It seems everyone enjoys taking shots at Confluence these days. While Confluence continues the company search for a CEO and works diligently to fill the recently vacated director of operations position, whispers surrounding the company and its future are getting louder.
In the face of an increased number of industry phone calls and emails to SNEWSÂ® central, even from long-time Confluence dealers, all wondering about the state of affairs at Confluence, Kelley Woolsey, senior vice president of marketing and sales, agreed to speak openly with us about distribution issues, production challenges, Confluence leadership and future plans.
SNEWS: Your company is still without a CEO following Johnson's successful legal move to block the hiring of Rich Feehan under a non-compete clause, and you recently fired Charles Alley, your company's director of operations for the last 12 months. Who's running the show at Confluence?
Woolsey: Basically, we have what we are calling the President's Committee made up of myself, Miriam Beckman, our company CFO, and Bob McDonough, our company director of R&D. We are charged with running the company from an operational standpoint and we report directly to the board of directors.
The Confluence CEO search is ongoing. In addition, we are actively interviewing for a person to fill the director of operations position. We let Alley go after the President's Committee decided that it was in the company's best interests to find a new person for that role.
SNEWS: If the company is running smoothly with the President's Committee, are you saying you don't need a CEO, really?
Woolsey: Not at all. I liken this to a team game with the team playing under the guidance of a player/coach. With the President's Committee, we are a player/coach and as such, we can survive playing very well for the short term, but as players, we also have our hands full with our own positions each day. In effect, we are sacrificing a little from each position to operate this way. With a strong coach or CEO, we have someone at the head of our team who is focused on the long-term planning and working on what we need to do strategically to build this business.
SNEWS: We hear dumping rumors and we know you've heard them. We also hear you'll soon be selling to anyone who will buy your boats with no concern for the specialty stores. Certainly, you didn't earn any cheers last year when your boats began appearing at Dick's at the same time you were telling specialty dealers their shipments would be delayed. How is Confluence addressing distribution concerns this year?
Woolsey: No question, we took the heat last year for opening Dick's, and we could have done that more intelligently to be sure. However, I think we've been unfairly battered and hammered for distribution policies that have nothing to do with us and everything to do with our competitors.
We have now put into effect a plan to restructure our product line that was decided on last year, before we began experiencing delivery challenges. Now, we sell only certain segments of a line to certain accounts which allows us much more distribution flexibility and allows us to better protect our specialty accounts.
Will Dick's get Wilderness Systems boats? Yes, but not with Phase III. Of course, this year, we aren't able to supply boats at the level that Dick's wants or needs so naturally, they are going to our competitors, like Watermark, to fill demand.
We have also instituted a program to ensure that our boats sell for the suggested retail. If a store wants to go off-price with a boat, we have established the Victory series made up of two boats, the Blast and the old Pungo now called the Classic 12. Any retailer can buy these boats and they can price them any way they want. For any other Confluence boat though, our dealers have agreed not to go off-price as a matter of practice. That doesn't mean they won't have seasonal sales, but the goal with this move is to establish value in the Wilderness Systems, Wave Sport and Mad River lines that won't get discounted or devalued by off-price retailing.
In addition, we are not opening any new retail accounts and are in the process of reevaluating current accounts which has and will continue to result in us closing some box stores and some specialty accounts. The stores we close or have closed, like West Marine, have made it very difficult for us to do business with them and make money while protecting our specialty dealers. We have been approached by some other well-known boxes but we will not be distributing to them.
If you look at the boxes or chains we agree to do business with, they are stores that have a similar philosophy as ours regarding brand building, merchandising, pricing, etc. REI, EMS, GI Joes, Sport Chalet, Dick's and MC Sports are boxes we enjoy doing business with.
No doubt we have made mistakes we will not make again, but it is important for this industry to look at markets our competitors are going after now, like SAMS, Costco and even Wal-Mart. How will the appearance of well-known brands in these markets and others like them affect the overall food chain for kayaks? I don't know, but I can't imagine it is a good thing.
