Rick Blackshaw, chief executive of Sport Maska Inc., the company better known as CCM Hockey, is unmoved by all the recession talk.
You would be too if you had a captive market and Sidney Crosby, Connor McDavid, and Alexander Ovechkin — the three biggest stars in the sport — all wore your gear.
“If you went back to ’08 and ’09, if you went back to ’01, those were still growth years for the brand,” Blackshaw said in an interview, referring to the Great Recession and the economic downturn that preceded it. “It’s one of those things. There’s such passion that surrounds the sport, you’re not going to deprive your kid of the sport. You’re going to go without a new car,” he added. “We haven’t seen any indication of a slowdown at retail.”
So the modern incarnation of the company that began life at the turn of the 20th century as Canada Cycle & Motor Co. Ltd. is recession proof. That’s good news for Birch Hill Equity Partners, the Toronto-based investment firm that bought CCM from Adidas AG in 2017 for US$110 million.
The International Monetary Fund this week cut its outlook for global growth this year to three per cent, the weakest since the financial crisis, mostly because of the trade wars. David Rosenberg, chief economist at Glusken Sheff & Associates Inc., told an audience in New York this week that he put the odds of a recession in export-dependent Canada at 80 per cent.
A certain amount of cushion from weaker growth doesn’t mean Blackshaw is sitting pretty. He’s been tasked with reviving a cherished Canadian brand that was gobbled up by Reebok International in 2004, and then ultimately spit out after Adidas purchased Reebok a year later. He must do so at a time when the rules of international business are in flux, especially when it comes to trade policy and what constitutes shareholder value. A look at CCM is a look at what economists mean when they talk about “uncertainty.”
The market for hockey equipment is relatively small and essentially static. According to Blackshaw, CCM, which generates revenue of about $350 million, is the fastest growing company in the industry. But you don’t need McDavid’s awesome speed to keep up with the competition; Blackshaw described revenue growth as a little faster than inflation. “Any gain we make is going to be from stealing market share from somebody, since there’s not huge organic growth,” Caroline Losson, the company’s chief marketing officer, said.
Blackshaw and Losson have a plan to more aggressively pursue market share.
Their research found that hockey players are obsessive about what their favourite gear can do for them on the ice, but attach no greater meaning to the brand away from the rink. Maybe that’s healthy. But the success of companies such as Nike Inc., Lululemon Athletica Inc., and Canada Goose Holdings Inc. suggests there’s more to selling sports gear than making the best stuff. Blackshaw and Losson developed a new marketing campaign called “All Out” that they hope will inspire rink rats to see CCM as more than the maker of Tacks skates and the sticks that Ovechkin used to lead the National Hockey League in goals last season.
Blackshaw, an American who was hired as chief executive in January 2018, told an audience assembled by the Canadian Club of Montreal earlier this month that one challenge he faces is consolidating a bloated product list, including hundreds of models of sticks. That’s the kind of thing you’d expect a chief executive to confront. Blackshaw also said he worries about climate change, the cost of housing in big cities, and social inclusion. Those are political issues that old-school business theorists think should be left to the politicians. But business isn’t like that anymore.
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Younger shoppers want the stuff they buy to stand for something, even their elbow pads. That’s why you see more and more companies choosing a side, albeit tentatively. In August, CCM marked Montreal’s Pride Week with a supportive note on its Facebook page. “We didn’t remove the post when there were some negative comments,” said Losson. “We’re proud to be making that statement about the brand.”
Make no mistake, the profit motive exists behind all of these decisions. Climate change matters to CCM because a warmer planet means fewer outdoor rinks. Housing affordability is an existential problem because if parents are forced to settle far from where they work, then hockey isn’t only competing with other sports for time, but also the daily commute. Growth in the hockey business demands moving beyond the sports core of white, straight males.
“In the end, it can be additive to your brand,” Blackshaw said when I asked him if taking stands on the environment and social and gender issues meant accepting narrower profit margins.
Most modern executives went to school to learn how to adjust to consumer preferences. Nothing prepared them for international commerce under U.S. President Donald Trump.
The United States represents about a third of CCM’s sales and the Trump administration’s trade war with China has cost the company about $10 million, Blackshaw said. The company designs its equipment in Montreal, manufactures the high-performance gear that the professionals use in Saint-Jean-sur-Richelieu, Que., and makes most everything else at factories in China.
So far, CCM and its Asian suppliers have absorbed the cost of the tariffs. If they persist much longer, the company will probably have to raise prices in 2020. “It’s not a pleasant position to say prices will increase because we have to, but it’s not because we’ve added great features,” Losson said.