Podcast Transcript: Starting small, making it big

In 1983, Louis Garneau started his journey from elite athlete to elite businessman.

Garneau started his cyclewear company in a garage. Twenty-five years later, the entrepreneur is leading the pack in business and his market is now the world.

I caught up with Garneau at his company’s headquarters in Saint-Augustin, just outside Quebec City. We’ll take a look at the path he’s taken to get to where he is, and why economic downturns are the perfect time to gain an advantage over your competitors.

I’m Michael Mancini, Editor-in-Chief of CanadExport, the official e-magazine of the Canadian Trade Commissioner Service. Visit www.canadexport.gc.ca to subscribe. It takes seconds and it’s free.

Also, tell us what you think of our podcasts and how we can improve. If you have story ideas, or business questions you want answered by our worldwide network of trade commissioners, let me know. Just send an email to canad.export@international.gc.ca.

Now back to the show.

Michael Mancini: I am speaking with Louis Garneau, President of Louis Garneau Sports. Thank you for taking the time to talk to us Mr. Garneau.

Louis Garneau: Thank you.

Michael Mancini: You founded your company in 1983. Tell us about those days and the challenges you were facing back then.

Louis Garneau: Well, it was a garage venture. In 1983, I was still a bicycle racer. My girlfriend and I at the time were doing a lot of handicrafts and art, and at one point I said "listen, we’re going to start a bike clothing company. Do you want to help me? You’re good at sewing." So we started out in our garage, without any training and without knowing anything about business. But we decided to make very, very good products. And what was good at the time was that we were the first people in Canada to make cyclewear and sell it slowly through our network of racers. That was my first network.

But we started small and, slowly, I became a full-time entrepreneur. In 1984, after the Olympics, I decided to stop and focus on this with my wife Monique. Together we launched the company. We started selling across Canada and then the following year, around the world.

Michael Mancini: Tell me about your first exporting experience. The United States was your first international foray right?

Louis Garneau: When I went into business, I said I absolutely have to sell in the United States, not just in Canada. So I went to Newport, Vermont. Why Newport, Vermont? Because at the time it was a clothing town, a textile town, and I thought to myself, if I go there, I’m not far from Quebec City, I can do a round trip in the same day, and there was a large labour force there specialized in textiles.

Every day was a challenge. We had seamstresses, but they were used to sewing coats. They were not used to working with delicate clothing like cyclewear with stretch seams. So every week I had to go see the seamstresses. I even set up a small apartment for myself in the plant and I slept there on Thursday nights on my small bed. I would get up really early and go into the workshop before everyone else arrived and I would oversee the quality myself.

But my greatest challenge was that the first year I wanted to sell at least $500,000 but I only sold $250,000. So it was a little complicated with the numbers. The first year we lost money. Not long after that we went into a recession, and I wasn’t too familiar with recessions. But I learned very, very quickly and I even had to find venture capital because I had to finance Canada and the U.S.

Another big challenge was that I realized that Canadian banks at the time couldn’t help me with the American side of things. So I went to U.S. banks. The U.S. banks said to me, I don’t really know you, Mr. Garneau, so we can’t finance you. So I was forced to take money from Canada and send it to the United States to develop the business.

Michael Mancini: Not easy.

Louis Garneau: It wasn’t easy. It was very, very difficult. And, maybe the lesson for entrepreneurs is that the American market is a very big market, it’s highly competitive. But first you have to carve out a place for yourself. And that takes time. So just because my name is Louis Garneau, or just because I had won races and had raced for an American team didn’t mean that all the shops were going to set up an account and buy my products.

What helped me a lot, for example, was that from the outset, we innovated a lot. We started with quality products. We started with products that were different. We were maybe the second company in the U.S. to offer cycling products. And the first in Canada. That really helped me.

And we offered products that were very good quality. Listen, I thought it would all go very fast, that I would sell $500,000 in the first year. But I waited more than two years for that, and I quickly realized that before I could run I had to walk, so to speak. Wanting to be a big company in the United States right from the first year was difficult. We had to take baby steps first.

So what I can recommend to all entrepreneurs listening to us today is to be patient, do a good market study before you start, and find out whether the market is ready to accommodate another player. At the same time, assess whether what you are offering can keep pace with the current market.

Michael Mancini: You just mentioned recessions. What impact has the economic crisis had on Louis Garneau Sports?

Louis Garneau: It’s funny but in the history of Louis Garneau – through all of the recessions – we have done well. When I was a bicycle racer, I never attacked in a tailwind. I always attacked at the top of a hill, in a headwind, where it was the hardest. And when it’s hard, you break away from the other cyclists. And in business, it’s pretty much the same. When it’s easy, everyone is good, everyone has the wind at their backs, everything sells and there is this great lack of discipline when you’re in a period of massive growth.

So people, even merchants, will try new lines, new companies, and when the recession sets in, retailers will buy the better brands. They tell themselves that now is the time to cut. We will keep three brands, and we’ll get rid of all the rest that are not really well known. And Garneau has always been among the top brands. We have a very strong brand. And as I say, in a recession, it’s like a bike race, when it gets tough, it’s time to attack. You have to do your best in difficult economic times. You can’t say: No, we’re going to cut costs, we’ll stop innovating, we’ll drop designers. On the contrary. When a recession sets in I say to myself: Okay, a recession is the time to clean house and it’s the time to shake up your competitors.

