From today's Wall Street Journal http://online.wsj.com/article/SB124683752846098045.html
July 6, 2009
By TIMOTHY AEPPEL
NAZARETH, Pa. -- At a bustling factory on the outskirts of this eastern Pennsylvania town, one of the world's oldest guitar makers is using a Depression-era strategy to keep production flowing and avert layoffs. Workers at C.F Martin & Co. are putting finishing touches on the solid-wood 1 Series model, so named for its simplicity. It lacks inlay, as did the company's stripped-down 1930s model, and is expected to sell for less than $1,000, breaking a key price point and far less than its $100,000 limited-edition guitars made of Brazilian rosewood. More popular Martins generally sell for $2,000 to $3,000.
At Martin's Nazareth, Pa., factory, Sophie Eckhart inspects a 1 Series guitar. The new model is an effort to maintain sales with cash-strapped musicians. Initial reaction is promising. The company, which had sales of $93 million last year, introduced the 1 Series in April and promptly sold out its first year's output of 8,000 guitars. "We needed something so we wouldn't have to start laying people off," says Chris Martin, the company's chief executive and sixth generation of his family to lead the closely held company, which was founded in 1833 in New York City. Martin employs about 575 workers, who make 52,000 guitars a year, at the plant here. It has another factory in Mexico that makes beginner guitars.
Although Martin's guitars have been favored by music legends including Elvis Presley, Gene Autry and Eric Clapton -- who once said if he could be reincarnated as anything, it would be as a Martin guitar -- the company began struggling when consumer spending swooned last fall. Guitars aren't necessities, and anything other than food, shelter or clothing has felt the downdraft as job losses mounted, home prices fell, and investment values dropped. Since autumn, Martin's sales have dropped 20%. Meanwhile, Martin's inventories of its high-end guitars ballooned. The company eliminated overtime and didn't replace workers who retired or quit, cutting its staff by about 50.
But given the special woodworking skills involved in guitar making, Martin wanted to avoid layoffs. The company figured it is better to find a way to keep workers occupied than face the challenge of having to train new ones after the economy recovers. The solution: Copy what many big retailers do by offering a lower-priced alternative. The dilemma was how to do that without sacrificing quality or muddying its image. It's an approach that many believe saved the company during the Depression, when Mr. Martin's great-grandfather introduced an all-mahogany unadorned guitar, void of inlay and frills, which sold for $20 to $30, a small fraction of the price of its other trim-laden models.
Stan Werbin, owner of Elderly Instruments in Lansing, Mich., ordered about 20 of the new guitars and has sold a half-dozen in the past two months for $800 to $900. "It was really smart of Martin to come out with these in the current economy. They seem to be filling the niche quite well," he says. Mr. Werbin says the new guitars are in a sweet spot in terms of pricing: under $1,000. "This is the price range that is not hurting as much."
After putting on the strings, Virgil Remaly tunes a newly built 1 Series. "Soundwise, for the money, they're very good," he says, but aren't necessarily comparable with more expensive models.
Martin has other models that are even lower priced, but they use laminated plywood for the backs and sides. The 1 Series is an all solid wood guitar.)
Others in the $472 million annual acoustic-guitar market are trying something similar. Santa Cruz Guitar Co., a small California producer, recently introduced a "1929 model," which company President Richard Hoover says is "not so much about austerity. But it's simple, and most importantly, something that feels OK to indulge yourself in during difficult times." The 1929 sells for $3,500.
Kurt Listug, chief executive of Taylor Guitars in El Cajon, Calif., says he has no intention of developing less expensive models. He doesn't believe the current slump will make any long-term changes in the types of guitars consumers want to buy, so he sees no reason to reach down market. "This is a passing episode," he says. Not all manufacturers are so adaptable. Unlike most mass producers of items like appliances and tractors, Martin's factory is still largely run as a handcrafted process. Each guitar travels through a series of 60 workstations, with more than 300 distinct production steps.
Workers use modern equipment, including robots that polish guitars to a high sheen, but much of the work is still done by hand. Pieces are fitted and glued by workers hunched over workbenches. Workers tune each guitar carefully to make sure its sound is true. The upshot is extreme flexibility, which is critical in the recession, when fortunes turned swiftly and unexpectedly. The ability to come up with a new design quickly and without tearing apart a production process allowed Martin to get a lower priced product into stores without a huge investment.
Subtle differences in construction are crucial in acoustic guitars. In the case of the new model, cost savings included switching to a type of lacquer that doesn't require time-consuming polishing.
"There's less man-hours in each instrument," Mr. Martin says.
