Cloudveil and Fila leveraging each other's strengths to grow globally

A little more than 10 months after Sports Brand International's acquisition of Cloudveil, the company's direction and strategy for growth is becoming clear -- maintain the independence of both Fila and Cloudveil while at the same time leveraging each brand's strengths to benefit the team globally, in this case, Cloudveil Mountain Works.
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A little more than 10 months after Sports Brand International's acquisition of Cloudveil, the company's direction and strategy for growth is becoming clear -- maintain the independence of both Fila and Cloudveil while at the same time leveraging each brand's strengths to benefit the team globally, in this case, Cloudveil Mountain Works.

SNEWS® spoke at length with Jim Reilly, CEO of CMW, and Steve Sullivan, co-founder of Cloudveil and now director of advanced product development and marketing for the company, about strategy and branding for both Cloudveil and Fila.

According to Reilly, when he first began working for SBI after it acquired Fila, he realized very quickly that Fila was anything but the global brand it claimed to be. Instead, it was a European brand that was Italian driven, a U.S. brand that was all about basketball, and an Asia brand that was something else entirely -- three separate entities and none of them working together very well.

"Fortunately, the European part of the brand was good," Reilly told us. "It was a good Italian brand with good to decent distribution that we could rely on as a base-business to help everything else grow."

In analyzing Asia, Reilly noted that a designer, Kim Speed (she'd recently left Salomon), was working for Fila as a consultant overseeing the development of a new ski line. It seemed good enough he told us, so Reilly focused on other challenges -- like finding an outdoor apparel brand that knew what it was doing to help bolster the SBI investment and add a relevant product to the mix.

In the meantime, Reilly told us, Speed's ski line not only came out looking good, it sold very well in New York and in Italy, encouraging him to look even harder for a relevant brand to acquire to help give his business wings.

"I had a neighbor who spent time in Jackson and she was wearing a Cloudveil jacket and at that point, a light went off," said Reilly.

Reilly told us that he saw in Cloudveil the relevant brand that he had been seeking that would give his growth strategy strong roots, a mountain location to add authenticity and vibe, as well as talented designers who already had a vision and a strong product that simply needed more cash.

Fila would become the brand that could throw off cash to help fuel the development of other brand ideas and together, and Cloudveil and Fila would become a reason for Speed to re-enter the full-time workforce.

"I told the guys at Cloudveil that I have a brand that is not beautiful, but it is a very stable European business. If I could get you guys to help me with that, you could get the cash you need to grow your deal and we could regroup into one place where we can make really good products and develop other business ideas," Reilly told us.

And there appears to be no looking back for the newly organized CMW team in Jackson, Wyo. Within the last month, Speed has been named vice president of global product overseeing all product development for Cloudveil and Fila. Allison Danforth, previously with Spyder and Pearl Izumi, has been named category business manager for Fila Mountain, and Donna Veraguth, who has been with Cloudveil since 2003, has been named category business manager for Cloudveil.

Reilly is very pleased with the progress. "Cloudveil will be in the positive next year and the brand has tremendous potential. Will it ever be a $200 million or even $100 million brand? No, but it will be a very strong $50 million brand."

"Fila is straightening out in Asia which bodes well for increasing opportunities for both Fila and Cloudveil in Japan and Korea," said Reilly. "There is no intent for us to build the Fila brand in the U.S. The bottom line is, Fila is a great European and Asian brand. Cloudveil is a great U.S. brand."

When we pointed out to Sullivan that Cloudveil's presence in the Fila booth at the winter ispo in 2005 (right after the acquisition) was a little lacking, he didn't argue. However, he did point out that already, as a result of Fila contacts and assistance, Cloudveil is making inroads toward establishing a healthy European presence.

"We have just signed a key distributor for Switzerland and Austria and we are in negotiations with another group that handles Northern Europe," Sullivan told us. "And at winter ispo 2006, we are fully going for it, with our own booth in the B hall with the other outdoor brands."

