Gibson gets $135M- Will they use it wisely? Can Epi save the day?

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

Yes, appears they've got about $100m in debt but keep in mind their opp revs around 850m while G is more like 150.

Fender is reportedly in financial trouble as well...

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[justFred]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

Yes, appears they've got about $100m in debt but keep in mind their opp revs around 850m while G is more like 150.

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From what I've seen revenue is at ~450m and declining...credit ranking is med-high risk...CEO admits they are scrambling to find out who there market is with the baby boomers leaving the scene...Fenders research shows significant numbers are first time buyers, 90% will abandon the guitar within 3 to 12 months...larges growth segment is women guitarists who prefer acoustics....it's a tough old world...think Mincer may be right on Gibson = divest and downsize to custom shop and work on growth from there (if I understood him correctly)

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

From what I've seen revenue is at ~450m and declining...credit ranking is med-high risk...CEO admits they are scrambling to find out who there market is with the baby boomers leaving the scene...Fenders research shows significant numbers are first time buyers, 90% will abandon the guitar within 3 to 12 months...larges growth segment is women guitarists who prefer acoustics....it's a tough old world...think Mincer may be right on Gibson = divest and downsize to custom shop and work on growth from there (if I understood him correctly)

G focusing on custom shop is a good idea regardless... In the article we talked about letting Epiphone take over all mass production, but thats just one of many ideas that require data... They need process one way or the other to generate that data.

As far as competition, Fender has already done most of the work that Gibson needs to do...but they picked up a lot of their process from Yamaha, and if Fender also slides, Yags has the funds to buy either or both of them...

Not very likely, but we do have the Yags buying Gibson odds in the final roundup.



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[justFred]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

maybe I missed it...discussion on restructure management team...leader and key positions...

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

maybe I missed it...discussion on restructure management team...leader and key positions...

Nope you didn't miss it- IV is published but not publicized and we're actually working on V now= Dealers and Management-

Open to any and all ideas, but a lot of it will be a review of what's not working now and why-

There are lots of leadership styles that could work with a reorg/refocus, but the key word is leadership.

 

[67Mopar]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

I made several call to Hostess Foods in regards to the Suzie-Q's they released last year. I explained to them that what they released was nowhere close to the original recipe. They had released a Chocolate Twinkie which just so happened to be made from the original Suzie-Q recipe. I advised them to toss the new Q recipe, and use the same Chocolate Twinkie recipe. I also recommended that they increase the amount of cream filling. My cousin called me last night... "Dude, you did it! The original Suzie-Q's are back! Thank you, bro!"

My point... If you find something that works, you stick with it! Remember when Coca-Cola changed their recipe? It takes a college graduate to make such a dumb-fu** decision as that. As a new high-end guitar builder, Gibson is through. Personally, I preferred the Norlin era Gibson's over the HJ era. 1978 through 1981 were tremendous instruments. Which are best is arguable, but one thing you can't deny is pricing. I purchased a new 1978 LPC for $525 out the door! A fabulous instrument at a fair price. Last I checked, the mark-up on Gibson guitars from 1978 to current came to 684%, give or take a few points. I could not find a single competing item available on the US market. Gold and diamonds are marked half of that amount. The new finishes look like ****, the hardware is made by a Chinese company that excels in coffee pots, and the fretboards are laminated. Want an ebony wood fretboard? Too bad for you! Like Aerosmith... Gibson is through.

Dumping the innovation line to focus on instruments is a mistake IMO. They should do the reverse. Suspend new guitar builds, and focus on electronics. If Gibson owns Philips, I'd like to complement them on the Air Fryer XL. I purchased one last week and haven't stopped using it. Made a bag of Nathan's onion rings in it last night, and they were delicious! Just spray them down with some canola oil before cooking.

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

67Mopar!!!! Your note is product manager's best dream for many reasons...

I made several call to Hostess Foods in regards to the Suzie-Q's they released last year. I explained to them that what they released was nowhere close to the original recipe... "Dude, you did it! The original Suzie-Q's are back! Thank you, bro!"...My point... If you find something that works, you stick with it!

