In an announcement that startled the fitness industry, the Taiwan-based parent of the Matrix, Vision and Horizon brand subsidiaries announced it would merge the U.S. companies, along with the company's U.S.-based research and development subsidiary, into one newly formed company -- Johnson Health Tech North America.
To assuage concerns and anxiety, new CEO and President Chris Clawson told SNEWS® on Sept. 4, only hours after the news was made public, the business its customers have known will continue as it has.
"There is going to be no change," said Clawson, who has been the president of the Matrix company since February 2007 after a stint at Stamina Fitness and a long tenure at Life Fitness, including overseeing the Omni Fitness division for a time. (Click here to read a February 2007 SNEWS story about his hire.)
"We clearly have brand segments. They serve different channels, and they serve them differently," Clawson said. "They all have a reason to exist -- nothing's changed.
"We're just asking the groups to come together," he added.
As the brands developed one-by-one over the last 12 years, each was birthed as a separate company with separate administration and operations: Specialty-focused Vision Fitness was first in 1996, spun off from the Trek Bike company's fitness division. Next was Horizon Fitness, with a cross-over into specialty but a focus on sporting goods, a couple of years later. In 2001, Matrix Fitness launched at the Club Industry show with its commercial line. And, in 2003, the company unveiled its Research and Development arm (click here to read that June 16, 2003, SNEWS story, "Johnson to set up 'global center' in U.S."), a first-of-its-kind brainchild intended to tap into the best of U.S. design and overseas manufacturing while also lowering communication hurdles.
That meant, as Clawson put it, duplication, triplication and "sometimes quadruplication" of tasks. With the ink on the Sept. 4 public announcement still wet after separate all-employee meetings at each of the four companies on the morning of Sept. 3 about the change, many of the details are still a work in progress, and reps were scrambling to finish contacting each of the brand's retailers, with some only receiving the press release by email as of Sept. 5.
Yes, layoffs are inevitable, Clawson said, but how many and where is still completely unknown. Now, in the four groups, Johnson has about 300 employees, nearly evenly divided, with the R&D group having the smallest number at approximately 40.
Where the groups will be headquartered is also still up the in air: Two years ago, Johnson unveiled a brand new building in Cottage Grove, Wis., just outside Madison (click here to read that October 2006 SNEWS story) that housed all but the Vision Fitness company, which had recently completed a build-out on its plant 17 miles away in Lake Mills.
What the newly formed company knows is that it will save money -- again, unsure how much but Clawson said it would be "in the millions of dollars."
"We're in the process of doing what we need to do to run our business more effectively," Clawson said. "Everybody's been nodding their heads -- this makes perfect sense."
He noted that although not forced into this by the current economy, that state made the decision even easier: "We don't have to do this. It's the right thing to do, and it's the right time to do it," he explained.
Changing faces and places
In executive changes, Mark Zabel, formerly vice president of global marketing for Matrix, is vice president, global marketing, for Johnson Health Tech North America and will oversee all product management and marketing for the Horizon, Matrix and Vision brands -- making him effectively Clawson's right hand.
Overseeing the big box-oriented Horizon brand (and its specialty label, AFG) will be Mike Olson, formerly Horizon's vice president of marketing, in a new vice president role leading brand sales and strategy in North America. Bob Whip, Horizon's founding president, will take on a newly created role as president of Johnson Health Tech, Wellness and Leisure Group, which will focus on new global business opportunities outside of the fitness equipment market.
Kent Stevens will remain to lead commercial-centric Matrix as executive vice president for sales, but also will oversee brand strategy in North America.
Nathan Pyles, who was president of Johnson Health Tech Research & Development and general development and strategy head, remains on the Johnson Health Tech Company board of directors. He will continue to oversee overall strategy and product development.
Continuing as head of the research department, Tom Moran, who has led that subsidiary since it began to take shape in 2003, is now executive vice president for product development and quality of the newly formed company.
