Pedro's emerges leaner

Editor's note: The following article first appeared in the May 1 issue of Bicycle Retailer & Industry News.

MONTEREY, CA—The last eight months have been a trying and uncertain time for Matt Bracken, Jim Hale and Jay Seiter.

The three are what’s left of Pedro’s old guard. Since last summer they have been working under the radar to breathe new life into the 23-year-old bike care and tool brand and to rebuild the confidence among distributors and retailers following multiple seasons of not fulfilling orders on time, ultimately leading to the brand’s near demise.

“We’ve been purposely aloof,” admitted Bracken. “It takes a lot for three guys to scale up an operation.”

Pedro’s slow decline began shortly after being sold by Swix Sport USA in the spring of 2008. Pedro’s no longer shared operational resources, like warehousing or accounts payable or receivable, nor had access to Swix’s deep pockets, but the company didn’t adjust its strategy and, in time, ran out of money.

“Pedro’s got too big in the sense of the operational side of it for the actual sales that were being generated,” said Hale, as he took a break from scrubbing bikes at the Sea Otter Classic.

Plus, a lot of inventory it had in stock was dated and unsellable, and in the case of its lubes, costly to dispose of. “Even though it’s biodegradable you can’t pour it down the drain. Many things that were in inventory were Cs, Ds and obsolete. It was never going to earn cash to help Pedro’s Inc. get off the ground,” said Bracken, who joined Pedro’s as product manager shortly after its sale to Swiss investment group Sports Adventures International S.A.

Pedro’s was in need of capital, but banks weren’t lending money as financial markets tightened in light of the recession. Employees thinned from 11 to three, and by November 2011, the U.S. warehouse and offices had shut down. Rumors abounded about Pedro’s going out of business.

“We call it Pedro’s dark period,” said Hale. “October to mid-January. Closing the offices and warehouse, that fell on Matt, Jay and my shoulders after everybody had left. It was enormous—to do all those things we had to do.”

But not wanting to see the brand go away, the three took it upon themselves to change course. They presented their plan for a more streamlined Pedro’s to key accounts, including Quality Bicycle Products and J&B Importers, among others, to gauge their support at Interbike.

Feeling they had buy-in, they moved forward to close Pedro’s Inc. down and started shoring up supply under Pedro’s North America. Instead of one global company, Pedro’s now consists of three entities—Pedro’s Taiwan, Pedro’s Europe (run by Sports Adventures International) and Pedro’s North America; each operates independently in its own territory.

In addition to cutting overhead by eliminating its warehouse and office space, Pedro’s NA has sped up delivery by shipping direct to its distributors. Tools are shipped from Pedro’s Taiwan, while bike care and lube—all still made in the U.S.—are shipped from a new filler in Massachusetts.

Most distributors stayed on board, Bracken said.

Pedro’s NA’s focus this year will be on delivery and solidifying its supply chain. While product has mostly been carried over, labels on bike lubes and cleaners have a cleaner look—gone are the peace signs and flowers. By next year they hope to begin to introduce new tools and bike care products.

“As we go forward now, we want to stay lean and mean for a while,” Bracken said. He and his two partners, all equally vested in the new business, work from home and communicate through Skype or conference calls. Bracken and Seiter remain in Boston, while Hale is based out of York, Maine.

Until recently, they hadn’t pulled a paycheck.

But it’s all been worth it, Hale said. “Things are much brighter. Right now our inventory levels are very robust. Our distributors are starting to see that. I would in no way say we’re out of the woods with them from a confidence perspective, but we’ve started down the road.”