WSJ article on Watermark (Dagger/Perception) - LONG
KSTRELETZK
Wall Street Journal, Southeast Journal Wednesday, August 5,1998
<bold><bigger><bigger>Calmer Waters? Buyout Reunites Rival
Kayakers</bigger></bigger></bold>
BY JOE BOUSQUIN
Staff Reporter of The WALL STREET JOURNAL
In late June, more than 10 years after they parted ways, Blll Masters
and Joe Pulliam were together again-if not exactly on speaking terms.
In the 1980s, the two used their mutual passion for whitewater boating
to help Mr. Masters's kayak company grab the lion's share of the U.S.
market. Then Mr. Pulliam left to form his own company, and the two
became fierce rivals.
It took the prospect of big money to bring them back under one roof on
June 25. For 15 hours, Mr. Masters paced law offices on the 45th floor
of Atlanta's 191 Peachtree Tower, negotiating a price for his kayak
company. Mr. Pulliam was five floors above him, doing negotiations of
his own with the same suitor.
As the two men bargained, the owners of Atlanta-based WaterMark
shuttled between them in the building's green-andpink-marbled
elevators.
Finally, by 2 a.m. on June 26, the deals were struck. WaterMark, a
newcomer to the $200 million paddle-sports business, bought both Mr.
Masters's Perception Inc. of Easley, S.C., and Mr. Pulliam's Dagger
Canoe Co. of Harriman, Tenn., for an undisclosed sum. To the tight-knit
fraternity of kayak enthusiasts, it was as if Ford and General Motors
had just merged.
Now, two men who have spent a decade trying to sink each other, find
themselves in the same boat-but still at arm's length. Indeed, on the
day they agreed to the biggest deal of their lives, Messrs. Masters and
Pulliam never even spoke. Some in the industry question just how well
the two will get along after so many years of competition. Especially,
they say, since the competition often seemed to get personal.
"This is a lot like marrying your exwife: You didn't like [her] the
first time around," says Tom Schlinkert, a former Perception sales
manager who now runs Schlinkert Sports Associates Inc., a
paddle-sports-equipment sales firm in Elberta, Ala. "You know, they'd
argue over what color the grass is."
But the deal has an impact far beyond personality clashes. Kayaks have
become one of the hottest toys of a generation of Americans seeking
greater adventure in their leisure time. The boats were the
fastest-growing segment in 1996, the latest year for which growth rates
are available, of the now $5 billion outdoor-recreationequipment
industry, according to the Boulder, Colo.-based Outdoor Recreation
Coalition of America. Car commercials now feature kayak-laden vehicles
headed for the moumtains.
Industry experts say about 80,000 kayaks were sold in the U.S. in
1995-up from only about 8,000 to 9,000 in 1982, according to former
Perception marketing director Ken Horwitz. (whitewater kayaks retail
from around $600 to $900, and top-of the-line ocean-going kayaks can
bring close to $3,000 apiece.)
Perception and Dagger dominate that market. David Secunda, executive
director of ORCA, confirmed industry estimates of a 38% market share
for Perception and a 23% share for Dagger. In sales, that correlates to
$25 million for Perception, and $15 million for Dagger, annually. While
neither Mr. Masters nor Mr. Pulliam would discuss dollar amounts, Mr.
Pulliam says those market share estimates are high.
Many entrepreneurs fear that the entrance of WaterMark and other big
buyers onto the paddling scene is a sign of things to come: the
consolidation of an industry that, until now, has remained largely in
the hands of owner-founders who started businesses in their backyards
25 years ago.
"You've got a lot of people out there who are upset about this, [who]
started out because they were avid paddlers" and not bottom-line
businessmen, says Bill Parks, the owner of Northwest Rlver Supplies
Inc., a manufacturer and distributor of river gear in Moscow, Idaho.
And some lament that the stiff competition between Perception and
Dagger, which. spurred innovation in the industry will now subside.
(WaterMark says that it will allow, and even encourage, competition
between the two companies. )
<bold>Trlckling Up</bold>
The industry had humble beginnings. When Mr. Masters founded Perception
in 1976, the market was so small that kayakers with boats on top of
their cars regularly stopped to greet one another.
By the mid-1980s, Perception had snared 85% of the whitewater market,
say Mr. Masters and former sales managers. Mr. Pulliam agrees: "We
owned the market."
The breakthrough: Perception was the first company to master a process
called rotational molding, which literally cooks kayaks in ovens the
size of small campers. This let builders work in plastic, a much
tougher material than the usual fiberglass, and vastly speed up
construction time.
Mr. Pulliam came to Perception in 1982, after a stint in banking, as
Mr. Masters's marketing director. While attending Clemson University,
Mr. Masters and Mr. Pulliam had glided side by side in home-made
kayaks, shooting rapids with names like Sock 'em Dog on the nearby
Chattooga River.
