,000-square-foot building nearby, its first industrial-type warehouse. Before the end of the decade, the company again doubled its size by relocating its business to a new 20,000-square-foot building in east San Jose.
As Custom Chrome entered the 1980s, it benefited from the increasing popularity of Harley-Davidson motorcycles and worked to obtain a dominant position in the market by the middle of the decade, supplying 60 to 70 percent of all aftermarket Harley parts, excluding the motorcycle company's own aftermarket production. In 1982, Custom Chrome completed its fourth move in six years, opening in a 40,000-square-foot building in Morgan Hill, California. A combination of several factors contributed to such rapid growth. First, the company skillfully cultivated its relationship with Harley-Davidson, both the primary source of its business and its chief competitor, by promoting the image of individualism, which was so much a part of the Harley mystique that appealed to the 250,000 members of the Harley Owners Group (HOG). Taking advantage of the almost fanatical desire Harley riders have to personalize their bikes as a statement of their individuality, Custom Chrome became an easily accessible source for customizing parts, supplying after-market shops to which the manufacturer, with a network of only about 600 dealers, could not sell. At the same time, Custom Chrome was able to offer its customers prices 10 to 15 percent lower than the competition, passing along the savings gained by manufacturing many of its parts in Taiwan. What is more, the company, which stocked parts for Harleys produced as early as 1936, was able to meet the unique needs of Harley enthusiasts who needed parts for their older bikes, ones that the manufacturer no longer carried.
Aggressive advertising also played a key role in the company's average annual sales growth during the early 1980s. Custom Chrome's marketing strategy at this time was carried out largely through its distinctive catalog, which not only provided attractive pictures of its product line but in addition supplied detailed information about the parts and offered suggestions for customizing and restoring as well. In 1982, the company's marketing department received its first Dealer's Choice "Best Catalog" award for its then 300-page publication, an award the company would receive again in 1983 and 1984.
Having emerged from the culture of Harley enthusiasts it now served, Custom Chrome knew firsthand the importance of customer service and the necessity of shipping orders as quickly and as inexpensively as possible. Accordingly, in 1985 the company introduced its "Eagle Express" freight program, enabling customers throughout the United States to receive their orders in three days by United Parcel Service (UPS) air shipment while paying only UPS ground shipment prices. As the company continued to develop its extensive warehousing system through technological upgrades and new buildings, rapid delivery time continued to set the company apart from the competition and contribute to sales growth.
By 1986, Custom Chrome had developed into a 170-person company with sales in excess of $20 million. In addition, it now produced enough Harley parts to introduce a complete motorcycle kit. Although it had obviously come a long way from its origins as a small "biker hangout," it worked hard to project the unconventional image commonly associated with Harley-Davidson. Although Panzica and Cruze skillfully assembled a work force that included alumni from such companies as Hewlett-Packard Co. and Varian Associates Inc. and invested heavily in the latest computer technology to track inventory, they still ran the company with a laid-back attitude, preferring blue jeans and cowboy boots to pinstriped business suits, a strategy that managed to keep employee turnover relatively low. They decorated the walls of the corporate offices with Harley memorabilia rather than Ivy League degrees, underscoring the company's blue-collar roots and its commitment to its customers, many of whom were touring Harley-Davidson riders and Vietnam War veterans with a strong distaste for mainstream corporate values.
Maintaining this biker-friendly image and marketing strategy, however, did not prevent the company from building a state-of-the-art administration and 110,000-square-foot warehouse facility as its corporate headquarters in 1987. That same year, the company launched another first in the industry by organizing a Harley-Only Warehouse Dealer Show. Dubbed "The Greatest Show on Earth," the show was highly successful among Harley enthusiasts and vendors alike, setting the stage for what would become a mainstay in the Custom Chrome marketing strategy. Not only did the company make the show an annual event, it also began taking an active role in other consumer events for Harley-Davidson enthusiasts, such as the Black Hills Motorcycle Rally, a popular annual event held in Sturgis, South Dakota, and the annual Bike Week in Daytona, Florida. Participation in such events enabled the company to stay carefully attuned to the needs of its best customers and advertise its products at the same time.
As the decade drew to a close, business continued to prosper, especially in the eastern part of the United States. In contrast to other domestic vehicle manufacturers such as Chrysler, Ford, and General Motors, Harley-Davidson managed to boost sales and market share in the face of increasingly strong foreign competition. To keep up with the increasing demand and improve on its delivery time, the company again expanded its facilities, opening a new 85,000-square-foot building in Louisville, Kentucky, in 1988. A year later, Custom Chrome was awarded the Dealer's Choice Award for "Best Consumer Advertising" for the third time in a decade.
