Brompton Bicycle Case Summary
THIS year, Brompton Bicycle expects to sell 19,000 of its folding machines, generating revenues of £7m and a pre-tax profit of £925,000.
But new managing director Will Butler-Adams is aware that if the west London business is to remain a player in a rapidly expanding global market it has to see significant sales growth. ‘Last year one of our competitors made 350,000 bikes,'' said Butler-Adams. "The market potential is huge. Selling 19,000 is nothing.’
The problem is a mix of capacity – emphasised by a six-month lead time – and sluggish production methods. ‘In the past we have not been able to make enough bikes to meet demand,’ Butler-Adams said. ‘We have been losing market share. The market has been growing 20% to 25% a year and we haven't …show more content…
To reach that, Brompton Bicycle is half way through a £1m production revamp and has just had a change of management.
Yet Butler-Adams is well aware that the debt-free firm's investment could be undermined by a competitor that not only compares on quality but undercuts on price. ‘We are knee-deep in competitors,’ he said. ‘There is always the risk that someone could turn up with a bike just as good and compact as ours but for two thirds of the price.’ Brompton bikes sell in the UK for between £550 and £1,200. Sales to Europe, the US and Far East account for 70% of income.
‘I think we have the best folding bike but the competition is getting better all the time. If we don't take advantage of the opportunity in front of us, someone will come along and do a better job. They will be taking revenue and investing in research and development and will come up with something better. We have to move …show more content…
Despite having just 10 outlets in the US – compared to 100 in the UK – America accounted for 5% of sales last year. ‘We need to grow our overseas sales.’
Brompton sells direct to bike shops in the UK and US, using distributors to sell in other parts of the world. As only Brompton makes the spares, the firm continues to benefit from a revenue stream generated by the shops' after sales and servicing. It is that aftercare that precludes direct internet sales.
‘We had the chance to go into 15 new shops in the US but didn’t because we couldn't supply them,’ said Butler-Adams, a chartered engineer who joined Brompton five years ago and who took over at the top this month following Ritchie's decision to step down and relinquish his majority shareholding.
Marketing so far has been by word of mouth: enthusiasts from its 150,000 worldwide users singing the praises of their Brompton. ‘The foundation of a brand is what people say to each other about it,’ he said. But to ramp up sales, Butler-Adams knows that the firm will need a more structured approach. ‘We are going to have to start from scratch with marketing. We need to decide what we are about and what we want to communicate. We have to get our distribution, routes to market and brand awareness
But new managing director Will Butler-Adams is aware that if the west London business is to remain a player in a rapidly expanding global market it has to see significant sales growth. ‘Last year one of our competitors made 350,000 bikes,'' said Butler-Adams. "The market potential is huge. Selling 19,000 is nothing.’
The problem is a mix of capacity – emphasised by a six-month lead time – and sluggish production methods. ‘In the past we have not been able to make enough bikes to meet demand,’ Butler-Adams said. ‘We have been losing market share. The market has been growing 20% to 25% a year and we haven't …show more content…
To reach that, Brompton Bicycle is half way through a £1m production revamp and has just had a change of management.
Yet Butler-Adams is well aware that the debt-free firm's investment could be undermined by a competitor that not only compares on quality but undercuts on price. ‘We are knee-deep in competitors,’ he said. ‘There is always the risk that someone could turn up with a bike just as good and compact as ours but for two thirds of the price.’ Brompton bikes sell in the UK for between £550 and £1,200. Sales to Europe, the US and Far East account for 70% of income.
‘I think we have the best folding bike but the competition is getting better all the time. If we don't take advantage of the opportunity in front of us, someone will come along and do a better job. They will be taking revenue and investing in research and development and will come up with something better. We have to move …show more content…
Despite having just 10 outlets in the US – compared to 100 in the UK – America accounted for 5% of sales last year. ‘We need to grow our overseas sales.’
Brompton sells direct to bike shops in the UK and US, using distributors to sell in other parts of the world. As only Brompton makes the spares, the firm continues to benefit from a revenue stream generated by the shops' after sales and servicing. It is that aftercare that precludes direct internet sales.
‘We had the chance to go into 15 new shops in the US but didn’t because we couldn't supply them,’ said Butler-Adams, a chartered engineer who joined Brompton five years ago and who took over at the top this month following Ritchie's decision to step down and relinquish his majority shareholding.
Marketing so far has been by word of mouth: enthusiasts from its 150,000 worldwide users singing the praises of their Brompton. ‘The foundation of a brand is what people say to each other about it,’ he said. But to ramp up sales, Butler-Adams knows that the firm will need a more structured approach. ‘We are going to have to start from scratch with marketing. We need to decide what we are about and what we want to communicate. We have to get our distribution, routes to market and brand awareness