That’s when we get our best ideas. A recession is very worrisome. It scares us but at the same time, though we’re scared, we tell ourselves we’ll come out with the best products. We will make the best products in the world because you really need to win people over and for us, it makes us innovate. Recessions make us more aggressive with our competitors. That’s when we make our best products and bring out our best management strategies. And I can tell you, it works.

Michael Mancini: After the plant in Vermont was established, what changed at your head office in Quebec?

Louis Garneau: Well, there was a lot of growth for us in Quebec. We moved to our plant in St-Augustin. That was in 1987. It was a big construction project. And back then it was clear that I was an entrepreneur and not an accountant…we invested $1.5 million in our new building and we had sales of $1.9 million. So you can see again that it was very risky. I still wonder how I got the financing. It was still very dangerous as a business since, as I said, an economic slowdown was imminent.

What helped us get through it was that we kept working on innovation. We worked on new markets and new products. What helped us a lot was bike helmets. Hard shell helmets were starting to gain prominence in Canada and in the United States. Bike racers had to wear them, and I started making them. The profit margins were significant. Again, we were the first in Canada to manufacture bike helmets and we were the second in the United States. Everybody needed a hard helmet; for safety’s sake a hard helmet was required.

And in the middle of a recession, we had a lot of growth because we found our niche. We were innovators. We came out with patented helmets and promoted them around the world. And it was based on this innovation that I made a name for myself outside Canada and outside the United States.

So the degree of innovation must be there. I would say that today, it’s even more competitive. So you really, really have to offer products with a very high value added if you want to conquer the world market.

Michael Mancini: What was the next step in terms of global expansion after the U.S. and why?

Louis Garneau: Today we have over 50 suppliers in China. We also have a plant in Poland subcontracted to manufacture clothing for us, but the biggest subcontract we have right now is China. We just recently opened a plant in Mexico too. There again, we wanted to take advantage of free trade between Canada, the United States and Mexico under NAFTA. So one year ago we opened a plant. We have 31 employees and we plan to expand to around 50 employees. So Mexico is helping us. For our medium-size production we have Mexico, for large production we have Asia, and for high value-added production we manufacture in Canada and the United States. We now have 85 employees in the United States.

So our business model has changed a lot. And the great thing about Louis Garneau Sports is the strength of our team, in assessing markets and our ability to adapt.

Michael Mancini: Over the years, have changes been made to your company’s global value chains?

Louis Garneau: Well, we are continually adapting. Today, China is profitable for a business. Ten years from now, it might be another country. Ten or 20 years ago, working in China was not appropriate for certain business lines. So you have to keep an eye out for changes, you have to be on the lookout for new countries that are developing. You also have to take a look and ask yourself: What can Canada do as a country? What’s left for us? You can’t get angry and say, ah, we can’t make such and such a product anymore. Of course it’s sad that we’re sometimes forced to cease production, but Canada can’t make everything.

There are things that we can make very well and our strength, as Canadians, is value-added products. The capacity to imagine products…innovation and creation. We do this in Canada and in the United States. Small-scale production is still profitable. So for high value-added business, we look to Canada. For large volumes, I look to China to be competitive on the global market, and for mid-size production it’s Mexico. We are adapting and highly diversified in terms of supply, production and distribution, all at the same time. So if you want to go global, I think you have to have resources in countries like China, you have to have some in Mexico, in the United States in Canada too.

My business model is very hard to copy. It’s very complex. We deal in clothing, we deal in helmets, we deal in accessories and we deal in bicycles. So it’s complex even for us sometimes, so imagine our competitors. But we have a good understanding of what we do, we have a very good team and we continue to develop and deploy the same strategy in the global market.

Michael Mancini: Is the Canadian Trade Commissioner Service a part of that strategy?

Louis Garneau: Well, we use the Canadian Trade Commissioner Service in our initial steps. We usually get a lot of information from our trade commissioners. We’ll go to them when we want to know about laws in a country, how they work, how we have to treat the Chinese, for example. What are they like in business? Do we have to tell them everything up front? Do we have to reveal all our strategies? So we get a lot of advice on introducing our business. And once we have the general information, we can then do the work ourselves and build on that knowledge, because we become specialists in a country. I would recommend that everyone work with trade commissioners in each country. You won’t know much at first so to go faster you call them and they’ll give you the information you need. For example, when we opened up Mexico, we got a lot of statistics on workers, wages, how that worked and what the laws were in that country.

So every time, it was very profitable for us. Otherwise, if you don’t use the Canadian Trade Commissioner Service, or if you learn about it too late, you can waste your time and you can lose money. So for us, working with Canadian trade commissioners is standard operating procedure.

Michael Mancini: Mr. Garneau, thank you very much for taking time to talk today.

Louis Garneau: Thank you very much.

Well, that’s all for this podcast edition of CanadExport.

If you are ready to take your business international and could use some help, contact the Canadian Trade Commissioner Service in your region. We have 11 offices across Canada, including our newest in Kelowna, British Columbia. Just visit www.tradecommissioner.gc.ca.

I’m Michael Mancini, signing off for now.

To download our other episodes, just go to www.canadexport.gc.ca or go to iTunes and use the searchword “CanadExport.”