The Golden Goose

One of Canada’s hottest companies has a chance to make it big—really big. Could that success be its undoing?

 
Written by S VanHeuvelen

Last December, Larry Rosen found himself in an unusual position. The president of top-shelf clothing retailer Harry Rosen Inc. had to beg a supplier for more merchandise: winter parkas. But not just any parkas; these were the high-end, high-puff down-filled coats produced by Toronto-based Canada Goose Inc.

Rosen is not the sort of retailer who often bows and scrapes for merchandise, but his stores had burned through their initial autumn order well before Thanksgiving, and customers were clamouring for more. But Canada Goose president and CEO Dani Reiss, who generally turns aside special orders because retailer demand is so high, made an exception and anted up 600 parkas for the Boxing Day sale, with a provision: no markdowns. (Canada Goose parkas start at $600.) “By the end of that day,” recalls Rosen, “we sold every single one of those coats at the regular price, on the biggest sale day of the year.”

Canadians, it seems, can’t get enough of Canada Goose. Nor can growing numbers of consumers worldwide, to whom the Arctic map patch adorning all Canada Goose products is becoming iconic. Reiss appears to be doing for winter what Roots co-founders Michael Budman and Don Green had done for summer a generation ago—weaving domestic materials (down and leather, respectively), domestic manufacturing and evocative Canadian symbols into a brand with global cachet and legions of celebrity endorsements. As Reiss says, “People hate being cold.” And who should know more about keeping out the cold than a Canadian?

Now, Canada Goose is facing the big question that confronts other entrepreneurial firms as they rocket up a fearsome growth curve: how will it keep up with ever expanding waves of consumer demand without compromising quality, undermining the brand promise or running out of runway?

In just a decade, Canada Goose has seen its annual revenue grow by 3,000%; sales are expected to top $100 million this fall as the company builds market share in Europe, the U.S. and Asia. In another measure of the firm’s popularity, company officials dedicate plenty of attention to the burgeoning Canada Goose counterfeit market.

In Canada alone, which still accounts for a full third of revenue, many retailers say they can’t order enough Canada Goose gear to keep up with demand despite the high price point. “It’s our No. 1 selling brand over the wintertime,” says Kris Choi, manager of Vancouver’s Alpine Starts Outfitters, adding that the store has been doubling its Canada Goose order each year.

I realized people had an emotional response to ‘Made in Canada,’” says Reiss. “Owning one of these jackets was like trying on a piece of Canada

Yet, Reiss has been careful to keep the market slightly undersupplied. And because he is adamant that the brand promise is indistinguishable from the made-in-Canada label, Reiss has opted not to offshore production, instead keeping the company’s manufacturing operations domestic and modestly scaled. Canada Goose operates 20 Canadian factories with a total of 1,000 employees, and sources all its down from Western Canada poultry farms. The bottom line: Reiss can dictate terms, including consistent rack prices.

While the company is still on a steep upward growth trajectory and is in the midst of a determined push to win new, brand-conscious consumers in China, it faces tough questions about the future. By maintaining its current position as an iconic niche brand, Canada Goose could avoid the risks of product diversification while also limiting its growth potential and developing no hedge against increasing competition from the likes of France’s Moncler and other high-end down gear-makers. By following Roots’ lead—diversifying offerings, extending the brand to licensed merchandise and sourcing some products offshore—Canada Goose unlocks huge growth potential but risks diluting the brand that has gotten the firm to where it is today. Either way, tens—and maybe hundreds—of millions of dollars are at stake.

Reiss has his reasons for staying the course. “We are not a mass brand,” he insists. “The strongest brands in the world are true to what they are.” Indeed, he likes to think of Canada Goose as a kind of anti-brand because it hasn’t succumbed to the commoditization that can swamp the original promise. “A lot of brands have become fake,” Reiss says, citing examples such as Victorinox Swiss Army, which has affixed its distinctive red cross on commodity items such as knapsacks. Reiss has far more time for undiluted brands such as Land Rover or Rolex. “You can’t make a Swiss watch in China,” he says. “We’re trying to be the Swiss watch of Canada.”