The two men are a contrast in styles. Mr. Masters, 48, is an intense,
hands-on tinkerer who isn't shy about touting his accomplishments,
including 30 registered patents. After the WaterMark deal, Perception
issued a news release that concluded, "The sport of kayaking owes much
to Bill Masters, who took a backyard business and turned it into an
industry."
Big talk-but even his competitors acknowledge he had a huge influence.
"Credit where credit is due," says Corran Addison, a former Perception
designer and now co-owner of Riot Kayaks Inc. in MontreaL "Bill did
some amazing stuff."
Mr. Pulliam, 43, is a lower-key administrator. During an interview, he
stretched out on the threadbare couch in kids office and took off his
shoes. But he, too, claims credit for much of the kayak explosion. "I
feel like I'm one of the people who's totally shaped this little
industry," he says.
<bold>Dlverging Currents</bold>
In 1987, after five years at Perception Mr. Pulliam left. He won't
comment on why he departed, but Billy Turner, a former Perception sales
manager who now heads Outdoor Sports Marketing, a
paddle-sports-equipment sales firm in Greenville, S.C., says Mr.
Pulliam was rebuffed by Mr. Masters when he asked for an equity stake
in the company. Mr. Masters says he doesn't recall exactly what
happened between him and Mr. Pulliam.
In any event, Mr. Pulliam soon started a company that would become
Perception's fiercest competitor over the next decade: Dagger Canoe.
"Dagger came on as really the first significant competitor to
Perception in the mass marketing of kayaking," says Risa Shimoda
Callaway, Perception's marketing director from 1991 until last April,
when she left after clashing with Mr Masters over management
structure.
The competition with Mr. Pulliam's company was heated from the start.
At Perception, employees kept such a close watch on Dagger that any new
market intelligence prompted a right-now response.
"Everybody would stop that day to respond to the scuttlebutt," says Ms.
Callaway. "And it would suddenly change the plans."
Dagger's plans prompted one early response by Perception. At the
outset, Mr. Pulliam's company concentrated on canoes. That's because
Mr. Pulliam had signed a no-compete contract at Perception that
prohibited him from selling kayaks for two years. Also, Perception
didn't manufacture canoes, and business associates say Mr. Pulliam was
happy to stay out of Mr. Masters's way. The plan met with success:
Dagger shipped 500 canoes its first year.
Then, in 1989, Perception unveiled a prototype canoe model at a
whitewater competition that, while it never actually went into
production, came to be seen as a warning shot across Dagger's bow.
Within a year, Dagger fired back with a kayak: the aptly named
Response. (The noncompete agreement had expired.)
Mr. Masters says he only started looking at canoes because he heard
Dagger was experimenting with kayaks.
"The word on the streets was that Dagger was going into the kayak
business," says Mr. Masters. When a canoe designer suggested he build a
canoe prototype as an answer to the Dagger rumor, he recalls saying,
"Let's do it."
<bold>
Paddle Pushers</bold>
Mr. Parks, the Northwest River Supplies owner, says the retail arena
was also the site of many battles between the companies. "The way to
domimate the market is not through having the hot boat," he says. "It's
by dominabug the retailers. " He says each company would try to load
retailers up by giving discounts to squeeze the other company out of
the market.
"I never thought of it that way," says Mr, Pulliam, who says his
company simply wanted to distribute as much of its product as possible.
And Mr. Masters says such squeezes didn't just take place "between
Perception and Dagger. I think that happens between all companies."
Further, Ms. Callaway says that because many people at Dagger had
worked at Perception in the past, the upstart knew where Perception's
weaknesses were, and took aim at them.
"If we had retailers that were less than 100% satisfied with
Perception," Ms. Callaway says, Dagger would target those stores as
potential outlets.
Mr. Schlinkert puts it more bluntly: "Dagger knew enough to be able to
get into Perception's shorts,"
The two companies also fought over names. In 1991, Dagger wanted to
call a new boat the Pirouette, but Perception insisted it had a
copyright on that name. The new name for Dagger's boat: Crossfire.
Also that year, the companies clashed over a good cause. Both wanted to
sponsor an event of the American Whitewater Affiliat:on, a conservation
group in Silver Spring, Md., now called American Whitewater. When
Dagger won the sponsorship, Mr. Masters asked Ms. Callaway, his
employee and the AWA president at the time, to wrestle it back. "But of
course, I wouldn't do that," Ms. Callaway says.
Mr. Masters acknowledges that he made the request. But he says he only
did so because he felt he hadn't had a fair chance to respond to the
AWA invitation.
I didn't know it was an opportunity until after the fact," Mr. Masters
says. And he points out that Mr. Pulliam is an AWA board member, as
well. Mr. Pulliam declines to comment.
