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Schwinn's fitness division, using mall-based kiosks and stores, is a bright spot for the company. SCHWINN AIMS TO BE A BIG WHEEL AGAIN REVAMPED LINES, $10M CAMPAIGN AID EFFORT

By Published on .

The way cycling enthusiast Gregg Bagni sees it, Schwinn Cycling & Fitness needs to move the needle on what he calls the "skeptometer."

The perception of Schwinn for many consumers is a fat, balding guy who drinks scotch and smokes a cigar, said Mr. Bagni, marketing director for the company's bicycle division. On the other side is the person who lives, breathes and dies biking.

"We need to win the hearts and minds of enthusiasts and cycling nuts," said Mr. Bagni, who bikes 16 miles to work each day. "That's the top of the pyramid. The types that eat, drink and sleep bicycles. When they are shopping on the retail floor and they say what kind of bike they ride," everyone listens.

That newly sought image is getting serious support via an estimated $10 million primarily print campaign developed by Carmichael Lynch, Minneapolis. Ads show hot biking enthusiasts mountain biking and racing.

"We needed to get people to warm to the brand. We needed to say, `Schwinn understands what you want,'*" Mr. Bagni said.

Understanding the market has been a problem for the company for some time. German bikemaker Ignaz Schwinn founded the company on Chicago's West Side 100 years ago, and brands like the Phantom, Sting-Ray and Varsity helped make Schwinn the most prestigious company in the U.S. bicycle industry.

But changing consumer tastes and tough new competitors with lighter, high tech products began making things hard for Schwinn as early as the 1970s, according to Crain's Chicago Business. After a failed search for a buyer and fights with banks, Schwinn filed for Chapter 11 bankruptcy reorganization protection in 1992.

Two years ago this month, Zell/Chilmark Fund, an investor group, and sports accessory manufacturer Scott USA bought then-Schwinn Bicycle Co. for a reported $43 million. Company headquarters for the division of Scott Sports Group since have moved to Boulder, Colo.

Schwinn's bicycle sales peaked in 1988 at $212 million. Last year, the bike division had revenue of $130 million, up 18% from a year earlier.

Schwinn was the No. 3 bicycle marketer worldwide in 1994 in units sold with 325,000, according to Fields & Associates, a Peoria, Ariz., consultancy. Trek/Fisher was No. 1 with 850,000, followed by Specialized with 380,000. In the U.S., 13.4 million units were sold in 1994, up 3.1% from 1993.

The first challenge for the new owners was to upgrade the entire product line. All 48 models from kids bikes to $3,000 racing bikes were redesigned from a performance and engineering standpoint, and each got a color and graphics face-lift.

The Homegrown line, racing and mountain bikes handmade in the U.S., is hot. The Cruiser, aretro line, also is in demand.

"We've evolved from a marketing driven company to a market driven company. A marketing driven company will try to sell a warehouse full of yellow bikes .*.*. a market driven company will determine what the consumer wants first," Mr. Bagni said.

And there's an acknowledgment that the consumer Schwinn wants is upscale.

"Schwinn used to be trapped in the $199 mind-set, selling $199 bikes. We are focusing now on the $399 to $799 bike," Mr. Bagni said. "We can make as many $199 as we want, but we won't be profitable. We need the higher price point, higher profit margins with the better image and more contiguous to lifestyle marketing."

"They are moving somewhat up market from their previous position of being the family bicycle brand," said Fields President William Fields. "There has been enthusiastic acceptance of their '95 line by retailers. Dealers went wild over the new Schwinn models. The technology edge Schwinn was seeking, they've now got it in '95. Schwinn is the surprise story for the '95 model year."

Mr. Fields projects Schwinn will move to No. 2 in 1995 with about 425,000 units. He projects Trek/Fisher will have 22% of the market; Schwinn, 11%; and Specialized, 10%.

Not everyone is sure targeting enthusiasts is the right move.

"Should they be hot? What was wrong with being stodgy?" asked Marc Sani, editor of Bicycle Retailer & Industry News, Santa Fe, N.M. "They are up against some real sharks-Trek, Specialized. These people are not going to give up market share willingly. Schwinn was never a cutting edge bike. They were a midline bicycle company, but that is where the bulk of sales are and where the money is."

"Schwinn lost the cachet in the '80s," Mr. Sani said. "It is not what it used to be. To try to reinvent their image is not going to be cheap."

Schwinn is employing more than traditional print ads in its bid to return to those glory days. The Schwinn professional mountain bike team races in the U.S. and Europe almost every weekend between April and September, and company representatives attend professional mountain bike events to bond with consumers.

"Project Underground" is also key. Before the company releases any high-end products, it sells them to Schwinn dealer employees below cost. The goal is to generate positive word-of-mouth buzz about the product in stores.

The marketer is also trying out a new identity via its fitness division, with $30 million in annual revenue.

Schwinn has 12 kiosks at shopping malls across the country operated by dealers. There, consumers can try out up to nine pieces of equipment. About 100 kiosks and 25 to 50 small, mall-based stores are planned in the next three years, said Kevin Lamar, VP-fitness.

"Our biggest concern is the 1,800 [Schwinn] fitness dealers in [free standing stores]. Typically, we have bicycle dealers sell fitness products. But we have to build brand awareness. There is high brand awareness of the Schwinn name but low awareness for the fitness equipment. So we decided to go direct to the consumer. Go to where the consumers shop. About 70% of bike business is done by mass merchants," Mr. Lamar said of the mall-based moves.

As consumers expand their in-home fitness products, they're investing in quality, Mr. Lamar said. As a result, Schwinn has expanded its product line from six to 20 items. Six new products will be introduced this year, including a revamped treadmill and a series of wind-driven products, he said.M

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