Brynn Winegard, professor of marketing and entrepreneurship at Ryerson University’s Ted Rogers School of Management, says Canada Goose has been “very smart” to keep the market slightly underserved and avoid “training” customers to look for discounted items in outlet stores. “They will never have a problem with surplus product in the marketplace,” she says. To maintain healthy growth, Winegard feels the company can continue to push into new geographical markets and diversify its product line into “peripheral” outdoor gear. In fact, in recent years, Canada Goose has introduced new lightweight down vests for the so called “shoulder” seasons.

Making parkas, circa 1970s

Making parkas, circa 1970s

Brand extension is a useful growth strategy, but it comes with its own risks, notes Alan Middleton, professor of marketing at York University’s Schulich School of Business. “The more you water down what your core appeal is, the more you’re going to become like a lot of other people.”

Middleton also notes that manufacturers like Canada Goose cannot simply wish away supply-chain issues as they grow internationally. He points out that brands like Tilley Hats initially stuck to a made-in-Canada approach but were forced to go offshore when demand grew too great. In the case of Canada Goose, for which the made-in-Canada promise is woven right into the brand, Middleton says, Reiss could take an alternative approach, pressing hard to drive down production costs with new technology as a means of retaining a Canadian manufacturing presence with enough capacity and flexibility to keep up with international orders. “That constant push for innovation becomes critical.”

Canada Goose traces its roots to Reiss’s grandfather, Sam Tick, an eastern European immigrant who began as a fabric cutter in Toronto and eventually started an apparel business, Metro Sportswear, in 1957. David Reiss, Sam’s son-in-law, built the company into a supplier of heavy-duty, down-filled coats for police, corrections officers, park rangers and other public-sector workers who spend a lot of time outdoors. By the late 1970s, the company was producing “Snow Goose” branded parkas for its institutional customers, as well as doing a lot of private-label manufacturing.

Ironically, David’s son, Dani, grew up feeling vaguely resentful for having to wear those parkas, which were neither cool nor fashion-forward. Dani had no intention of joining the business either. Instead, he dreamed of becoming a writer, although there were early intimations of an entrepreneurial bent. During a bachelor of arts program at the University of Toronto, he started a small software company with a couple of buddies, bundling and selling sports statistics to fantasy pools. In 1997, after university and with little on the go, Dani agreed to spend a few months working for his father to make some money. At the time, he recalls, the tiny company had just two computers and no email address.

With its expansion into other seasons, Canada Goose finds itself in a race with brands like Moncler and Eddie Bauer

Dani spent his time learning the business by travelling with the company’s sales managers on visits to apparel buyers in Italy and Sweden. He also trawled through the letters that came across the company transom. Many were filled with personal stories about what those heavy coats meant to their owners. Dani came to recognize that European customers associated the product with idealized images of Canadian wilderness. “My whole life was like a focus group,” he says. “I realized people had an emotional response to ‘made in Canada.’ The experience of owning one of these jackets was like trying on a piece of Canada.”

He was so struck, in fact, that in 2000 he persuaded his father to change the company’s name from Snow Goose to Canada Goose. David asked Dani to take over as CEO the following year: “No family transition is ever perfect,” Dani says. “My dad was very focused on manufacturing and machinery. I was more focused on telling the story.” Dani began the process of transforming an iconic specialty item into a bona fide brand. At the time, the company’s private-label business was disappearing rapidly—customers were ordering from Asia—and he faced a tough call: continue a Canadian manufacturing presence or outsource.

Many confidants and customers advised Reiss to go east. “It was a decision I wrestled with for a long time,” says Reiss. In the end, he relied on his instincts, opting to go against the flow by maintaining his Canadian production facilities and teasing a storyline out of all those customer experiences. Indeed, he says, he has put his writing and literary skills to work, often crafting the company’s marketing copy himself. This includes a tag line that continues to this day: “Ask anyone who knows”—an allusion to the unsolicited endorsements that come in the mail every day.