SNEWS: Are you saying Confluence will never distribute to accounts such as SAMS or Costco or Wal-Mart?
Woolsey: Medium term, I would say firmly that we would not consider going there since we have to fix our own house first. However, I would also ask any company that is considering that distribution model if this is the right time in a marketplace that is challenged for a lot of reasons. Right now, I would say no, it is not the right time. Of course, as an industry matures, any company has to explore options for distribution channels that make sense, both to the company and to the marketplace.
SNEWS: You've heard the rumors as we have -- Confluence has anywhere from 13,000 to 20,000 boats in the warehouse and will likely start dumping them soon. Our spies tell us there is no truth to that and your numbers are closer to a reasonable 8,000. Talk to us about Confluence's inventory levels.
Woolsey: We are sitting right at the same inventory level we were at when you interviewed John (Bergeron) in November of 2003. Bottom line, the demand for our product is higher than we could ever produce, especially with Wilderness Systems. We are working very hard to improve our own efficiencies so we can get additional units out of this facility. We are also working with outside contractors to increase our capacity too and boats are starting to come in from those facilities now. Are we going to have to scramble? Most definitely!
SNEWS: How did you get from feeling good about where you were heading last spring when we talked to being unable to meet demand this spring?
Woolsey: There was a tremendous lack of planning from Confluence senior management, and partly as a result of some of those issues, our CEO and our director of operations lost their jobs. We should have a tremendous advantage in this business since we book well in advance of when we ship. Following Outdoor Retailer Summer Market last year, there should have been a strongly focused effort and firm direction from the top to address the production needs of our company, and that did not happen. As a result, we are oversold and under delivered.
SNEWS: What are you doing to ensure retailers that you will not make the same mistakes again?
Woolsey: First, our retailers need to know that we are not and will not be playing favorites. All our dealers will be affected in the same way by certain key models that will be difficult to get this year in terms of filling some preseason orders as well as in the area of re-orders and fill-ins.
Planning and communication is a key area we are focusing on now, and it is an area that historically has not been one of our strengths. We are placing more folks in customer service to handle phone calls and work with our dealers to give them the best service we can and be sure they are getting the product they need.
In some cases, this will mean we will not be able to supply them properly, so we want to be very sure we are giving our dealers sufficient notice that they have options to fill holes in their inventory with competitor's products.
To be sure, that is very, very frustrating for our team, but it is the right thing to do for our dealers who have been so very loyal to us through all of this.
Our sales reps, customer service reps and myself will all be working very hard to contact all of our dealers with an accurate picture of our stock levels and what they can and cannot expect to be delivered.
SNEWS: The notice that you are rescinding preseason shipping guarantees as of March 15 is part of that?
Woolsey: Absolutely. We need to be sure all of our dealers have been contacted as to what they can expect from us within the next two weeks. I would encourage any of our dealers to be proactive too and call us. We want to talk with everyone quickly. Our dealers need time to plan for options if we can't meet their needs for inventory this spring.
We're also trying very hard to support our specialty dealers here. We are not going to charge freight on any accessories from orders where boats can't be delivered, and original volume freight rate will be applied when backordered items are delivered.
SNEWS: Confluence has been trapped in a rut of its own making for the last two years. Can we assume the team is fully focused on bouncing out of the rough and back onto a smoother road to travel in the months ahead?
Woolsey: What I hope our dealers remember is that our products do sell at some of the highest margins in the industry and that we have been innovative and will continue to be innovative. We have done and will continue to do a respectable job of marketing and selling our products and we will only get better. We have a great team that is only getting stronger. Quality control issues from last year as a result of too many temps working the factory have been addressed and will not occur again. We have a solid training program in place that takes into account the fact that working with rotomolded plastic is as much an art as it is a science. We are going to get through this and as a result, we will be a much stronger and more efficient company with products that we will deliver as expected and with products that our dealers can be very proud of selling, supporting and promoting.