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 been growing at the same rate.’
Using a system of double shifts backed by slicker systems, he wants to boost production to 50,000 bikes a year. 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 forward.
‘The Brompton is unique, but not that unique.’
There are other problems. Any patents Brompton had expired eight years ago, although the bike's design is still covered by copyright. Also, being based in a 22,000 sq ft site in London, it does not benefit from the low wage structure of Taiwan, where 80% of bikes are made.
In a country where traditional manufacturing skills are in short supply, Brompton has had to train many of its 85 staff in skills such as welding and brazing. It means that Brompton Bicycle – named after the area of London where the prototype was first developed – is unwilling to relocate.
In other cost areas, said Butler-Adams, it is more competitive. ‘Most bike manufacturers are perpetually changing their models and so never refine their manufacturing process,’ he said. ‘Our bikes have hardly changed in 20 years and we have been able to invest over time in the tooling. It’s a big upfront cost but it's an investment we have already made.’
Butler-Adams has further reduced costs by outsourcing non-core elements of the manufacture, retaining only the skilled machining and complex engineering at its Brentford base.
It is that engineering ethos that underpins Brompton. Butler-Adams said attention to detail - which started with the firm’s founder, inventor Andrew Ritchie, when he created the company 20 years ago – is Brompton’s main differentiator. ‘They are built to last,’ he said. ‘We have to make sure that we don’t become so obsessed by growing that we lose sight of that quality.
‘The Brompton is not a commodity product. We don't want to sell 250,000 a year as that would undermine the brand, making it so mainstream that it would lose its appeal. We are not interested in sales for sales' sake.’
The big sales push is focused overseas. 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'...
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