Trek Bicycle Corporation - Company Profile, Information, Business Description, History, Background Information on Trek Bicycle Corporation

801 West Madison Street
P.O. Box 183
Waterloo, Wisconsin 53594

Company Perspectives:

The Trek philosophy is to produce a quality product for a competitive value, deliver it on time and in a positive environment.

History of Trek Bicycle Corporation

Trek Bicycle Corporation is the world's largest manufacturer of bicycles sold by specialty retailers. Founded in 1976, the company sells close to a million bikes a year, as well as full lines of bicycle accessories and clothing. In addition to bicycles bearing the Trek brand name, the company also markets a line of mountain bikes named after Gary Fisher, one of the inventors of the mountain bike, and a line of bikes named for racing star Greg LeMond. Trek has several European subsidiaries, and its equipment is distributed in over 60 countries across the globe. In the United States, Trek maintains five Wisconsin manufacturing plants and four distribution centers. In addition to its manufacturing operations, Trek sponsors a number of racing teams, an on-site repair program, and an annual fund-raising ride for Midwest Athletes Against Childhood Cancer.

Early History

Trek was established in 1976, at the peak of the 1970s bicycle boom. Its founders were Dick Burke, president of Milwaukee-based appliance and electronics distributor Roth Co., and Bevill Hogg, the proprietor of a chain of bike stores, one of which was located in nearby Madison. With financial backing from Roth's parent company, the Brookfield, Wisconsin-based Intrepid Corporation, Burke and Hogg launched Trek in an old warehouse in Waterloo, Wisconsin, located halfway between Milwaukee and Madison. With a work force of about five, the company began making high-quality, lightweight steel bicycle frames by hand.

From the outset, Trek committed itself to selling bicycles primarily through specialty bicycle stores, rather than through general retail outlets. This decision helped the company to maintain its image as a supplier of equipment for serious bicycling enthusiasts. Trek quickly became a favorite brand among that connoisseur market, and independent bicycle shops have remained Trek's most important outlet.

Competing primarily against European and Japanese manufacturers, Trek began to have an impact quickly, gaining industry attention both for the quality of its bikes and for being an American company. Trek bicycles were especially popular in the Midwest, the company's own backyard. By 1978, however, Trek was distributing to both coasts, as well as to other bicycling hotspots, such as Colorado. After only three years in business, the company's annual sales had grown to $750,000.

By 1980, Trek had outgrown its original plant. The company moved to a new facility in Waterloo, and there it began mass-producing bicycles. Sales were so brisk that Trek also contracted a Taiwanese firm to produce some of the company's bikes. Among bicycling enthusiasts, Trek was quickly gaining a reputation as a producer of the very highest caliber of bicycles available, and its sales reflected that reputation. During the early 1980s, sales virtually doubled each year.

The Age of Mountain Bikes

In 1983 Trek became a fairly early entrant into the mountain bike market, with the introduction of its 850 model. Developed in California in the late 1970s, mountain bikes featured more comfortable seats, fatter tires, and more gears than the ten-speed road bikes that dominated the market at the time. Fueled largely by the surging popularity of mountain bikes, Trek sold more than 45,000 bikes in 1984. The company also launched its Trek Components Group that year.

During the 1980s, Trek was one of the very few American companies that stood in the way of an all-out takeover of bicycle manufacturing by Taiwanese factories. Although even Trek continued to import some of its bikes from Taiwan, the company found that it was able to offset the somewhat higher costs associated with manufacturing in America by saving on ocean shipping and cutting out other middlemen. Even labor costs proved to be a relatively minor problem, since making bikes was seen by young employees, many of them avid bicycling hobbyists themselves, as a fairly glamorous job, and those employees were therefore willing to work for rather modest wages. As Trek expanded its facilities over the next several years, it was able to rely less and less on imports.

After a conflict with cofounder Burke, Hogg left Trek in 1985 to start his own bicycle company in California. In spite of the changes, Trek continued to grow at an impressive rate. In 1985 the company introduced its first aluminum road bike, Model 2000. Its first carbon composite road bike, Model 2500, hit the market the following year. By 1986 sales had soared to $16 million, and surging demand led to the addition of 75,000 square feet to the company's Waterloo manufacturing facility.

A New Philosophy for the Late 1980s

Ten years of startling growth did not come without problems, however. As Burke explained in a 1996 Capital Times (Madison, Wisconsin) interview, "In all fairness, Bevill [Hogg, company cofounder] was more of a dreamer than a manager." Although sales remained solid, Trek began to experience difficulties in a number of areas. Unsold inventory began to pile up, and as a result the company was losing money. With morale nearing rock bottom, Burke decided to take over the day-to-day management of the company. He instituted a "back to basics" approach, emphasizing sensible business practices and quality service. His new mission statement had four components: "Produce a quality product at a competitive price, deliver it on time in a positive environment."

Burke's new approach began to pay off quickly. Improved efficiency and marketing, combined with Trek's ongoing reputation for turning out quality products, breathed new life into the company's sagging bottom line. Sales doubled in each of the next three years. In 1987 Trek successfully introduced a new line of mountain bikes, and their popularity helped the company sell a total of about 100,000 bicycles in 1988.

Trek continued to find innovative ways to make money during the last years of the 1980s. In 1988 the company introduced a line of bicycling apparel. The following year, Trek entered the stationary bicycle market with Trek Fitness bikes. In 1989 the Jazz line of children's bicycles were introduced, and the company opened subsidiaries in Great Britain and Germany. Within five years, international sales accounted for about 35 percent of the company's business. By 1990 mountain bikes made up nearly half the bicycles sold in the United States, and Trek was prepared to claim a strong share of those sales. The company sold 350,000 bikes altogether that year. Trek's sales grew to about $175 million for fiscal 1991, and the company had about 700 employees by that time.

