BUSINESS

Dorel pumps up bike business with acquisition and racing sponsorship

09/20/2012 11:35 EDT | Updated 11/20/2012 05:12 EST
MONTREAL - Dorel Industries is hoping to grow its bike business with the acquisition of a Quebec-based company's personalized bike fitting system and the title sponsorship of a professional cycling team.

The Montreal-based company has bought and upgraded a system developed by Laval's Guru Cycles that allows retailers to help customers find bikes best suited for their needs.

The Guru Experience's automated units use software to identify the ideal bike based upon each rider's body flexibility and type, personal goals, ability level and riding style.

The goal is to drive additional sales among serious cyclists, who are willing to spend thousands of dollars on premium bikes like its Cannondale brand. The fit system should also help drive more traffic to stores since it isn't available on the Internet.

Dorel chief financial officer Jeffrey Schwartz told a CIBC investor conference Thursday that each dealer that uses the system will pay an annual fee plus a per-use charge.

"As these stores start to use the fit systems they're going to start showing the customers the benefit of that and why you need to come into the store," Schwartz told analysts.

The maker of Cannondale, GT, Schwinn and Mongoose bikes said sales of its most expensive brands have grown by more than 20 per cent annually, outpacing its mass merchant bike business.

Dorel (TSX:DII.B) also said Thursday it is launching a new pro-cycling team with Brixia Sport in January. The Cannondale Pro Cycling Team will include several well-known racers such as Peter Sagan, the winner of the green jersey at the 2012 Tour de France.

It began in 2007 as technical sponsor for the Liquigas Pro Cycling Team before becoming co-sponsor in 2010.

Schwartz said becoming title sponsor will help sales, especially in Europe, where bike racing is very popular and customers are heavily influenced by star riders.

"Becoming part of the professional team is a very important reason why people buy bikes — they want to identify with their heroes."

Dorel, which also makes car seats and strollers, hopes to further expand its juvenile business through acquisitions in central and South America, along with Eastern Europe.

"We think there is an opportunity to become the dominant player in that part of the market," he said of Latin America, noting annual growth of at least 15 per cent.

Last year's purchase of a majority stake in a Chilean-based company came with a chain of 52 Baby Infanti retail stores in Chile and Peru.

While Dorel didn't target the company because of the retail network, being manufacturer, distributor and retailer generates incredible margins and gives the company control since it distributes competitors' products.

"We're not at anyone's mercy in South America. We control our own destiny so it's great."

On the Toronto Stock Exchange, Dorel's shares gained 25 cents at $33.45 in afternoon trading.