This is customer-driven development at it's very best- they heard you, you must have inspired them to discover a significant '67Mopar' segment, they did the cost/benefit analysis and everyone wins- I really, really hope that they named this segment after you- this is case in point for customer driven development and we will discuss exactly what we can do (as consumers) to help Gibson in the final article.

Last I checked, the mark-up on Gibson guitars from 1978 to current came to 684%, give or take a few points. I could not find a single competing item available on the US market. Gold and diamonds are marked half of that amount. The new finishes look like ****, the hardware is made by a Chinese company that excels in coffee pots, and the fretboards are laminated. Want an ebony wood fretboard? Too bad for you! Like Aerosmith... Gibson is through.

Yes, they used brand to scrape every nickle they could get, they let quality and innovation slip and prices went astronomical- great analysis, but I personally believe they have a narrow window to get back on track and otherwise they will fade over time...

Dumping the innovation line to focus on instruments is a mistake IMO. They should do the reverse. Suspend new guitar builds, and focus on electronics. If Gibson owns Philips, I'd like to complement them on the Air Fryer XL. I purchased one last week and haven't stopped using it. Made a bag of Nathan's onion rings in it last night, and they were delicious! Just spray them down with some canola oil before cooking.

67Mopar, I totally get your thinking- Yamaha and Fender have tremendous up-sell, cross-sell and strong dealerships because of their diverse offerings-

Imagine "Hey John, I'm calling to let you know that your custom (insert favorite guitar) came in, I checked it out and it's exactly what you asked for- And give yourself an extra hour when you come to pick it up- the mixer we were talking about came in this morning- I know you've been learning the demo software I gave you and I'd like to walk you through how the whole recording package will work when you're ready to buy"

As wonderful as this scenario is, it's extremely unlikely that Gibson can pull this off so late in the game for a number of basic reasons:

1. Integrating ancillary lines requires a ton of investment, integrating products, messaging and biz dev- Gibson did little or nothing to integrate their ancillary products up to this point and they don't have the time or money now.

2. Integrating ancillary lines requires tight, optimized processes... ie, the requirements for this new mixer and the DAW software we acquired have to match by the next roll out and we need to build messaging so that buyers and dealers understand that it will be the perfect solution for home studio guitarists...

It appears that Gibson doesn't have basic customer-focused processes for product, messaging or biz dev for guitars- much less to provide unified management across a much bigger portfolio.

3. Bottom line, Gibson desperately needs those basic processes for guitars to get quality and price points competitive and they don't have time or resources to do this across ancillary lines...

The one exception to this would be a very deep pocket buy out- If Yamaha grabs them at firesale, they will keep most of the ancilary and one of these days everything will support everything else (although I'm still waiting for my Motif to play nicely with Cubase

67Mopar, your note is exactly the kind of feedback that Gibson desperately needs- when we get to the 'What can customers do?' section, it would be very nice to see you leading the charge!

Sorry for the long reply, but this is really good stuff.

 

[67Mopar]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

Off-topic, but... 30 grams of sugar in one Suzie-Q? :eek5:

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

Off-topic, but... 30 grams of sugar in one Suzie-Q? :eek5:

Business Transformation studies have repeatedly proven that guitars are sugar free and calories burned are greater than calories consumed-

A big next step is getting gyms to add guitar playing for weight loss

 

[Mincer]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

You're right though...I had a Suzie-Q after not having one for like 20 years, and they tasted horrible. So do Twinkies and Devil Dogs. I don't remember any of them being that bad.

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

You're right though...I had a Suzie-Q after not having one for like 20 years, and they tasted horrible. So do Twinkies and Devil Dogs. I don't remember any of them being that bad.

They replaced fats with carbs under the incorrect assumption that it was more healthy...

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[Darg1911]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

Since my brain doesn't do corporate financial stuff, I have a few questions. Forgive me if they're dumb questions.

-I read that Gibson had 122 million in profit for 2017, up from 110 million the year before. That's just the guitar operation from what I understand, but does that include Epiphone too, or is it just Gibsons brand?