<bold>Heavy Water</bold>
Then, last December. WaterMark came calling. Led by Ken Madren Jr. of
Forsch Corp., an Atlanta-based acquisitions and management firm,
WaterMark's five partners first looked into the fly-fishing business,
but decided kayaks offered a faster growth rate.
For its two pioneers, the industry was getting increasingly turbuent.
The sport's growmg popuarity was attracting a raft of startups. Costs
were going up and profit margins shrinking. And the life span of each
design was getting shorter. "You'll have a design out for eight months
and it's toast," says Mr. Schlinkert.
Mr. Masters had made no secret that he was ready to cash out. And Mr.
Pulliam decided to sell, he recalls, when an accoumting clerk asked him
to sign a check for $11,000 to pay a single month's interest on one of
Dagger's numerous loans used to finance its growth.
In the wake of the buyout, Mr. Pulliam remains Dagger's president, and
Mr. Masters says he will serve in an "advisory capacity as chairman of
Perception. (Jim Clark, a former executive for Wichita, Kan.-based
Coleman Co., will take over the day to-day operations of Perception.)
John Rukavina, chief operating officer of WaterMark, says Perception
and Dagger will operate as separate companies, in the spirit of two
siblings sparring for attention from a parent. "My job is to be the
referee," he says.
For his part, Mr. Masters says that since the deal, he and Mr. Pulliam
have cleared the air. "We were best friends at one point in our lives,"
says Mr. Masters, "and I like the idea that I've got my best friend
back."
Mr. Pulliam seems less sure. "I wish we still considered each other
good friends.... But it hasn't been that way. "
</fontfamily>
- Mothra (aka Kathy Streletzky)
"The everlasting universe of things
Flows through the mind, and rolls its rapid waves, . . .
Where waterfalls around it leap forever," - Percy Bysshe Shelley
taylor, nathan
> designer and now co-owner of Riot Kayaks Inc. in MontreaL "Bill did
> some amazing stuff."
I was vaguely aware that Corran used to design for Perception, and was he not a Prijon
employee for a while too? My question. Can anyone point to any perception or prijon,
designs, features, or boats, (almost wrote *boasts* there) that the young Corran was
responsible for? If we are to view him as a DaVinci of design, is there an early
harbinger of his talent?
Nate
Scott Broam
- and given it's rather angular appearance, I could buy that. I've
also read posts where Corran discussed safety related testing at
Perception, but don't recall if he took credit for any particular
design direction.
Anybody else?
Scott
On Tue, 18 Aug 1998 10:22:08 -0500, "taylor, nathan"
<fastest...@sprintmail.com> wrote:
>> "Credit where credit is due," says Corran Addison, a former Perception
>> designer and now co-owner of Riot Kayaks Inc. in MontreaL "Bill did
>> some amazing stuff."
>
>I was vaguely aware that Corran used to design for Perception, and was he not a Prijon
>employee for a while too? My question. Can anyone point to any perception or prijon,
>designs, features, or boats, (almost wrote *boasts* there) that the young Corran was
>responsible for? If we are to view him as a DaVinci of design, is there an early
>harbinger of his talent?
>Nate
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Scott Broam web page : pw1.netcom.com/~canoe
Lexington, SC
"...you're just a wave, you're not the water..." - Jimmy Dale Gilmore
To respond remove the 'dot no dot trash' from my address
Chris Bell
>> "Credit where credit is due," says Corran Addison, a former Perception
>> designer and now co-owner of Riot Kayaks Inc. in MontreaL "Bill did
>> some amazing stuff."
>
> Prijon employee for a while too? My question. Can anyone point to any perception
> t¤
> design, is there an early harbinger of his talent?
I believe he is responsible for the Corsica, not sure. He told me once he
left Perception over a disagreement about ownership of a boat he designed
on what he believed to be his own time -- a C-1 whose left and right halves
were asymetric, meaning it naturally paddled straight with a straight
"righty" power stroke.
-- Chris
Clyde Patrick
Corran had told me he designed the Corsica and went on to point out
the design differences between the early models and my own later
model. I also recall seeing some C-1 designs being credited to him in
one of the glass boat manufacturers catalog.
SYOTR-Clyde
cwpatrick at mindspring dot com
x_b...@hotmail.com
> designs, features, or boats, (almost wrote *boasts* there) that the young
Corran was
early
> harbinger of his talent?
The Corsica Matrix. It does have that oh-so-stylish molded-in stripe on the
side; I bet Corran's got an excellent explanation of its technical merits.
Check it out at Perception's site
(http://www.kayaker.com/products/index.html), it's the "Surf Machine!"
--
David Mackintosh
X_b...@hotmail.com
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Chris Bell
Just so there's no confusion, Clyde wrote all of the above, not me.
He snipped my entire message but left my name.
-- Chris