What came next was a combination of good luck and savvy target marketing. Some film crews began using the rechristened Canada Goose parkas for outdoor shoots. Wardrobe designers took notice and decided to put the actors in those coats to achieve an authentic look for winter scenes. Kevin Spreekmeester, who heads global marketing for the firm, says its big break came in 2004, when several parkas turned up in the eco-disaster flick The Day After Tomorrow. Subsequently, celebrities like Matt Damon, Sacha Baron Cohen and Toronto DJ Deadmaus have been photographed in their CG coats, thus heightening the cachet, especially among teens. (Spreekmeester claims the firm doesn’t pay product-placement fees to get its gear onto the big screen, although it does provide free coats to celebs who want them.)

Daniel Craig wearing Canada Goose on a film set

Canada Goose on a film set
with Daniel Craig

From there, Canada Goose began focusing on other professions working outside in highly visible urban settings, such as nightclub security guards in New York, Copenhagen and Toronto. More recently, the firm elbowed its way into VIP seating areas of major stadiums, including Edmonton’s Rexall Place and the Air Canada Centre in Toronto. The deal is that patrons can check their own coats and check out Canada Goose coats. “We’re very tactical,” says Spreekmeester. “We target highly desirable audiences.”

Of course, so do many other quality apparel manufacturers. In the past two years, Canada Goose has embarked on a subtle but important shift, moving to expand its product line into the shoulder season—spring, fall and even late summer—with products like branded toques, leather gloves and even baseball caps. It’s a classic line-extension strategy, says the company’s product development director Spencer Orr. (The firm is also experimenting with a down bedding line in Scandinavia.)

With the expansion into other seasons, Canada Goose finds itself in a race with brands such as Moncler and Eddie Bauer to sell ultra-lightweight running jackets, vests and hoodies. These garments trade the puffiness for a sleeker look, with insulation ratings suited for cool rather than frigid weather. Orr says the company has distinguished its product, a $425 light jacket known as Canada Goose “Hybridge,” by adding stretch panels, thumb loops and down quilting designed to address the different ways in which men and women lose heat. “That category has done really well for us,” claims Reiss. In fact, the Hybridge will account for 15% to 20% of Harry Rosen’s fall order from Canada Goose.

But in Europe—which accounts for a third of the company’s revenue and where its products often sell at higher prices than in North America—Moncler is a well-capitalized rival that has focused on almost the same slice of the down-wear market, and, unlike Canada Goose, has a substantial retail footprint. Partly owned by the U.S. private equity giant The Carlyle Group and a French investor group known as Eurazeo, Moncler was valued at $1.76 billion last year shortly before it cancelled plans for an initial public offering. At the time, Eurazeo officials told Women’s Wear Daily that the company plans to open more Moncler stores in the U.S. and Russia and accelerate its expansion into China. Moncler currently has five stores in the U.S., including one in Aspen, Colo. Canada Goose had opened a new European head office in Stockholm two years ago, with plans to boost its market share in the region. But, Reiss says he has no plans for a retail network for Canada Goose or to establish a presence in the burgeoning outlet-mall market.

With a long-standing presence in Japan, the company is also intensifying its push into the rest of Asia, which currently accounts for about 15% of the firm’s business but represents a huge market of highly brand-conscious consumers. Canada Goose’s recent decision to cut ties with a network of under performing distributors and consolidate the business with a South Korean agency has chalked up much improved numbers, Reiss says. “We’re a global brand now, and we’re relevant all over the world.”

Despite the competitive environment, company officials seem bullish on the prospects for the new product lines and insist there’s still plenty of room to grow. As Spreekmeester says, “We have a long way to go before we run out of customers.”

But, Middleton points out the company shouldn’t fall victim to the problem that has dogged many other Canadian brands that have sought a place in the cutthroat international arena: “Canadian companies notoriously underinvest in marketing communications.”

Reiss has demonstrated that he’s as good at spinning a compelling brand story as are the likes of Michael Budman and Alex Tilley. And, having spent a decade watching other brands rise and fall, he remains determined to buck the global production and distribution trends that have turned other brands into caricatures of their original selves.

“We definitely like to swim upstream,” Reiss muses. “It’s a much greater challenge to go up rather than down.”

Photos by Fredrik Sandberg/Sipa; Rick Madonik/Corbis; Canada Goose; iStock

Originally appeared on PROFITguide.com

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