-Assuming the 122 million was Gibson only, what makes them not viable with that profit? I mean, I assume it's because of the debt that they are burdened with because they bought all those other entitites. But assuming that Gibson didn't get themselves into financial hell with purchase of all those other entitites, would they not be doing just fine with 122 million in profit?

 

[67Mopar]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

You're right though...I had a Suzie-Q after not having one for like 20 years, and they tasted horrible. So do Twinkies and Devil Dogs. I don't remember any of them being that bad.

I purchased a box back in December of last year, which is what prompted me to make the call to Hostess. I've been a fan of Suzie-Q's my entire life, so I wasn't just going to stand idly by and do nothing. I think you will find the revised Q every bit as enjoyable as the original. Maybe better, since they also increased the cream content. I also stressed the importance of the wax card for twin-pack sales... Scraping that thin layer of glorious chocolate cake from the card finalizes the experience. It's going to take time getting Hostess back in order, but it's going to require customer input to make it happen. Getting their pies back in order may take some doing.

As far as Gibson is concerned, don't waste your time. Even if Gibson could turn things around, the guitar is no longer an integral part of pop music. Why? Because that's the way the music industry wants it. They never liked having to deal with rock bands. Excessive personality conflicts, creative control, legal issues, and excessive payouts. The industry longed for a return to the days of Elvis and Connie Francis. An era where they had complete control, and now they have it. Industry created, single artist acts are all they want. That's all they ever wanted.

Legacy acts will tour as long as they are physically able. Once these bands are gone, that will pretty much be it. Then again, some bands don't have a single surviving member in the group! It get's even better... KISS plans on hiring replacements who will tour as "KISS" so that they can continue to profit on the brand. I fully expect this model will be copied by other legacy acts, and also by some that have been broken up for years. A reconstituted Jefferson Airplane with all new members? Don't laugh... If there's a profit to be had, it will happen.

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

Since my brain doesn't do corporate financial stuff, I have a few questions. Forgive me if they're dumb questions.

-I read that Gibson had 122 million in profit for 2017, up from 110 million the year before. That's just the guitar operation from what I understand, but does that include Epiphone too, or is it just Gibsons brand?

-Assuming the 122 million was Gibson only, what makes them not viable with that profit? I mean, I assume it's because of the debt that they are burdened with because they bought all those other entities. But assuming that Gibson didn't get themselves into financial hell with purchase of all those other entities, would they not be doing just fine with 122 million in profit?

Great question Darg-
The reason they are in ch11 now is they potentially owe as much as $560m by August and $122 profit in itself simply cannot balance the books-

But as you said, some of the debt comes from the ancillary lines they have purchased, so it would seem logical that they could just sell them off and be happy with $122 in the bank, right? Unfortunately it isn't that simple-

First of all, it's not easy selling a company, even when it's profitable. A lot of the challenges are finding the right company that is in the right place to buy- but Gibson can't wait for that company to be in the right place. And now, multiply that alignment of the stars by the multiple companies that Gibson needs to sell.

So it's possible they will only be able to sell at highly discounted Fire-sale prices.

However, there is still hope here and that's why disinvesting was the first suggestion on our list.

So best case scenario, if they are able to sell enough fast enough and stay liquid, they could survive with $100m+ profit- But the primary point of the articles is would they prosper and grow?

Probably not- Bad decisions got them where they are and they have lost an incredible percentage of the market over the last 20 years. As we discuss in the articles, on the mass production side, Yamaha, Fender, Ibanez, etc have adopted best practices that give them better margin opportunities with clear 'I get this value at this price point' messages.

On the boutique side, where the challenges are totally different, the Suhrs and Lowdens of the world have set new standards for innovation and high quality at reasonable prices and PRS and Taylor (and many others including Martin) have successfully filled in the upper midrange-

Another problem is that the brand has been damaged- Search 'Gibson' online and you will find a lot of vocal users who moved away and are very happy to explain why-

Bottom line, imho there will always be a 'Gibson' - But will it be a strong innovative, growing company- or continuing to lose market share until they are acquired by someone like Yamaha?

