Rapala profits drop almost 50%.Posted on September 21st, 2022
After flying high in the two previous years, the company reported sales down 12% and operating profit down by almost half on the same period in 2021, with Group President and CEO, Nicolas Cederstöm Warchalowski, noting that the speed of change in market sentiment in the US in particular has been ‘fast and furious’.
And with contributing factors like rising inflation, high gas prices and the impact of the conflict in the Ukraine showing little sign of improvement, the landscape looks daunting.
But Rapala is not the first major company to report a significant decline this year, and it is how businesses react to changing forces that will determine how they perform going forward, says Warchalowski. There are a number of problems to address, he points out.
“The market reset some time ago outside of the US. Now there is a lot of stock still around. The season is winding down so companies will sit on that stock. We have not yet seen the full effect of product clearances, but they will happen for sure and are likely to cause pricing pressure across the industry both in 2022 and 2023.
“People are also able to do other things as society has opened up and some of the occasional anglers who came into angling have reverted to other activities and spending.
“Customers had been calling us chasing stock. They were taking everything we could give them. Now the roles have reverted and we call on the customers again just like pre-pandemic. The more experienced angler is ‘king’ again.
“We see this reflected in the market. There are still exciting pockets of opportunity that we will fully utilise to ensure growth, but overall the current outlook is negative compared to the last two years.
“In this environment products have to offer something special and those companies with strong product development and innovation skills will do best and win market share. It is important not to get distracted from this.”
Warchalowski concedes that the escalation of a gradual market reset to a sharper reset was unexpected, as it was accelerated by the strong macro-economic headwinds. However, he maintains that it has not slowed the implementation of the ONE Rapala VMC turnaround plan he introduced following his appointment two and a half years ago.
“We remain very focused on the ONE Rapala VMC Strategy,” he says. “It is all about getting our operational platform in better shape. The long lead times caused by the pandemic affected our forecast accuracy, but new sales and operations capabilities now implemented should help us to better match customer orders with demand planning, maintaining the correct inventory levels and controlling purchasing.
“With current stock levels high and the continued disruptions in worldwide supply chains, several elements of our plan have been greatly accelerated, including inventory management.
“By investing in staff resource in the planning department we will be able to speed up the implementation of the strategy.
“In terms of brands, we also plan to put more emphasis on our flagship brand, Rapala. It is essentially a lure brand which should have a presence in all lure segments and also adjacent categories like accessories. Rapala is a global mega brand that we want to utilise to its full potential.”
The Group’s second quarter sales report showed some performance inconsistencies by region, and Warchalowski sees some markets offering more growth than others.13 Fishing is under-distributed in the US, and further integration with Rapala VMC will bring real benefits, he says.
There is also good growth potential in the Asia Pacific region, where Enrico Ravenni (above) is now Executive Vice President and is successfully executing a growth plan. “An advantage of our move to put experienced team members with strong sales and product development skills into these roles is that they are able to unlock untapped potential in more difficult regions like APAC,” explains Warchalowski.
One of the big successes for Rapala this year has been the launch of Okuma in Europe which, despite dampened consumer demand and retailer de-stocking of entry level rod and reel combos, is ahead of Group targets.
Together with 13 Fishing’s improved spinning reel range, this momentum is delivering incremental growth in what is a fundamental category in the ONE Rapala VMC plan as it replaces sales lost following the split with Shimano.
“Okuma, with its many rod and reel families, has a broad consumer base,” says Warchalowski. “The brand is very strong in the spinning reel category. 13 Fishing on the other hand appeals to cool, young consumers with products dipped in (13’s CEO) Jim Coble’s secret sauce and is strong in the ice fishing and baitcaster markets.”
Warchalowski’s efforts to reduce management levels and develop a people culture embodying a more collaborative, dynamic and growth-driven team could also be key as growing shares becomes ever more important.
“Our team continues to be our greatest asset and especially so in the post-COVID market where above normal growth needs to be fought for fair and square,” he says. “Companies able to win market share versus competitors will be rewarded.”
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