(BRAIN) — Although we've been chatting with Jake Heilbron and Dan Gerhard at Kona virtually since BRAIN was launched in the early 1990s, my recent conversation with Jake began last year when he emailed to ask why he wasn't receiving a print copy of Bicycle Retailer. That started an extended email thread that continued through the announcement Monday that the partners had re-acquired the company. Turns out there are a lot of details to work out when acquiring and relaunching a global bike brand. Here are some takeaways. Watch for an in-depth story in our next print issue.
The transaction: A new corporation.
- Co-founder Jake Heilbron and Dan Gerhard have acquired Kona’s assets and taken on some of its liabilities (such as the inventory currently held by its factories) and have formed a new corporation (KONA BICYCLE COMPANY, INC. was registered in Delaware on May 7). They declined to release details of the acquisition. After the 2022 sale, Heilbron remained with the company in distributor sales while Gerhard was no longer employed by the company. In the new company, Gerhard is president and Heilbron is COB – Chief Operating Bicyclist. Jimbo Holmstrom, who was a partner in Kona when the brand was sold to Kent, retired last year and is not officially involved in the new company.
D2C is out. For Now.
- Kona has ended its online consumer-direct sales program, which many Kona retailers found untenable, and is ending its deep discounts such as its Buy One Get One promotion, which sometimes included unassembled bikes being shipped to consumers. “We’ll never do a BOGO Sale again, so don’t ask, but we promise to offer good value for good money, always.” Heilbron later told BRAIN: “The sales team is re-writing the current click and collect program to ensure that customer service will be first-rate and dealers are supported fairly. It will take several years before Kona is in a position to create a D2C program that incorporates those principles.”
Inventory woes.
- The new owners acknowledged that the brand still has excess bike inventory, some of it still at factories in Asia, that it hopes to sell at discounted prices through retailers. The new owners have taken on responsibility for that inventory and said they are working with their longtime factory partners to move it. “We are now positioned to price our bikes much more competitively. Private ownership allows us to be more streamlined, more flexible, and quicker on our feet. This, combined with the support of our suppliers, means we can deliver high quality bikes in a distinctly Kona flavor at super attractive prices.”
Development continued
- The new owners said product development continued over the last two years despite the business challenges, and it expects to roll out new innovative products soon. “Alongside the freshly released Ouroboros (gravel bike), we’ve got some incredible bikes in the pipeline that we are looking forward to unveiling,” they said in the letter. Heilbron added, "For the first 18 months, we’ll be working through the significant inventory that includes those new models, still remaining at our assembly factories. Kona is re-emerging as a smaller bike company, so our bandwidth for development will be less than it was in 2021. A full re-engagement of collaboration and co-operation between all the teams at Kona is going to review the plans developed by the product team. It will be a refreshed but reduced range of bikes, so it’s possible one or two categories won’t continue past the end of 2025."
Employees return.
- Heilbron said the new company will employ many of the current Kona employees, including at least some of those who were recently laid off in the U.S. “Almost all US & Canadian employees have been retained. Our good friends Eddy Marcelet and Chris Halcrow are returning as heads of Marketing and IT. Some of the U.S. team who were let go in June 2023 are coming back, and as we rebuild our U.S. dealer network, we’ll increase the size of a fully committed Kona sales team to support those dealers.” Kona also has employees who work remotely for the company in Taiwan. Kona Europe, registered in Monaco, was part of the group of companies that the founders sold to Kent in 2022. That corporation is being wound down; the new owners are taking over its inventory and will re-establish a European business. Kona’s distributors in other markets are independent.
Native homes.
- Heilbron and Gerhard own Kona’s longtime offices in Ferndale, Washington, and North Vancouver, British Columbia, and the brand will continue to use them.
Teams and athletes.
- "The first step is to bring Cory Wallace, our 5 time World WEMBO Champion back into the fold to ride for Kona MTB and defend his title later this year in Australia. The athlete program is considerably smaller than before, and we hope to keep the riders that were with Kona before the sale, still on our bikes."