Our article describe industry standard business practices and this is the time for Gibson to do the work, no matter how the cards fall-

Great question! Did the response make sense?

 

[justFred]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

What business entities generated the $122m???what was profit generated by fretted instrument businesses???

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

As far as Gibson is concerned, don't waste your time. Even if Gibson could turn things around, the guitar is no longer an integral part of pop music.

67, you might be right- On the other hand, if the guitar industry does a better job targeting young people and undeserved markets (Gibson's share of electric country market is a good example), I believe there is growth potential- Music styles shift every 20 years or so, we're due for change and I would like to believe it could be guitar concentric and that a company like Gibson could make guitars exciting and fun again-

But they can't lead while they are falling apart.

And thanks for the concern, but no worries- the reason we started this series is that we do a lot of Business Transformation work- but it tends to be dry and boring- The Gibson case study gives us a way to talk about process in a ways that we all understand, plus it's fun to talk about guitars

 

[Darg1911]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

What business entities generated the $122m???what was profit generated by fretted instrument businesses???

This^^^

I'm still unclear as to whether the reported $122m was just Gibson USA and Custom guitars or if it also included Epiphone ... or if it was everything that Gibson owns.

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

This^^^

I'm still unclear as to whether the reported $122m was just Gibson USA and Custom guitars or if it also included Epiphone ... or if it was everything that Gibson owns.

All Gibson inc is $604m- Off top of my head, Baldwin was 38m , Onkyo 36m

I think the last time guitars was broken out was 2017 and that should include Epi-



The problem with the numbers is that G is private- so we can get very little data-

That's one of the reasons that we are far more focused on processes that lead to growth- the $ side can go in many, many different directions, but demonstrating process value is relatively easy in Mfg.

 

[Darg1911]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

All Gibson inc is $604m- Off top of my head, Baldwin was 38m , Onkyo 36m

I think the last time guitars was broken out was 2017 and that should include Epi-

View attachment 90486

The problem with the numbers is that G is private- so we can get very little data- that's one of the reasons that we are far more focused on processes that lead to growth- the $ side can go in many, many different directions, but demonstrating process value is relatively easy in Mfg.

Ok, so just guitars, Gibson (and Epiphone based on your assumption), 2017 was $122m in profit (based on something I read earlier). Maybe this was answered but IF HJ/Gibson didn't purchase all those other entitites, if they just stuck with guitars, would that $122m profit have been enough to sustain them? I guess I'm asking if they already had too much debt with just Gibson and Epiphone before buying all the other stuff? I'm assuming that it's not clear because they are privately held. But asking anyway in case you know.

 

[zionstrat]

Re: Gibson gets $135M- Will they use it wisely? Can Epi save the day?

Ok, so just guitars, Gibson (and Epiphone based on your assumption), 2017 was $122m in profit (based on something I read earlier). Maybe this was answered but IF HJ/Gibson didn't purchase all those other entitites, if they just stuck with guitars, would that $122m profit have been enough to sustain them? I guess I'm asking if they already had too much debt with just Gibson and Epiphone before buying all the other stuff? I'm assuming that it's not clear because they are privately held. But asking anyway in case you know..

Yes, it is unclear- Considering that Onkyo and others are profitable, it's possible they could have turned this into 'soup to nuts' portfolio as Yamaha and Fender do, if they had time and resources- but as written before, it is clear that they never got integration to the point where there was much (if any) cross brand synergy with the ancillary lines-

As far as would Gibson have done better sticking to guitars, considering the way they handled things, it's likely they wouldn't be in Ch11 if they had stayed gtr focused- If they could clear $150m they would have been around Martin and ahead of Taylor-

But here's where I argue that Ch11 can be good- They're here, they are likely to divinest-- so use that capital wisely- get modernized and see if they can double the business by being a far more efficient organization focused on the stuff that guitarists really want.

Again, the process stuff, that's pretty easy- Playing with the numbers and the past that's not so easy, but I don't really need to go there