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Wheeling Toward Dominance

When lifelong biking enthusiast Chris Sugai rode his first 29-inch wheel mountain bike, he knew the industry was headed for a turn. He recalls how the bike seemed to climb faster, descend more confidently and turn corners better than the 26-inch wheel mountain bikes that dominated the market. “I knew after that that this was going to be the future of mountain biking,” he said. Sugai is now owner of Niner Bikes, a North Hollywood-based designer and manufacturer of high-end, professional-level 29-inch wheel mountain bikes, also known as 29ers. Sugai, who started the company in 2005, predicts 29ers will eventually turn their smaller-wheel counterparts obsolete as riders make the switch to the larger wheel. The rise in popularity of bikes is evident through the growing sales for the company that is one of the few to manufacture solely 29ers and their frames. While the company started with only about 17 bike dealers in the United States after its first year of business, it now sells its products to more than 350 retailers domestically and internationally. The company sells to distributors in 19 other countries. Niner Bikes’ revenues have also skyrocketed, increasing from $658,356 in 2007 to nearly $2.68 million in 2009. Revenues for 2010 are projected to be between $5 million and $6 million. “We’ve been growing at the average rate of 73 percent a year,” Sugai said. “It’s a hot market. People are abandoning 26-inch (wheel) mountain bikes and they’re buying 29ers, and we’re at the forefront of that because we’re the only company that sold it dedicated to that purpose. I think people respect that.” Sugai operates his company from his main office in North Hollywood. However, he also has two other offices he opened this year in Fort Collins, Colo., and in Taiwan, where the bikes are manufactured. His business partner, Steve Domahidy works from the office in Colorado. When Sugai started Niner Bikes, he already had about 20 years of business experience under his belt. He was the owner of Solar Art, a window tinting company he started at the age of 19. The venture into mountain bike manufacturing was an attempt to switch to something he had a passion for. Sugai started by selling his bike frames directly to consumer through the Internet. Offices for both companies were located in Canoga Park. Focusing on bikes However, as word spread about his product and sales increased, Sugai moved both companies to a larger office in North Hollywood. By the end of 2009, he sold Solar Art, focusing all his efforts on Niner Bikes. Sugai said he was laughed at for focusing his entire business solely on a bike that many riders hadn’t fully warmed up to yet. Many riders assumed bigger wheels would slow them down and were hesitant to even try the 29ers, Sugai said. However, Niner Bikes was able to win the attention of riders and dealers in 2007 at the Interbike bicycle expo in Las Vegas. “We just decided to go huge and we brought 80 bikes to the show, which is a quarter of a million dollars worth of bikes we had to invest,” Sugai said, adding that his company only brought about five or six bikes the year before. “We made (such) a huge push that if we would have gotten it wrong, we would have bankrupted the company. That’s what you do sometimes – you just roll the dice.” The promotional stint resulted with favorable responses from the public and contracts with new dealers. Sugai said that over the years, his company has also been able to influence some of the major mountain bike part manufacturers, convincing the companies to use their research and development dollars toward parts for the larger-wheel mountain. Meanwhile, bike retailers that sell the company’s products say Niner Bikes’ name has become a fixture in the industry. “They bring (29ers) more to the general consumers’ attention more than any other company,” said Adam Williams, general manager of Golden Bike Shop in Golden, Colo. He said that the “Niner” brand name has become a general reference word for 29er bikes, just as the brand name Kleenex has become common name for tissues. While the shop sells 29ers from several manufacturers, Niner Bikes is its number-one seller. “We basically run a rather large demo fleet of bikes at the bike shop and the Niners just go nonstop. They just sell themselves,” Williams said. He estimates that the 29er bike trend has slowly grown over the past five to seven years with more rapid growth over the past two or three years. International presence Beside broader exposures, Sugai also credits his company’s growth to its international sales presence, which helped it excel even during the recession. The company sells to distributors in countries such as Spain, Italy, Israel and South Africa and the Czech Republic. “It’s a good thing we pushed heavily into Europe because when the dollar dropped, our sales overseas went through the roof,” he said. “And also, we’re venturing into new markets where other companies aren’t even venturing into right now, so we’re getting huge market shares.” The growth has also been due to having high-quality products and efficient staff members, he added. However, Sugai said that the growth has not come without its difficulties. “Growing a company that’s growing this fast is difficult because things are happening at such a rapid pace and you have to make decisions with very little information that have a major impact on going forward in the company,” Sugai said. The company is also struggling to raise enough capital to match its growth because of banks’ hesitancy to lend. Either way, Sugai strongly believes that 29ers will dominate its market, comparing the transition to the switch from film cameras to digital cameras. “We’re going to take a certain amount of market share away from even the large (mountain bike) competitors,” Sugai predicted. “As long as we keep executing our plan well year after year, we’ll be able to maintain our share. Niner Bikes FOUNDER: Chris Sugai location: North Hollywood CORE OF BUSINESS: Mountain bike manufacturing Number of Employees: 15 Revenues for 2007: $658,356 Revenues for 2008: $1.95 million Revenues for 2009: $2.68 million Revenues for 2010 (projected): $5 million to $6 million

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