The story of how a new president was called in to help bring a manufacturing firm from the brink of failure.
Marmot Mountain's shoddy business practices carried the company to the brink of disaster. It took an outsider, Steve Crisafulli, to engineer a step-by-step retreat from the edge
When it comes to making outdoor clothing, no one has done it better than Marmot Mountain. When it comes to running a business, few have done it as badly and survived to tell about it.
From its beginnings, in 1974, Marmot established its reputation as a maker of the most technically sophisticated, most expensive outdoor clothing and sleeping bags available. "It was the best-designed performance clothing and equipment in the world," asserts founder Eric Reynolds. Mountaineers and outdoor enthusiasts cherished their Marmot gear, dragging it up to the world's highest peaks. But the legendary quality of Marmot's products stood in stark contrast to the miserable state of its business operations.
"It wasn't a business -- it was a cult," exclaims Steve Crisafulli. He had been chairman of Marmot's board for one year when the company was acquired by Odyssey International in 1991. The $350-million Hong Kong-based consortium of outdoor- and sports-apparel manufacturers included the North Face, Sierra Designs, Head, and other heavy hitters. When Odyssey appointed Crisafulli Marmot's president, the clothing-industry veteran discovered a company that "had no credit records, an unusable computer inventory system, and financial statements that were six months late. I had never before seen a company this screwed up from an operational standpoint."
Crisafulli was determined to transform Marmot into a profitable business. His strategy for that quixotic task sounded deceptively simple. "I have a theory," Crisafulli says, "that a small- to medium-size company can concentrate on only one or two things at time."
He set about fixing the broken company one painstaking problem at a time. But not long after he embarked on the corporate repair job, Marmot faced disaster: in January 1993 the Odyssey empire filed for Chapter 11 protection. Among the smaller and shakier of
Odyssey's holdings, Marmot was pushed to the brink, and many observers predicted that the scrappy company would simply perish.
Marmot's staff viewed the Odyssey bankruptcy, says John Cooley, a grizzled Himalayan mountaineer and Marmot's vice-president of marketing, as "a line in the sand. I suppose we were defending our own personal ideals about excellence. And now was the time to stand and fight."
Twenty months of Crisafulli's problem-solving regimen had convinced Marmot employees that the company could overcome its problems. So convinced were they that after six frantic months -- during which time their loan applications were rejected everywhere in the United States -- a group that included Marmot's entire management team ponied up $3.5 million and bought the company. What has happened since that July 1993 buyout has stunned the outdoor-goods industry. Marmot has outpaced competitors to become the third-largest-selling brand of outdoor clothing, after Patagonia and the North Face.
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The Cult of Marmot started in 1974 in the Colorado garage of Eric Reynolds. The 21-year-old mountaineer couldn't find outdoor gear tough enough to withstand the rigors of high-level mountaineering. He and his friends decided to make "bombproof" outerwear and sleeping bags themselves. "We were fanatically dedicated to high performance and craftsmanship, and we found that there was a market for our single-minded zeal," he recounts.
Reynolds and two partners invested a total of $3,000, and Marmot Mountain Works was born. They set up shop in Grand Junction, Colo., a midsize Rocky Mountain town. It was the right place, they figured, because they could easily drop work and go climbing nearby.
"Marmot products were always considered the sine qua non of outdoor equipment," says Peter Benjamin, a former Odyssey executive and the former chief operating officer of the North Face. "They talked about hot-cutting their fabrics one by one. It meant doing things in a slow, careful fashion, and that was considered very virtuous. The impression from the start was that this company really cared about the quality of its products."
Quality was Marmot's raison d'être and its greatest liability. "Stories abound of the company's not delivering product because the highest-quality down couldn't be found, or of products being seconded because of two or three stitching errors. The bottom line truly suffered," says Cooley, who was a Marmot sales rep for many years before he became vice-president of sales and marketing, in 1991.
In short, Marmot's commitment to quality didn't extend beyond the factory floor. Its lowest moment came in 1989 when it delivered its entire winter clothing line, due in stores by Labor Day, the following January. "The joke in the stores was, 'Oh, another Marmot surprise," Cooley recalls. But the consequence of that fiasco was no laughing matter: that year, Marmot lost a sizable slice of its business. "We represented a serious financial incident for retailers," he concedes.
What kept Marmot alive was its customers' phenomenal brand loyalty. The true believers managed to find a silver lining even in Marmot's screwups. "Having poor availability can be an advantage: it enhances the mystique that your product is hard to get," says Steve Hitchcock, Marmot's vice-president of sales.
But Marmot's chronic delivery problems and sloppy business practices inevitably took a heavy toll. Reynolds, who had been president of the company until his departure, in 1987, continually had to scramble for investors to tide the company through another season. His departure threw the business into turmoil. Over the next four years Marmot went through three owners before Odyssey stepped forward. The short-lived marriage with Odyssey was a turning point for Marmot. Odyssey was an aloof parent that temporarily relieved its rebellious child of burdensome financial responsibilities. But in Steve Crisafulli, Marmot had a tough taskmaster. He came with 30 years of executive experience in the ski- and sports-clothing industry.
Crisafulli's involvement with Marmot had begun in 1990, when Wall Street investment firm Spear, Leeds & Kellogg briefly owned the company and brought him in as its chairman. Working from his home in Vermont, Crisafulli stayed in the background, but he did insist on one change: the Marmot factory in Grand Junction had to close. "It was the single-least-efficient manufacturing facility I had seen in my life," he says. "The cost of labor and manufacturing of sleeping bags was higher than the selling price." That summer Marmot moved to Santa Rosa, Calif., and began outsourcing from Asia.
