In The Gun Industry, Sometimes Bigger Is Better

Some say firearms companies that go public or buy up other brands wind up sacrificing quality and focus. But the numbers show when it’s done right, getting bigger can force companies to deliver better products to their customers and help brands survive tough times.
In The Gun Industry, Sometimes Bigger Is Better

Despite some high-profile bad news like Colt’s bankruptcy woes, Remington’s product issues and a major pistol safety issue at Taurus, the firearms industry is actually being managed far better than one would imagine.

Gunmakers have their share of problems like any other industry: bad hires, union turmoil, prehistoric sales and marketing operations that ignore the basics of social media and Internet audience building are a constant headache — not to mention some companies that have the added complexity of managing public stockholders’ expectations.

According to one firearms industry source, “the industry is run primarily by people who have been recycled through the gun industry since the dawn of time and are just repeating exactly what they have done for the last 20 years in a different company.”

“A lot of these folks who were just promoted because they are good sales guys don’t have management skills and end up getting fired when the business needs a manager instead of just a good sales guy,” the anonymous source added.

It turns out that firearms companies that are doing well have increasingly looked outside the gun industry for marketing and management expertise — companies like Vista Outdoors, Ruger, Leupold and even smaller companies like The Mako Group.

Mark Shindel at Lobo & Petrocine, who represents The Mako Group, conveyed some great insight into how this proves an advantage for companies.

“The typical firearms advertising agency is born from a careered person from within the firearms industry. They usually have a narrow focus of what they can do creatively due to a lack of real-world advertising and PR experience,” Shindel said. “Instead of an integrated marketing strategy, the brand message ends up being choppy and inconsistent.”

Shindel went on to note you do have to be careful with the big-city firms because sometimes they aren’t smart on guns. In one incident with Heckler & Koch, a high-end agency delivered the legendary 2004 SHOT Show catalog with the bullets backwards in the magazine.

Things are changing as more management and strategy talent from outside the gun industry join gun companies. But it’s been difficult to recruit talent from outside the industry, mainly because the pay is far below what a senior executive would receive at a company like Craftsman or John Deere. In 2013, I was asked to consider a leadership position for a large firearms related company and the compensation was about a third of what it should have been — it’s tough to recruit talent when your salaries aren’t competitive.

Journey Of This Article

A lot of folks in the retail and distribution side of the business see the trend to look outside guns for management and marketing expertise, as well as a broader issue of industry consolidation, as a kiss of death for a brand. But through interviews, analysis of corporate financial data and research, Shooting Sports Retailer found companies like Freedom Group, ATK, Vista Outdoors and other brand acquisition and consolidation companies were heroes instead of villains.

There’s also evidence that the international oversight, capital and structure of companies like Glock, IWI, Beretta, H&K, and others who have protected their global brand and business from some potentially poor or less strategic U.S. management decisions.

The problem I observed with acquisition companies is that as the consolidation progresses, the acquired brands start to lose much of the individuality and roots that made it a firearm legacy brand. The conglomerate throws its resources at the high-value areas of the acquired business and the rest gets tossed in the dumpster, which in many cases tend to be the most important parts of the business to its customers.

For example, Thompson/Center’s finish quality fell slightly from its heyday after Smith & Wesson purchased it. Smith also closed down the renowned Fox Ridge Outfitters TC Custom Shop, but product prices and accuracy remained consistent — all while the engineering minds of TC did great things across the S&W brands. Manufacturing costs decreased, which netted a better bottom-line, pleasing investors.

After ATK’s acquisition, MOD Knives quickly went from premium $200 and more custom high-speed steel-billet tactical knives to now offering the same knife styles around $100 but with lower-end steels and materials. Admittedly, this tactical knife strategy better served price-conscious military and LEO customers, so it wasn’t a bad move at the time. The same potential consolidation changes are allegedly in process at Freedom Group, with Bushmaster, DPMS, Remington and Marlin.

The brand marketer has to work even harder after an acquisition to keep his ears pointed toward the customer.

“Advanced Armament Corporation was a brand whose soul and character was about being a little creative, edgy and wild, and their suppressor advertising reflected that brand with rather scantily clad woman,” Glock’s Mike Robinson said. “However, after the acquisition by Freedom Group, the cool factor of the brand went away with the more conservative corporate advertising standards. That edgy image of the AAC brand has suffered because of those restrictions."

Vista Outdoors” marketing team listened to the screams of the rabid 10mm fans and started offering that caliber under its Federal brand. And rumor has it the company is now having a hard time keeping 10mm in stock. Similarly Sturm, Ruger & Co. along with Vista Outdoors has continually introduced new customer-driven products with great success.

But sometimes the marketing ears seemed a bit tone deaf. Take for example Remington's ill-fated R51 and RM380, which have both struggled out of the gate. The company’s 1911 line seems to have done really well, as did the DPMS GII .308.

On the flip side, sometimes the customer is happier with the status quo. Marlin, for example, has closed the quality gap on its old-school lever-action rifles by keeping things simple and homing in on quality rather than innovation.

