Jam Group: Canada’s Best Managed Companies 2018

Why you should never stick to what you’re good at

Canada’s Best Managed Companies

Martin Szpiro can’t play a note, but that hasn’t stopped him from becoming the leader of a group whose products regularly appear at the Grammy Awards and mingle with the likes of Stevie Wonder and Extreme guitarist Nuno Bettencourt.

Evolving consumer habits might be creating some business challenges for the CEO of Montreal’s Jam Group, but Szpiro still loves the music distribution business more than words. “It could be worse,” he says. “We could be selling plumbing fixtures.”

First launched 45 years ago as a distributor of musical instruments, Jam Group has grown and diversified to become the self-described “go-to company” for musical instruments, pro audio and lighting, and consumer electronics, with between 50,000 and 60,000 products currently under management across 12 divisions.

The Jam Group roster includes a combination of well-known consumer brands like Washburn guitars and Marshall amplifiers, as well as specialized brands that are highly regarded in the industry, such as British mixing console maker Allen & Heath.

Jam has been growing revenues between 10 and 20% a year for the past five years, closing in on nearly $500 million in sales in fiscal 2017. Its staff size has also ballooned, from 200 to 700 people.

Szpiro says that a series of acquisitions—primarily of U.S. distributors such as Davitt & Hanser (which distributes brands including Ernie Ball, Audio-Technica, Shure and Hohner) and KMC Music (acquired from Fender Musical Instruments in 2015)—have driven much of the company’s growth over the past five years.

These acquisitions have provided Jam with much-needed scale in an increasingly consolidated business. “It’s hard to be small and deal with big customers like Amazon and Wal-Mart and retailers like Guitar Centre,” he says. “A $15-, $20- or $30-million distribution company is small today; you don’t have the chops to work that well with big players.”

Jam Group is striving to maintain an annual growth rate of 10%. “There are more companies to acquire than we can acquire,” says Szpiro. Although the music industry faces significant headwinds as consumer tastes continue to change, Szpiro says that market forces are helping counteract many of the more worrisome trends.

While Jam’s once-burgeoning home theatre business is challenged, for example, Jam Group is seeing increased demand for Bluetooth and connected home products, and while electric guitar sales are tumbling (from 1.5 million a year to one million a year according to a much cited 2017 report by the Washington Post), sales of acoustic guitars, ukuleles and mandolins are on the rise; acoustic drums are challenged, but electronic drums are gaining in popularity.

“Every one of the spaces we’re in has good stories and bad stories, but our diversity has created some nice stability,” says Szpiro, who says that Jam is also looking to open up new territories, such as South America, as a way of fuelling future growth.

It might not have been as seismic as Dylan going electric, but Jam has also thrived by evolving and changing. Long known for its sales acumen, it has become ruthlessly focused on the operations side of the business in recent years.

“We’re just as strategic and sales-driven, but there are a hell of a lot more sharpened pencils,” says Szpiro. “If we had just stuck to what we were good at and not augmented that operational talent, we would have fallen on our sword. Even with best intentions, we would have failed.”

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