March 21, 2023


Moving Forward

Roman Arnold: the German entrepreneur who bet big on bikes and won

There was a single threat Roman Arnold was unwilling to take when he marketed a majority stake in Canyon Bicycles, the German maker whose bikes can set you back €8,000.

Shunning private fairness corporations this kind of as KKR and Carlyle that had been circling Canyon, Arnold sold a 52 per cent stake to Groep Brussel Lambert, a Belgian expense team, in 2020 for €350mn.

Though Arnold’s owing diligence experienced contented him that GBL would be excellent entrepreneurs, he could not resist taking out an insurance coverage coverage: the 59-calendar year-outdated bought a handful of prized bikes from Canyon, which includes one applied by previous environment champion Cadel Evans.

“I instructed myself: ‘OK, you by no means know how the new trader will be,’” Arnold says in an interview from Canyon’s modernist headquarters in the German town of Koblenz. If his marriage with GBL soured, “at the very least I preferred to maintain some bikes that signify a great deal to me”, he additional.

The offer handed Canyon the means to fund the global enlargement of a company that two decades back had defied sceptics by developing a enterprise promoting quality bikes on the net instantly to consumers.

GBL, in the meantime, took regulate just as the bicycle marketplace emerged as a winner from the coronavirus pandemic. Revenue of common and electric bicycles in Europe rose 7.5 for every cent to a history €19.7bn in 2021, in accordance to the Confederation of the European Bicycle Industry.

Canyon Bicycles is discovering how to change far more generation to Europe © Tino Pohlmann

Canyon, whose profits have climbed 20 per cent a 12 months considering the fact that 2016 and strike extra than €640mn in 2022, is aiming to get to the €1bn mark by 2025. The ambition is significantly taken off from the company’s early a long time, which have been formed by the death of Arnold’s father shortly soon after he had concluded significant school.

The sudden reduction prompted Arnold to rip up his strategies. Ditching the thought of joining the German military’s sport battalion, he instead embarked on apprenticeships as a salesman and a mechanic before taking over the little bicycle store his father experienced proven in the spouse and children garage.

A desire to forge a existence that would have impressed his late father and a passion for biking have been his driving force instead than a wish to maximise gains, he suggests.

“I generally did what I favored and what I considered was suitable,” suggests Arnold, who stepped down from working day-to-working day management of the company in 2020 but continues to be chair and retains a 40 for each cent stake truly worth €340mn.

The organization he inherited, then acknowledged as Radsport Arnold, immediately turned a thriving retailer of foremost US bicycle brands these kinds of as Trek and Specialised, emboldening Arnold to start his personal. But his most important gamble was the selection in 1996 to bypass stores and market directly to clients on-line.

He remembers his brother outlining that he had bought lifetime insurance policy on the internet and that Texan entrepreneur Michael Dell experienced started providing computers by using the website. An ambition to turn into the Michael Dell of biking, he says, was scoffed at: “Initially, every person advised me: ‘Roman, selling bikes on the internet? That definitely will not get the job done.’”

Employing the web as a store window also opened the prospect of promoting significantly over and above Koblenz, a metropolis with lots of biking lovers but a population of little additional than 100,000. Arnold registered the domain name early with an eye on markets outside Germany.

The earlier number of a long time, even so, have uncovered the perils of currently being a world wide enterprise. Canyon has been beset by a lack of essential bicycle sections, caused by the two ballooning demand and disruption to offer chains.

Arnold is persuaded that more than the next 10 to 15 decades the bicycle marketplace will have to minimize its dependency on Asia as the chief production hub. “We will need to adjust the supply chains, and output requires to be moved close to where the close consumer is,” he says.

Canyon, which because March has been led by main government Nicolas de Ros Wallace, a former Nike executive, is checking out how to change a lot more production to Europe. Numerous of its bikes are assembled at its manufacturing facility in Koblenz, but all the frames and a lot of parts are imported from Asia.

“We are unable to move anything at when, we need to have to just take this stage by step,” points out Arnold, who sported a black classic biking jersey, pink sweat pants and a black Canyon baseball cap when the Financial Instances fulfilled him late final 12 months.

Most of the wheels are produced in Switzerland and Canyon is analyzing how some frames can be produced in Europe. But, drawing a comparison with the rise of natural generate in supermarkets, Arnold argues that regionalising offer chains will also rely on the client.

“If customers are inclined to shell out a bit a lot more for the point that the solution is created right here, and if entrepreneurs are daring more than enough to go output in this article, we can kind it out,” he says.

When provide chain shortages are Canyon’s existing blight, the team has faced much far more grave crises. In 2006, a carbon fork produced by an Asian supplier proved flawed, prompting the recall of 7,500 bikes and a warning from a German purchaser magazine that the bikes posed a “mortal danger”.

In a bid to maintenance the damage to the group’s popularity and keep away from a repeat, Arnold decreed that just about every essential element, this sort of as forks and handlebars, should be individually examined. At its Asian suppliers, Canyon operates its individual X-ray devices that scan specific parts. “Each fork has a QR code, and can pull up the pics of that part on our pcs,” a protection engineer advised the FT on a tour of the Koblenz factory.

That storm was dwarfed by the damage inflicted by a substantial cyber attack on the business on Christmas Working day in 2019.

“Our manufacturing facility could not be rebooted anymore, everything grounded to a halt”, leaving the business unable to assemble or ship a bicycle for a month and haemorrhaging funds. “I was confident we go bust,” says Arnold. “Fortunately, our banking institutions stored the faith. We have been quite, really fortunate.”

3 decades on and Canyon’s ambitions seem undimmed by the near-demise experience. Acquiring been mainly devoted to manufacturing rapid, light-weight road and mountain bikes, the enterprise has formulated types improved suited to urban dwellers eager to ditch their cars. Canyon desires urban bikes to account for 20 for each cent of income by 2025, up from about 10 for every cent.

“This is a subject near to my heart,” clarifies Arnold, adding that he was encouraged when Koblenz’s mayor, a Social Democrat, promised to make the town a improved 1 for cyclists. The moment a year, he invitations the mayor to Canyon’s headquarters. “I constantly convey to him that regardless of some improvements, a lot of matters [for cyclists in Koblenz] are nevertheless not up to scratch.”

Canyon is also wanting to prise open the American marketplace, which accounts for considerably less than €100mn of once-a-year profits. In a sign of the brand’s opportunity attraction in the US, basketball star LeBron James obtained a little stake in the organization previous July.

Arnold claims that some of his finest thoughts have appear from self-aid administration publications, with the advice in one to constantly start out a job “with the conclude in mind” encouraging condition his tactic to choice producing at Canyon.

But soon after far more than four many years main the company — and obtaining received a battle against cancer in 2016 — the entrepreneur now ideas to dedicate some of his fortune to a charity that fosters cycling amid young individuals.

Any trepidation Arnold could have experienced about Canyon’s new majority operator seems to have light — he has even returned some of his most cherished bikes.