From a distance, we all hear the criticism from folks affected by industry consolidation and factory moves, and many shake their fists in the air and scream “those bastards!” The harsh reality is that these cuts would have happened anyway. Often the acquisition saved the brand, just postponed the inevitable and allowed everyone to prove their value.

The international giants like IWI, Glock, H&K and Beretta seemed to have very restrictive controls over their U.S. operations and seem for the most part to be run by accountants.

On one side, that control is great because someone in the U.S. cannot suddenly change a specification on a manufacturing program or do something from a sales or marketing perspective that devalues the global brand. H&K is a great recent success story where that control allowed it to recover from financial problems in 2013 to a strong financial position by taking advantage of the American consumer market rather than focusing on military sales.

Since 2013 H&K has introduced a number of consumer-focused pistols and rifles, which has allowed it to climb back to a position of strength.

Insiders in several of these international brands told Shooting Sports Retailer that every new initiative has to meet “the Mothership’s” approval. One of my sources noted that, “it is like your crotchety 80-year-old grandfather has to check and approve your work even after you have been running things for years.”

The reality is that these international brands have been insanely financially stable compared to most public U.S. companies, and that is because most have very refined processes for every aspect of their business. It’s a trade-off, but it’s a formula that has worked for these companies.

Business Is About Tough Choices

More than one source noted it seemed finance guys who only care about making money, versus making quality products, were now running the industry. No one wants to see legacy brands die, but they do need to become profitable — and that can be painful.

As I pored over the yearly and quarterly financials of a number of these firearms companies, what I saw were the hard decisions any executive would have made to maximize the stock value and keep the company running another year. Wall Street private investors do not back companies thar don’t strive for higher efficiency, more margins and higher revenues all while increasing brand market value each and every quarter — and this sometimes means cutting and consolidating jobs and facilities.

Which leads us to Colt Defense LLC. An excerpt from Colt’s current “About Us” statement reads: “Colt is one of the world’s leading designers, developers and manufacturers of firearms.” But looking at the numbers, Colt seems to represent everything wrong with the industry in one company led by a management team with blinders on.

Colt has not offered anything innovative or “leading” since the 1993 Colt Cadet .22LR pistol, which was a phenomenal gun. The company has previously bent to government and political pressure and stopped selling to civilians for a time, filled the company with veterans whether qualified or not, completely killed its legacy line of heavily sought-after revolvers, become too reliant on government contracts for its revenue model, and was cash-strapped by overpriced unionized labor. Some might wonder why it didn’t fail sooner?

The reality is that Colt reportedly has somewhere around $35 million in United Auto Worker employee benefits, which seems insurmountable with its current revenue and without going into full-on bankruptcy. Even with unionized labor, better marketing, real product innovation and improved manufacturing would have put Colt in a far better spot. Reintroduce the phenomena at reasonable prices and many believe the brand would flourish.

Some argue the best bet for Colt is to complete bankruptcy, close operations and then enter into a licensing deal for its most popular guns with companies like Ruger, Glock or S&W. Business is business, and sometimes radical decisions need to be made to allow the brand to survive and become stronger.

Meanwhile, while Colt was failing, IWI created the innovative Tavor, Mossberg struck a marketing deal with Duck Dynasty, Savage has overtaken a huge portion of the precision rifle market, Glock expanded its lines significantly, S&W developed a ton of new revolvers, rifles and pistols,  and Ruger seems to have something new each month, all while Freedom Group and ATK gobbled up companies like a Pacman video game.

Vista Outdoors seems to be the managerial polar opposite of Colt. According to Amanda Covington, vice president of communications for Vista Outdoor, “Vista Outdoor was over a decade in the making, as we acquired and strengthened more than 40 brands. We focus our management efforts on several key business strategies: developing innovative products; growing our brands; expanding into complementary and adjacent markets; building on our strategic partnerships; and continuously improving our performance.”

Many industry analysts argue Vista continues to be one of the most well-run conglomerates in the market.

To end on an even higher note, I have to mention Henry Repeating Arms’ glorious reemergence like a phoenix from the ashes under Anthony Imperato’s management.

Henry is delivering a quality and brand with a focused marketing mission and superb quality, leveraging the most advanced manufacturing equipment available. Anthony has relaunched a brand many in the industry thought was completely dead. But now Henry is still one of America’s most recognized firearms brands with a really simple mission of delivering high-quality firearms to the shooting public.

Many retailers might wonder whether they should continue to stock brands run by companies in decline. But while some might have issues, in many respects, the customer really doesn’t care or even see the industry consolidation. As bad a financial position as Colt might be in right now, customers would likely still line up to buy a new Colt-branded Python revolver — even if it was made by Ruger.

Thankfully there are bigger companies who are saving worthy brands during a challenging time in the market.


Comments on this site are submitted by users and are not endorsed by nor do they reflect the views or opinions of COLE Publishing, Inc. Comments are moderated before being posted.