Milt Reimer, the founder of a $45-million-a-year snowmobile and motocross clothing empire, is an entrepreneur who believes in mechanics. He’s not talking about the workaday mechanics of running a company with operations on three continents. Rather, Reimer likes to surround himself with people who know their way around a grumpy engine. In his view, they’re intuitive problem solvers. “My broad base of lateral thinking comes from being a mechanic,” says Reimer, whose Winnipeg firm, FXR Racing Inc., has more than doubled its sales over the past five years, earning it a spot on the 2014 PROFIT 500.
It’s not difficult to understand why he places so much faith in this approach to business. Over 20 years, Reimer parlayed a job in the repair bay of a tiny rural snowmobile dealership into the creation of a well-recognized international brand that’s become de rigueur in the power-sports world of snowmobiling and motocross.
The path from one business to the other is every bit as winding and bumpy as an open-country snowmobile trail. Reimer spent a few years with the dealership and eventually bought it, figuring he’d run the company for a few years to finance his college studies. Soon, however, he found himself intrigued by gaps in the snowmobile apparel market. A racer himself, he couldn’t find warm, lightweight gear, so he began looking at designing products suitable for riders doing hours-long cross-country races. As he researched the apparel industry, Reimer discovered a small Winnipeg firm called Modern Headwear, which made heavy jackets, mainly for corporate customers. Reimer proposed a deal: He’d hire Modern Headwear to sew his designs, and he’d place the product in snowmobile dealerships. “That’s where FXR was born.”
Reimer had big ambitions from the start. He didn’t want to limit FXR to Canada; while the Great White North is about as ideal a market as anyone plying snowmobile wear could hope for, it’s still a small one. So, as Reimer was building the business here, he was also working to establish the brand in the northern U.S., where, as he knew from his own experience as a racer, there were large and well-established snowcross associations. In the early 2000s, with the Canadian dollar trading at record lows, Reimer’s designs, which were produced here, easily found customers in snowbelt states like Minnesota. “For the first five years, people thought we were an American company,” he says.
Word spread, and within a few years Reimer was able to set up a co-branding arrangement with Yamaha’s snowmobile division. That amped up foreign sales considerably, as Yamaha pumped the apparel through its extensive dealership network around the world and soon formed an exclusive relationship with Reimer. He was also getting interest from Scandinavia, where a Norwegian snowmobile racer was importing FXR’s gear for resale. “We had good momentum, and I knew we were on the right track,” Reimer says.
Get more winning export ideas by signing up to receive the weekly PROFIT TRADE TIPSHEET
Here’s where lateral thinking enters the picture again. By the mid-2000s, with the dollar rising sharply, Reimer realized he’d have to move production offshore, to South Korea, or risk bankruptcy. He also saw that his exclusive relationship with Yamaha—by that point, says Reimer, FXR had become the business’s de facto house label—stood in the way of extending the brand to riders who preferred other snowmobile companies. And Reimer grew increasingly interested in the Scandinavian market, which he felt had too much growth potential for one Norwegian racer to capitalize on.
These factors led to a series of bold moves in 2009. First, Reimer severed his exclusive relationships with both Yamaha and the Norwegian importer. Second, he hired Yamaha’s former European sales manager, Jorn Madsen, to build a larger presence there and in Russia. Reimer believes snapping up Madsen—who had quit Yamaha during its ultimately futile negotiations with FXR over exclusivity—was a coup: “He’s a very rare commodity,” he says of his new European rep. “He’s an eagle.”
The revamped FXR was thus equipped to focus intensively on expanding sales throughout northern Europe, which it initiated by sponsoring well-known racers in the region—a tried-and-true promotional strategy in the sports-gear sector. But the focus on northern Europe meant the company had to make a big shift in its logistics. Since FXR started manufacturing offshore, it had simply shipped product directly from the factory in Asia to dealers. It quickly became clear that this approach wouldn’t meet the high standards of the Scandinavian clientele. Scandinavians, Reimer learned, don’t mess around when it comes to getting the latest equipment for the winter sports they’re so passionate about. Even more than North Americans, “they expect high quality and high performance,” he explains. “And they like their product on time.” So Reimer decided to update his supply chain and contract out Scandinavian warehousing and distribution operations so dealers could get access to merchandise more easily.
Reimer found a third-party warehouser in Norway to handle distribution and deal with customs clearance. But the seemingly ideal arrangement soured when he began getting complaints from customers who weren’t receiving their shipments. After probing more closely, Reimer discovered the Norwegian company was facing government fines because it had failed to complete mandatory paperwork relating to the imports. “It was such an ugly, ugly mess,” he says—and a great lesson in the importance of vetting foreign suppliers. (See below for the enlightened approach Reimer has since adopted to find the right partners.)
After extracting FXR from that relationship and doing a lot of due diligence, Reimer found a solid partner in a Swedish logistics firm called ColliCare, which now moves the company’s merchandise to power-sports dealers throughout Scandinavia. (FXR also has a distribution partner in Minnesota and a warehouse in Winnipeg to handle North American logistics.)
The new setup gave FXR the base it needed in Scandinavia and northern Europe, and the business expanded steadily. Russia seemed like the obvious next step, as Reimer knew from his contacts that the firm’s target market had been growing briskly. He was cautioned about shipping valuable merchandise to Russian dealers, and for good reason; as he’s learned, some have a lax approach to business ethics. “With Russia, it’s always a different game,” he says. “You want their money up front. [A relationship with a distributor] will work really well, and suddenly they’ll string you along for $300,000.” To hedge the risk, Reimer decreed that Russian clients would pay in advance for goods shipped directly from the factory in Asia. No middleman, no false promises, no chance of not getting paid.
These days, Reimer is experimenting with a small string of FXR retail stores as a way of further extending the brand and finding new customers. So far, the stores are just in Canada, but he doesn’t rule out the possibility of opening outlets in the U.S. or Europe. “There’s always talk of it,” he allows. Given what Reimer has learned from his foreign expansion efforts so far, much will depend on identifying a strong partner. “When you can find the right person to run it, that’s the cornerstone,” he says. Needless to say, he’s looking for someone who can fix an engine.
Four tips for picking a foreign distributor
FXR Racing learned a hard lesson in hiring suppliers overseas when the first agreement it struck with a third-party logistics provider in Europe ended badly. Here, founder Milt Reimer shares four strategies that will keep you from getting caught out by a partner who can’t deliver the goods.
It sounds obvious, but it’s something too many exporters overlook in their haste to penetrate a new market. Reimer advises listening less to a supplier’s sales pitch and more to its customers—current and past.
When the initial arrangement fell apart, Reimer decided to hire not only a new logistics provider in Scandinavia but also a separate company to handle customs paperwork. “This two-party system ensures things are done correctly,” he says.
Before Reimer inked a deal with the new provider, he asked his lawyer to investigate the tax implications. It ended up being OK—a trade treaty meant that FXR pays Canadian tax rates, which are much lower than those of Scandinavian nations, on its profits from the region—but checking ahead of time saved him from a potentially unpleasant surprise later.
Don’t plug and play
As positive as FXR’s second attempt at outsourcing distribution was in Scandinavia, Reimer was leery of using the same model when he expanded into less-secure Russia. So he opted to use a cash-up-front approach more suited to the realities of the local market.