Columbia Sportswear sees market advantages in OutDry acquisition

Columbia is counting on its OutDry acquisition to provide a competitive advantage when it comes to speeding up time to market, as well as expand its reach into markets outside the outdoor industry. SNEWS has details.

As was announced in SNEWS on Aug. 4, Columbia Sportswear has signed an agreement to buy the intellectual property and other assets of the OutDry brand, a waterproof/breathable membrane for gloves and footwear, from Nextec S.r.l. in a cash-only transaction. Terms of the deal, which is expected to close during the third quarter of 2010, were not disclosed.

OutDry’s construction methods bond a waterproof/breathable membrane directly to the inside of the outermost layer of a shoe or glove. The company said the patented process prevents water or dirt from penetrating internal airspaces and fabric layers -- a drawback with booties or bladders from other suppliers.

“We think it is a superior differentiating technology that would benefit us to own to set ourselves apart in the industry,” Ron Parham, senior director of investor relations and corporate communications, told SNEWS®.

Nextec co-founders and brothers Luca and Matteo Morlacchi will remain with the company, serving as CEO and general manager, respectively, of OutDry Technologies. OutDry will operate as a wholly owned subsidiary of Columbia Sportswear, and retain its headquarters in Busto Arsizio, near Milan, Italy. It will also continue to run its branch operations in China.

Already in use in an assortment of gloves at Mountain Hardwear since fall 2009, with more to come in 2010, the company will be incorporating OutDry in select Columbia-branded gloves and footwear, as well as Montrail footwear, for fall 2011. Inclusion in Sorel-branded products is slated for fall 2012.

“When it comes to the outdoor industry, there are a few benefits that consumers are looking for above all others. Whether it’s in garments or footwear and gloves, staying dry, staying warm and not creating an environment where you are going to sweat inside the garment is critical,” Parham told SNEWS. “In all the technologies we’ve looked at over the years and tried ourselves, OutDry seemed to have, in our view, the best solution to deliver that benefit to outdoor consumers.”

The acquisition of OutDry will also allow Columbia to reduce the time it takes to bring product to market from where it is now at 18 months to a more competitive timeline, SNEWS was told. This, in turn, will help the company better compete with other brands inside and outside the outdoor market -- something Columbia executives have been recently emphasizing.

“Whether (the acquisition of OutDry) in and of itself is a significant step in that direction is yet to be determined, but it definitely gives us the opportunity to control our own destiny,” Parham told SNEWS. “We’re not in the position of having to wait for a third-party provider to come up with a solution on their timeline and then figure out how to implement or integrate that into our product line. We can much more quickly advance the technology and have it appear in our product line sooner.”

Other ventures outside of the outdoor industry are being examined, including the military, work safety, athletic, and even the casual and dress shoe markets.

“With resources from Columbia, we will be able to take our product innovation to newer levels and markets,” Matteo Morlacchi told us during Outdoor Retailer Summer Market. “The objective of Columbia, naturally, is to grow the brand, and we look forward to that.”

OutDry is already in use by a variety of companies in the outdoor market, including Kamik, Lafuma, Montbell, Wenger and Gronell. Parham said Columbia will review all of those relationships, as well as looking at additional relationships to pursue.

“We haven’t made any determinations there and don’t want to speculate at this time,” he said, adding that the company could not share what, if any, stipulations may be implemented on OutDry’s use by others in the outdoor sector.

Morlacchi added, “While we may limit the opportunities to use our product with direct competitors, we will certainly continue to support the relationships we currently have, as we also continue to look at other brands who wish to use OutDry. For example, we recently set up a partnership with Scarpa that we and Columbia are very proud of.”

The sale is not expected to have a material effect on Columbia’s (Nasdaq: COLM) 2010 operating results, the company said.

--Wendy Geister with Michael Hodgson


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