The days of Willy Loman salesmanship are long gone. Building and maintaining long-term solid relationships with partners who are savvy in supply-chain management and EDI is what counts in today’s business arena. Kaman Music Corporation is keenly aware of these significant changes in the music industry, and its business model demonstrates this. “It’s a whole different game today with a lot of unique challenges,” says Paul Damiano, vice president of sales and marketing for the Bloomfield, Conn.-based company, the largest independent distributor of guitars and percussion instruments and musical accessories in the country.
“People think being the biggest makes our job easier – but those in the know understand that this is what really makes it harder,” Damiano says. Whereas smaller companies have the flexibility of turning on a dime, Kaman Music relies on its long-term strategy of being in the right place in the industry at the right time, especially when it comes to acquiring companies that can bring added value to Kaman Music’s extensive product offering. “There is nothing lucky about this – it all comes down to a carefully developed strategy that includes value-added services, quick responses, and an acute understanding of supply-chain management,” says Damiano.
The Consolidation Factor
Not unlike the trend toward consolidation in other enthusiast and hobbyist industries in the country, the music industry faces similar challenges brought about by large-scale consolidations. “The bigger are getting bigger and the smaller retailers are going away,” says Damiano. “About 10 years ago, our customers were smaller, independent retail stores with one, two, or three stores. Today our largest customers include Guitar Center, with over 150 stores nationwide, and Sam Ash. So, as a company in distribution, we face a lot more risky challenges.”
Some of these challenges include catering to the widely diverse needs of both large retailers and small music retailers. “Our sales team today is completely different from what it was about 10 years ago and we’ve had to re-deploy these assets in order to create a sales team that can cater to the individual needs of the customers we serve, both large and small,” Damiano says.
Company salesmen call on local smaller independent retailers, usually every month. “This is the traditional sales model we use for our smaller retailers, and during these visits our salesmen outline company specials, answer questions about products, and even offer training sessions on how to use Kaman Music’s new products,” Damiano says.
The model is a lot different and more complex for big-box retailers. Kaman Music implemented a number of plans for these large retailers, including the creation of a national accounts sales team. Large retailers have multi-faceted distribution issues, which can involve a Web presence, a catalog presence, and a brick-and-mortar presence that might include dozens of stores nationwide. Salesmen do not call on each individual outlet store since all the ordering is handled in one location. “We have to bring our sales entourage to their centralized purchasing office where we discuss with them how to handle processing orders for their multiple locations,” explains Damiano. “We have to help them coordinate their orders with their Internet and catalog teams so they receive just the right merchandise they advertise in their flyers for a particular period of time. It’s a more complicated process.”
Lean and Responsive
Keeping customers’ shelves replenished with the musical instruments and accessories they need for their own consumers is one of Kaman Music’s top priorities. “One very important milestone for us is that we are electronically tied in with many of our large retailers,” Damiano explains. “A few years ago we set out to become one of the first companies in the musical instrument distribution business to become EDI capable.” Orders and invoices are processed electronically, thereby speeding up the order-to-delivery process so much so that orders placed by 4 p.m. EST are shipped on the same day. Now operating an entire information technology department dedicated to responsive customer service, Kaman Music leads the industry in technological expedience. “We are very good at bringing technology to bear on the supply side and we have the resources to put together these EDI capabilities, which help keep us ahead of other less-technological-savvy distributors,” Damiano says. In 2003, Kaman Music processed 10,000 online orders totaling over $20 million in sales. “This methodology is really similar to employing lean manufacturing concepts, because when a retail store sells one of our guitars, a PO is automatically generated,” he continues. “The practical aspect of this is replenishment happens automatically and doesn’t require a lot of human intervention.” Constantly investing in advanced technology for its information systems infrastructure, Kaman Music also equips its field sales force with laptop computers so they are always connected to real-time sales and inventory information at the enterprise level.
Within the markets it serves, Kaman Music partners with manufacturing companies producing the full range of products to complement those markets. “Part of the reason we are the largest distributor of musical instruments and accessories is due to the unique strategy we’ve been using over the last 20 years,” Damiano says. Not purely a wholesale distributor, nor purely a manufacturer, “Kaman Music is really a unique blend of both in that we have created some of our own branded products in addition to being a wholesale distributor; it’s this duality that makes us more valuable to our customers,” he says.
Furthermore, the company acquires companies whose own products complement those of Kaman Music. Kaman Music is most known for its Ovation guitars. “This is the product that really brought us to the dance and it’s still one of the leading brands of acoustic guitars in the country,” Damiano says. First introduced in 1966, Ovation’s distinctive innovative round, molded-back design created a more durable and road-worthy guitar with better sound quality. “It was the first time technology was brought into guitar manufacturing,” says Damiano. Charlie Kaman, guitarist and founder of parent company Kaman Corporation, was involved in the helicopter business when he decided to design a better guitar, which he named Ovation. Although most musical instrument manufacturers have moved offshore over the last 25 years, Kaman Music still manufactures many of its high end products in the U.S. “We source to Asia through a variety of joint ventures, partnerships and alliances of companies who can produce for us quality, medium- and low-end musical instruments,” Damiano says. He adds that the higher-end guitar and percussion instruments are manufactured here in America.
Recent acquisitions continue the Kaman tradition of acquiring music-related companies to complement the Kaman Music product line. The acquisition of Phoenix-based Genz Benz, a manufacturer of guitar amplifiers, offers tremendous growth potential, says Damiano. “We were not a player in this side of the business before the acquisition and the reason Genz Benz wasn’t growing on its own is because they were a privately held company with no access to growth capital, which they will now have through Kaman Corporation.”
On the percussion side of Kaman Music is its recent acquisition of Garfield, N.J.-based LP (Latin Percussion) which is the undisputed king of the conga and bongo drum market, with 75 percent market share, says Damiano. “We were already a major player in the percussion channel and by acquiring the No. 1 company in Latin percussion instruments, we will have a solid platform from which we can continue to grow and strengthen our percussion business,” he says.
About three years ago Kaman Music gained the global marketing rights to the Gretsch Drum brand name. “Gretsch is one of the country’s really old and traditional names in drums and over the last few years we resurrected the company from almost disappearing completely,” explains Damiano. “Our goal is to have this brand name in the top-three position in the music business. We liken Gretsch to what happened recently to Harley Davidson’s rebirth. So much of drum manufacturing has gone overseas to the Japanese and we wanted to keep Gretsch alive here in the U.S.A.”
Other Kaman Music acquisitions complementing the company’s product line include several music distribution companies and a guitar string manufacturing company.
Employing about 400 people, Kaman Music operates five manufacturing and/or warehousing facilities throughout the country, totaling almost 400,000 square feet. Sales for 2003 reached about $150 million, says Damiano. “We face the classic struggle of the American manufacturer – which is an increasingly competitive import business and an increasingly extensive domestic situation in the cost of labor and in governmental intervention,” he continues.
Strategic acquisition continues to be an essential key to Kaman Music’s success in an industry that’s been flat over the last few years. “With the LP acquisition, we acquired an additional $20 million chunk of business,” says Damiano. “When times are challenging, as they are today, companies like us, who have the ability to see past the current malaise and look to the future in terms of putting together the various pieces, will be in a great and winning position when the economy begins to loosen up.”