Still, Reilly preaches patience, and emphasizes that his mandate is for the company to focus on establishing strong and gradual footholds in Spain, France, Italy (of course), Germany and Eastern Europe.

"The most important international markets for Cloudveil right now to focus on are Italy and probably Japan, because Fila is just finishing a deal to reorganize there," Reilly told us. "What I do not want is for us to try to jam a bunch of American stuff into Europe and think that is clever. It is an investment Brian (Cousins, president of CMW) is working very hard on and it will become more in time -- probably by 2007 it will be a very strong business."

As for domestic growth, it is all about combining the best of organic expansion with strategic acquisitions of relevant product that will support the other brands.

A recent launch into the fly-fishing apparel business has gone very well, even though Reilly acknowledges he wasn't exactly jumping up and down with excitement. Reilly went with the program though, as it did seem to be a natural part of the Cloudveil brand image -- the mountain lifestyle.

Good thing too, because while "no one in their right mind would try to launch a fly-fishing apparel brand in a category that sees only $65 million in total sales each year," according to Sullivan, it was a passion play for the company that is already working out exceptionally well.

"We are strongly positioned to be the apparel the younger set wants to use, and there are a lot of younger fly-fishing enthusiasts coming into the sport," said Sullivan. "And now, it has opened up other opportunities and ideas."

Building alliances and a group of brands is what makes the Reilly-directed model for the company so perfect, according to Sullivan. Like Newman's Own branded coffee, which is really just Green Mountain coffee packed to sell the gift and environmental angle of the company, Sullivan sees CMW as an opportunity to develop a lot of other brands and products all working together to the benefit of one goal.

Reilly pointed out that he is already looking at the opportunities with the fly-fishing launch to, perhaps, buy a fly-fishing rod and reel company, or a bag company.

"With fly-fishing and Cloudveil, I can explain about the brand and the people and the place and fly-fishing as a product line just makes sense," said Reilly. "You do things that increase velocity of something else in your line that already exists."

And that is why Reilly told us he is also looking to acquire a footwear brand -- because to him, Cloudveil-branded footwear would simply be a loss of focus.

"Fila footwear is about a $50 million brand globally, but not much in the U.S.," said Reilly. "We can develop a line that will be in the middle tier, but what I really want is a premium brand outdoor footwear company that may not be really profitable by itself, but it adds to the critical mass of talented designers and people that help to build the entire brand. Right now, that is either buy, or build, and buying would be much easier."

Meanwhile, Cloudveil continues to fire on an engine that has been super-charged thanks to SBI.

"I am now able to work farther out on product concepts and ideas," Sullivan told us. "I can now think in terms of what the market is lacking, what it needs, and how we are going to translate that into something the consumer will understand and buy. I can tell you we are already working on some product concepts that we have wanted to do for sometime now, but lacked the resources to pull off. Now it is green lit, and what we will bring out will have a dramatic affect on construction techniques."

SNEWS® View: Supercharged would be an understatement. Cloudveil has been going full bore since the introduction of its ski line several years ago. By adding breadth to the line, it has given retailers reason to purchase more Cloudveil product and moved Cloudveil beyond its one-product moniker -- the Serendipity company. Whereas orders were in the $5,000 to $7,000 range just a few years ago, now, we have learned, it is not uncommon for better accounts to be ordering $25,000 to $100,000 -- nice biz if you can get it. As for Reilly, he's got a good thing going with a great team. He is lucky to have such talent working for and with him, and they are lucky to have such leadership challenging the status quo and helping to maintain focus when focus gets a little fuzzy. It is also refreshing to hear Reilly use the word patience frequently when it comes to expansion, distribution, growth and ROI. We know, from speaking with Steve Wynne, president of SBI earlier in the year, that he shares the same philosophy -- you can't play any investment for a quick return, and any investment often takes more money in the short term to achieve goals that are good for the business, good for the industry. As for that Cloudveil footwear thing -- thank you for not going there. Like we need another footwear brand in this market. Puleeeze!

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