If you missed the news last Friday that Fox Factory acquired Race Face and Easton, here's why it matters: competition.
The $30.2 million deal turns Fox into a more complete supplier of bike parts to complement its expertise in suspension. That means it can better compete with a company like SRAM, which can currently offer a bike manufacturer the full package: suspension, drivetrain, cockpit components, brakes and wheels. Even with Fox and Shimano's close relationship, SRAM sure seems to be winning this game right now at the high-end, thanks to the proliferation of the single-ring drivetrain and the popular RockShox Pike fork. Shimano's introduction of its one-by system and the new Fox 36 all-mountain fork could shake up that landscape, but we won't see that until model year 2016 bikes come out.
Fox stands to gain more bargaining leverage with customers now that it can include Race Face's cranks, bars and stems or Easton's wheels and cockpit components in its spec package. It won't happen right away, but you'll definitely start seeing bikes outfitted with parts from all three of these brands. The deal also strengthens Fox when it comes to athlete sponsorship–another strong suit of SRAM's–which is an important factor from both a marketing and product development standpoint. More competition can help progress technology, improve product quality and sometimes drive down consumer prices.
"This makes a lot of sense for us," Chris Tutton, president of Race Face and Easton, two companies that themselves just merged back in April, said of the deal. "The industry is getting bigger and it's harder for smaller guys like us to compete. If you're going to partner with someone you want it to be the best and Fox is certainly one of them."
Fox is a $272 million company, with about two-thirds of those sales attributed to its mountain bike suspension business. Its backing creates a huge growth opportunity for Race Face and Easton, two small brands with about 35 percent of their business coming from the highly sought after Original Equipment Manufacturer, or OEM, category. There is a lot of potential to increase that number due to the brands' alignment with Fox, which already sells the majority of its products to OEM customers like Giant, Scott, Specialized and Trek.
Tutton said he would remain at the helm of Race Face and Easton at the company’s headquarters in Burnaby, British Columbia, and that nothing operational would change after the Fox's acquisition. Any consolidation would likely occur in the manufacturing part of the supply chain. Fox is in the process of moving all of its mountain bike manufacturing and assembly from Watsonville, California, to a new facility in Taichung, Taiwan¬where the majority of high-end bikes are made¬in order to be closer to its customers. Race Face and Easton both have manufacturing facilities in Taiwan, too.
Although it is not imminent, there could be a possibility of combining manufacturing in Asia at some point, Tutton said. He is currently merging the Race Face and Easton Asian facilities. The only Race Face products still made in Canada are the carbon-fiber cranks, Tutton said.
In terms of technology, there is much for Fox to gain from its purchase. It now owns all of the Easton and RaceFace patents and carbon-fiber technology. Fox has a long history with Easton–at one time Easton manufactured its fork stanchions.
What it develops with that technology, or what Race Face and Easton develop with Fox's technology (like that of its DOSS dropper post), won't be seen for probably two years at a minimum. But Tutton said he doesn't anticipate any co-branded product.
"We're not looking to dilute the brands. We're looking to build the brands together," he said.
More on Fox and Raceface:
News: Fox acquires Raceface and Easton