July 6, 2009
By TIMOTHY AEPPEL
NAZARETH, Pa. -- At a bustling factory on the outskirts of this eastern Pennsylvania town, one of the world's oldest guitar makers is using a Depression-era strategy to keep production flowing and avert layoffs. Workers at C.F Martin & Co. are putting finishing touches on the solid-wood 1 Series model, so named for its simplicity. It lacks inlay, as did the company's stripped-down 1930s model, and is expected to sell for less than $1,000, breaking a key price point and far less than its $100,000 limited-edition guitars made of Brazilian rosewood. More popular Martins generally sell for $2,000 to $3,000.
At Martin's Nazareth, Pa., factory, Sophie Eckhart inspects a 1 Series guitar. The new model is an effort to maintain sales with cash-strapped musicians. Initial reaction is promising. The company, which had sales of $93 million last year, introduced the 1 Series in April and promptly sold out its first year's output of 8,000 guitars. "We needed something so we wouldn't have to start laying people off," says Chris Martin, the company's chief executive and sixth generation of his family to lead the closely held company, which was founded in 1833 in New York City. Martin employs about 575 workers, who make 52,000 guitars a year, at the plant here. It has another factory in Mexico that makes beginner guitars.
Although Martin's guitars have been favored by music legends including Elvis Presley, Gene Autry and Eric Clapton -- who once said if he could be reincarnated as anything, it would be as a Martin guitar -- the company began struggling when consumer spending swooned last fall. Guitars aren't necessities, and anything other than food, shelter or clothing has felt the downdraft as job losses mounted, home prices fell, and investment values dropped. Since autumn, Martin's sales have dropped 20%. Meanwhile, Martin's inventories of its high-end guitars ballooned. The company eliminated overtime and didn't replace workers who retired or quit, cutting its staff by about 50.
But given the special woodworking skills involved in guitar making, Martin wanted to avoid layoffs. The company figured it is better to find a way to keep workers occupied than face the challenge of having to train new ones after the economy recovers. The solution: Copy what many big retailers do by offering a lower-priced alternative. The dilemma was how to do that without sacrificing quality or muddying its image. It's an approach that many believe saved the company during the Depression, when Mr. Martin's great-grandfather introduced an all-mahogany unadorned guitar, void of inlay and frills, which sold for $20 to $30, a small fraction of the price of its other trim-laden models.
Stan Werbin, owner of Elderly Instruments in Lansing, Mich., ordered about 20 of the new guitars and has sold a half-dozen in the past two months for $800 to $900. "It was really smart of Martin to come out with these in the current economy. They seem to be filling the niche quite well," he says. Mr. Werbin says the new guitars are in a sweet spot in terms of pricing: under $1,000. "This is the price range that is not hurting as much."
After putting on the strings, Virgil Remaly tunes a newly built 1 Series. "Soundwise, for the money, they're very good," he says, but aren't necessarily comparable with more expensive models.
Martin has other models that are even lower priced, but they use laminated plywood for the backs and sides. The 1 Series is an all solid wood guitar.)
Others in the $472 million annual acoustic-guitar market are trying something similar. Santa Cruz Guitar Co., a small California producer, recently introduced a "1929 model," which company President Richard Hoover says is "not so much about austerity. But it's simple, and most importantly, something that feels OK to indulge yourself in during difficult times." The 1929 sells for $3,500.
Kurt Listug, chief executive of Taylor Guitars in El Cajon, Calif., says he has no intention of developing less expensive models. He doesn't believe the current slump will make any long-term changes in the types of guitars consumers want to buy, so he sees no reason to reach down market. "This is a passing episode," he says. Not all manufacturers are so adaptable. Unlike most mass producers of items like appliances and tractors, Martin's factory is still largely run as a handcrafted process. Each guitar travels through a series of 60 workstations, with more than 300 distinct production steps.
Workers use modern equipment, including robots that polish guitars to a high sheen, but much of the work is still done by hand. Pieces are fitted and glued by workers hunched over workbenches. Workers tune each guitar carefully to make sure its sound is true. The upshot is extreme flexibility, which is critical in the recession, when fortunes turned swiftly and unexpectedly. The ability to come up with a new design quickly and without tearing apart a production process allowed Martin to get a lower priced product into stores without a huge investment.
Subtle differences in construction are crucial in acoustic guitars. In the case of the new model, cost savings included switching to a type of lacquer that doesn't require time-consuming polishing.
"There's less man-hours in each instrument," Mr. Martin says.
You might send this to Guild John. I thought Taylor's reaction was interesting....we'll see. Definately looks like there's a void to be filled in the under a grand range.