The High-Tech 1990s

During the first part of the 1990s, Trek remained at the technological forefront among bicycle manufacturers. Throughout the 1980s, the company had succeeded in developing advanced materials that enabled it to maximize the lightness and strength of its bicycle frames. These breakthroughs led to the 1992 development of the Optimum Compaction Low Void (OCLV) carbon fiber lamination process. Using the OCLV process, Trek was able to make the lightest production frames in the world, weighing in at a mere 2.44 pounds. Trek's first OCLV carbon road bike, Model 5500, was introduced in 1992, and its first OCLV carbon mountain bikes, Models 9800 and 9900, were unveiled a year later.

Meanwhile, another expansion project took place at Trek's Waterloo plant, which now measured 140,000 square feet. During the early 1990s, the bicycle industry in the United States experienced a bit of a sales slump. To compensate, Trek looked to boost its sales in other areas. The company continued to emphasize international growth during this period. Sales in Japan, for example grew by about 40 percent per year from 1991 through 1993. Trek also concentrated more on sales in Europe, where it was gaining a solid reputation among bicycle buyers who had long thought of American bikes as heavy, clunky monsters built for kids.

In addition, the company began to focus more on the sale of bicycling accessories. Beginning in 1992, Trek assembled helmets at a new plant in Oconomowoc, Wisconsin, out of parts purchased from other companies. By 1993 the plant was making helmets at a rate of about half a million a year, double its total from 1992. Trek also launched a small line of tandem bikes in 1992. Although a relatively small market, the tandem bikes proved popular among family fitness buffs.

In 1993 Trek acquired the Gary Fisher Mountain Bike Company, the company founded by and named for the originator of the mountain bike. Gary Fisher's sales increased tenfold in its first year as part of the growing Trek empire, from $2 million to $20 million. Altogether, company sales reached $230 million for 1993, a $20 million increase from the previous year. That modest increase was impressive considering that it came during a period so difficult for bike makers that it saw longtime industry giant Schwinn sink into bankruptcy. Having passed competitors Specialized and Cannondale, Trek was now the clear market leader in specialty bike shop sales. By this time, exports generated $80 million of Trek's sales, and the company maintained seven overseas distribution operations--one in Japan and the other six in Europe.

Trek passed the $250 million mark in sales in 1994. By that time, the company was manufacturing 65 different models in its Wisconsin plants, including road bike, mountain bike, hybrid, and tandem styles. Trek expanded its children's bicycle business that year with the introduction of a line called Trek Kids. A number of major developments took place at Trek in 1995. That year, the company opened a new state-of-the-art manufacturing facility in Whitewater, Wisconsin. The Whitewater plant, capable of producing 3,000 bicycles a day, dwarfed the company's other factories.

Acquisitions in the Mid-1990s

Trek also bought out two smaller niche-market competitors in 1995--Bontrager Bicycles, based in Santa Cruz, California; and Klein Bicycles of Chehalis, Washington. Those companies' plants remained in operation after the purchases. On top of those additions, Trek also signed a ten-year licensing deal with bicycle-racing superstar Greg LeMond to use his name on a line of road bikes. Additionally, the company introduced a new line of mountain bikes featuring an innovative Y-shaped frame. Trek's Y-frame received an "Outstanding Design and Engineering Award" from Popular Mechanics magazine, and the U.S. Secret Service even bought a few Y-frame bikes for patrolling the grounds of the White House.

Largely on the continuing strength of mountain bike sales, Trek's revenue grew to $327 million in 1995, a jump of nearly 19 percent. In early 1996, the company announced plans to add another 45,000 square feet to its Oconomowoc distribution center. It also announced its intention to build a distribution center in Atlanta to go with its existing centers in New Jersey and Southern California. Around the same time, Trek revealed that it was joining forces with Volkswagen of America to form a professional mountain bike team. The Trek/Volkswagen alliance went further yet, with the introduction of the Volkswagen Jetta Trek, a car that comes equipped with a mountain bike and rack.

In 1996, Trek also began planning a retail "superstore" on the west side of Madison, Wisconsin. The announcement did not sit particularly well with the specialty retailers already selling Trek bikes in the area. Although the company had dabbled in retail operations before--Trek has another retail store already operating in Madison, and flirted briefly with part ownership of a chain of stores in northern California--Burke insisted that it was not about to plunge into retail as a major part of their operation.

Meanwhile, Trek continued to beat out much of the competition in terms of quality and service, as it sought to solidify its position at the front of the high-end bicycle pack. Its ability to thrive during a period in which the bicycle industry as a whole was more or less stagnant suggests that Trek is poised to maintain its dominant position.

Principal Subsidiaries: Fahrradhandel Gesellschaft GmbH (Austria); Bikeurope BV (Netherlands); Trek Denmark; Trek Bicycle GmbH (Germany); Trek Japan; Bike USA S.L. (Spain); Trek Fahrrad AG (Switzerland); Trek UK.

Additional Details

Further Reference

Fauber, John, "Riding a Profitable Cycle," Milwaukee Journal, September 15, 1991.------. "Riding Up in a Down Market," Milwaukee Journal, October 24, 1993.Gribble, Roger A., "Trek Builds Worldwide Reputation," Wisconsin State Journal, February 14, 1993.Holley, Paul, "Trek Bicycle Plans Addition in Oconomowoc," Business Journal of Milwaukee, February 3, 1996, p. 4.Ivey, Mike, "Trek Cycles to the Top," (Madison, Wis.) Capital Times, March 29, 1996, p. C1.Schubert, John, "Trek Is Going Strong," Bicycling, March 1984, p. 137."Trek Bicycle Corporation Reinvents the Wheel," Waterloo, Wis.: Trek Bicycle Corporation, 1995.

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