When Gordon Merchant created the Billabong label in the 1970’s, it had serious credibility. In the tight and difficult to impress surfing world, it passed all the tests to receive a coveted stamp of approval. For non surfers (the wanna be’s), it was the ultimate aspirant brand.
According to WA Today, Merchant nurtured the brand and created a targeted and highly relevant label and grew it internationally.
For years the strategy worked wonders. Sales grew strongly from $ 225 million at the time of listing 12 years ago, to $ 1.7 billion last year.
But for the past four years profits have been shrinking. Earnings reached $ 249 million in 2007, and are expected to fall to $ 107 million this financial year.
Billabong announced that it had received a non-binding, indicative proposal from TPG, a private equity firm, to acquire the company at $3 a share. Merchant still owns about 16 % of Billabong’s shares.
The Billabong board said it would consider the TPG proposal and advise shareholders of its view in due course.
Billabong’s share price rose a further 21c, to $2.83 late last week as news of the bid was leaked.
The downgrading of the Billabong Pro Jeffreys Bay will give Merchant plenty more reason to be upset with the suits in charge of Billabong International, apart from a plunging share that he has endured of late and uninvited bids to take over the company he created.
Merchant has a long history with the town of Jeffreys Bay and its people that dates back to the 1970’s, and will know better than anyone else that you don’t just go toss away a contest at one of the world’s iconic surf breaks.
The official statement by Billabong regarding the dropping of J’Bay from the WCT reads “The change in event status follows a broader review in which we are seeking to identify cost savings throughout the business”.
Reaction from South Africa to the fact that the Billabong Pro, the biggest party in winter, has been cancelled was met with disbelief and even outrage when the announcement was made.
How many people will travel from around the country to come and watch a second tier event at one of the best waves in the world? There was a lot of disappointment last year when Kelly Slater did not make the trip to Jeffreys Bay as the fact remains – everyone wants to watch Slater surf.
Will Kelly bother coming to South Africa for a qualifying event, even if it is Supertubes?
Luckily Jordy Smith made up for a Billabong Pro without Slater when he pulled off a second victory in a row in 2011, much to the delight of the home town crowd.
Multiple Billabong Pro winner Joel Parkinson had this to say about the downgrade: “Obviously I’m spewing. I mean, it’s the best event and one I really love going to. It’s sad, really – we don’t get to have a world tour event at what I think is the best pointbreak in the world”.
When asked if he would surf the new Qualifying event in Jeffreys Bay, Parkinson replied, “Um, I’m not sure, it’s a long way to go for a ‘QS event. But, it is a Billabong event. So, maybe I will. But you know, you could almost fit a boat trip in, or something.”
Billabong sponsors three remaining events on the WCT, in Rio de Janeiro, Teahupoo and at Pipeline in Hawaii.
In terms of dollar bills, it must have made financial sense for the Billabong Board to axe Jeffreys Bay from the list.
What the effect will be on Jeffreys Bay in terms of the tourism benefit the Billabong Pro brought, remains to be seen.
The ultimate effect on the perception of the Billabong brand may be even greater however, than the potential loss of income and international exposure for Jeffreys Bay.