Today, Custom Chrome is the worlds largest independent supplier of aftermarket parts and accessories for Harley-Davidson motorcycles, distributing our own products, many of which are offered under the brand names of RevTech, Premium, Dyno Power, Santee, Regency, Chrome Gear and C.C. Rider.
Although Custom Chrome benefited greatly from the success of Harley-Davidson during the 1980s, the relationship between the two companies has not been free of conflict. In 1989, the motorcycle manufacturer accused Custom Chrome of patent and trademark infringement, taking issue with its use of a brand name "Hawg," which closely resembled Harley's familiar trademark "Hog." At the same time, Custom Chrome brought a complaint against Harley-Davidson for packaging its products in a way that closely resembled the former's so-called "trade dress." A year later, the two parties settled their differences. Custom Chrome agreed to stop using the "Hawg" name by 1992, and Harley-Davidson agreed to stop using the distinctive packaging style.
Although operating income continued to rise into the new decade, the company lacked the cash needed for further expansion and product research. A management-led leveraged buyout in 1989 by the Jordan Co. had resulted in the accumulation of enough debt to threaten the company's future growth. In 1991, after enduring two years of interest payments on the heavy debt load, Panzica took his 20-year-old company public to alleviate the debt burden. Having generated $39.6 million in revenues the previous year while consistently enjoying annual profit margins surpassing 40 percent for several years, the company hoped to raise enough capital to pay off the principal and accrued interest on loans and strengthen its credit line.
With its balance sheets stabilized, Custom Chrome was again ready to expand, creating the infrastructure for continued growth in the 1990s. A year after its initial public offering, the company opened a new 65,000-square-foot warehouse facility in Harrisburg, Pennsylvania. The new distribution facility made it possible for the company to provide one- to two-day delivery service for its customers in the entire New England area and on most of the East Coast.
The early 1990s proved to be years of strong growth for the company. Between 1991 and 1994, revenue jumped from $43.6 million to $74.9 million, while net income over the same period rose from a loss of $2.6 million to a profit of $6.4 million. Twice the size of its nearest independent competitor, the company enjoyed both the economies of scale and the financial strength to offer competitive prices and lead the industry in new product development at the same time. Despite such advantages, the company saw its market share decrease slightly in 1992 and 1993, primarily as a result of moves by small regional and national aftermarket competitors to undercut Custom Chrome's pricing on nonproprietary parts. In 1994, the company took several aggressive and highly publicized measures to ensure that its prices were indeed competitive. Such strategies included stamping the phrase "We Will Meet or Beat Any Printed Price" on its sales invoices and repositioning certain items within product lines in an attempt to make it easier for dealers to make comparisons with competitors' products. The intensive marketing program also stressed the company's record of superior performance and quick delivery time, qualities illustrated by three consecutive Dealer's Choice "Aftermarket Manufacturer of the Year" awards.
In October 1994, Custom Chrome was able to build upon its already strong reputation for customer service by constructing a 100,800-square-foot distribution facility in Visalia, California. The new site replaced Morgan Hill as the central distribution point for the company's markets throughout the western United States and was selected after talks with UPS confirmed that the Visalia location would improve the efficiency of Southern California deliveries, an important factor considering that the state accounted for 17 percent of the company's business. Once the company completed the monumental task of moving 13,000 part numbers to the new facility, it was able to guarantee oneday delivery to all of California and most of the western states.
As Custom Chrome entered the late 1990s, it sought to expand sales by cultivating relationships with existing customers, realizing that repeat business generated most of its revenue. In addition to bolstering its telemarketing program, the company increased its presence at motorcycle events throughout the country, transporting its newly assembled "mobile showroom," a custom-built truck and 48-foot trailer housing six Harley-Davidson motorcycles outfitted with the latest in Custom Chrome parts, to several events each year. Attendance at trade shows and events enables the company to monitor customer satisfaction and introduce the more than 300 new products it usually develops each year.
The earnestness of Custom Chrome's desire to expand its business scope was expressed in several meaningful ways during the late 1990s. Panzica realized the company's growth was limited by its focus on serving Harley-Davidson customers, which prompted him to form a holding company to house his expansion efforts. "We know this market has walls," Panzica explained in an October 20, 1997 interview with the Business Journal , "so our future goals and vision is to expand into other areas of the motorcycle business." When Panzica made his remarks, he served as chief executive officer of Global Motorsport Group, Inc., a holding company formed several months earlier, in August 1997. Global became the parent company of Custom Chrome and its ancillary businesses Bad Kreuznach, Germany-based Tom's Motorcycle Parts and Accessories; Tainan Hsien, Taiwan-based Custom Chrome Far East Ltd.; and a third company, acquired days after the formation of Global, Fort Worth, Texas-based Chrome Specialties, Inc.