At Vision, the specialty-only brand, Gary Peak remains vice president to oversee that brand and its North American sales. Greg Waters, one of the company's founders, has chosen to leave his role as Vision's president as of Sept. 30. He will continue as a consultant until Oct. 31.
"If it weren't for Greg Waters, Nathan Pyles and Vision Fitness, we wouldn't be here today," Clawson said in a tip of the hat to the two who spun off Trek's fitness division and, in the end, helped launch a worldwide equipment powerhouse.
Marching toward No. 1
The move is one more way the Johnson company is continuing its march toward its goal of being No. 1 globally. Since it began in 1975 as a mom-and-pop manufacturer in Taiwan, founder Peter Lo and his wife Cindy Lo have built an empire that now has 18 subsidiaries in just as many countries and remains family run with son Jason as CEO and daughter May in sales. In September 2006, SNEWS visited the company and toured its manufacturing facility. Click here to read that Sept. 18, 2006, report: "Johnson Health brands taking big steps globally."
Clawson said that although its dealers will now be "Johnson dealers" they will still operate in a segmented fashion, with some carrying one brand only and none being forced to carry others.
"We're not going to leverage one off the other," he said.
The retailers and dealers, he explained, should find a friendlier competition -- "We'll still compete, but friendlier," he said.
Websites too should remain separate to help the public understand the brand differentiation. At trade shows, the company representation is up in the air too, he said, but he expected that brands would retain separation for less confusion.
Retailers told SNEWS after the announcement -- at least the ones who had heard about it -- they, of course, had some apprehension since they didn't know yet what would change. But most expressed confidence and felt encouraged that it could only improve customer service and quality -- partly because they know and respect Clawson.
"Chris Clawson is probably one of the most respected individuals in the industry," said Stan Terry Jr., who leads the Houston, Texas-based, stores Fitness Unlimited, Busy Body and Winston Fitness, "and if anybody can align companies and properly run it, Chris Clawson is the guy to do it."
Margy McEnaney, co-owner of Cape Cod Fitness in Hyannis, Mass., and a long-time Vision dealer, said she received an email and a call after hours on Sept. 4 and was still trying to process the change, calling it a surprise in "a year of surprises."
"By consolidating under one umbrella with strong leadership at the top, this seems like it'll be a positive direction," McEnaney said, who also added that she admired Clawson, calling him "genuine."
Several others said they could only hope it would be positive and that the change would not erode the brands or the dealer network.
"I would hope to see things stay status quo," Terry said. "It's a big change to consolidate those lines. We'll just have to see."
SNEWS® View: Clawson was right about heads nodding in the affirmative: A move like this, particularly with today's economy, makes nothing but good sense financially for a company. Costs for administration, warehouse, phone lines, accounting and other shared services can be pared back, leaving more for the areas that matter, including quality control, product development, service and customers. Horizon has, of course, grown like gang-busters, while Vision has had a few hiccups in the last couple of years and Matrix has just moved out of a bumpy transition period. Nevertheless, all are still doing well and each has maintained a separate identity. The R&D arm continues to be a feather in Johnson's cap because of the way the developers can work closely with both the United States and Asia and move ideas more quickly to market. You can't blame a retailer for being, as they say, cautiously optimistic -- the industry has seen a number of good brands moth-balled or, worse yet, destroyed, and they don't want to see this merger in the end water down the strengths of the three separate brands. We don't believe Clawson, with his long-time experience, or Pyles, who stands quietly behind the scenes but oversees the entire orchestra, would want to see that happen either since that brand differentiation and maintenance is what has partly led the company to success. We at SNEWS will be happy to see one company where all are willing to acknowledge their relationship to the other. We found it somewhat laughable at times when Vision representatives would chide us for daring to mention in public or in a story that the companies were "siblings" or in any way related to each other: Everybody knew it. It was the truth. So why hide? That less-than-friendly competition will, we hope, end, and leave the group working together more smoothly to help the entire company -- and the industry -- grow and profit.