Custom Chrome's closest rival after Harley-Davidson, Chrome Specialties was founded in 1984 by brothers Greg and John Kuelbs, who built the company into a $35 million-in-sales wholesale distributor by the time its was acquired by Global. Its addition to the Global family of companies added a network of 4,100 retailers worldwide that carried Chrome Specialties parts, giving the company the ability to offer aftermarket parts for Japanese-made Hondas, Yamahas, and Suzukis, Italian-made Ducatis, and British-made Triumphs.
In the wake of the Chrome Specialties acquisition, Global prepared for further expansion, but before the company could assume a greater profile in the aftermarket parts industry it attracted the attention of a corporate suitor. Golden Cycle LLC, a company formed expressively for the purpose of acquiring Global, launched a hostile takeover in March 1998. Golden Cycle, owned by the operator of a chain of retail motorcycle parts stores called Biker's Depot (a Global customer), met with stiff resistance to its offer. A series of lawsuits and countersuits dragged on for much of the year. Golden Cycle's efforts eventually were thwarted when Stonington Partners, an investment group, intervened and acquired Global, a transaction that returned Global to the private sector.
No longer a public company, but free to pursue its expansion plans, Global completed a giant step toward becoming a bigger, broader company as it entered the 21st century. In January 2000, the company acquired Motorcycle Stuff, a distributor based in Cape Girardeau, Missouri. Motorcycle Stuff boasted a diverse product line, offering parts for European and Japanese motorcycles, ATVs (All Terrain Vehicles), personal watercraft, and snowmobiles. "Motorcycle Stuff brings us national distribution and a new range of customers to involve everybody in the powersports business," Global's senior vice-president of sales and marketing said in a March 2000 interview with Dealernews . "We'll be adding another 5,000 dealer customers," the executive added.
As part of Global, the company it created, Custom Chrome was a distinct entity, as were the holding company's two other principal businesses, Chrome Specialties and Motorcycle Stuff. Custom Chrome's headquarter facilities were the same as Global's main offices; Chrome Specialties and Motorcycle Stuff each occupied the same quarters they had before being acquired by Global. During the first years of the 21st century, Global felt the weight of its acquisitions, strained by the debt taken on to add Chrome Specialties and Motorcycle Stuff to its operations. In October 2004, the financial pressure experienced by the company was eased somewhat when it secured a new $90 million credit facility, which was used to pay down some of its debt and strengthen its clash flow. The month also marked the first time Global combined trade shows for Custom Chrome and Motorcycle Stuff, an event held in Morgan Hill that attracted more than 2,000 people and roughly 1,200 dealerships.
As Custom Chrome and the rest of the Global businesses prepared for the future, they represented a powerful and diverse aftermarket parts organization. Custom Chrome, the catalyst of the Global empire, held sway in its niche, occupying a favorable position for the years ahead. In 2005, the company's catalog, a 1,400-page tome featuring more than 21,000 products, offered the most extensive parts selection in Custom Chrome's 35-year history. "Custom Chrome is the leader in their field," an advertising executive said in an April 4, 2005 interview with Powersports Business . "But there's still potential to do more and they recognize that. Overall, people now expect to be able to customize everything from music to a cup of coffee. And within the motorcycle industry, which has always valued individual expression, customization is more popular than ever, as is seen with the success of television shows and personalities entirely based on it."
Custom Chrome Manufacturing, Inc.
Harley-Davidson, Inc.; Edelbrock Corporation; Hawk Corporation.
"Custom Chrome Names Mono Agency of Record," Powersports Business , April 4, 2005, p. 13.
Hayes, Mary, "Big 'Hog' Parts Seller Goes to Market," Business Journal-San Jose , October 14, 1991, p. 10.
Hildula, Scott, "Morgan Hill Firm Rings $20 Million in Hog Outfit Sales," Business Journal , October 27, 1986, pp. 1–2.
Jones, Danna M., " 'Nace' Panzica: Steers Motorcycle Parts Distributor to Public Success," Business Journal , August 30, 1993, p. 12.
Kontzer, Tony, "Custom Chrome Confirms Moving Local Distribution to Visalia," Business Journal , April 18, 1994, p. 7.
Labate, John, "Custom Chrome," Fortune , May 31, 1993, p. 99.
Taylor, Dennis, "Global Buyout Delayed by Bond Market," Business Journal , August 31, 1998, p. 1.
——, "Global May Be Rescued from Hostile Takeover," Business Journal , June 8, 1998, p. 1.
——, "Real Hostility Marks Takeover Attempt," Business Journal , April 20, 1998, p. 1.
Watanabe, Laurie, "Global Motorsport Adds Motorcycle Stuff to Its Powersports Line-Up," Dealernews , March 2000, p. 32.
—update: Jeffrey L. Covell