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Two Wheels: Bike brands follow automakers' lead in consolidating

It will be interesting to see how far these bicycling conglomerates go with the platform engineering and sharing game.

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The largest bicycle brand in Latin America became Canadian last week, when Dorel Industries of Montreal announced the acquisition of Brazil’s Caloi.

Meanwhile, the most famous Canadian brand on the pro cycling tour now happens to be Dutch. Netherlands-based Pon Holdings acquired Toronto-based Cerv?lo early last year.

Does that matter? No more than Lamborghini or Bentley now being German-owned.

The automotive industry has gone through a formidable consolidation over the past couple of decades, hence the often complete disconnect between what a brand is traditionally known for and who actually owns it.

For example, the Volkswagen Group owns no less than eight brands, which cater to the needs of most socio-economic categories: from 9,000 euros for a Skoda Citigo to 1.6 million for a Bugatti Veyron.

Is there really a ?platform sharing? strategy between Skoda and Bugatti? Does the tiny Citigo use some of the same chassis pieces or components as the mighty Veyron?

Most likely not. But what is a certainty is that the SEAT Mii and Skoda Citigo look very similar to the Volkswagen up!. They are essentially the same car, with different looks. All three are made in the same factory in Slovakia, using the new Small Family Platform that Volkswagen developed for ultra-compact cars.

Most auto makers practice platform engineering and sharing, some to a greater extent than others, just because it makes economic sense.

When you can save a couple of dollars on a component used in millions of cars, it makes a difference.

When the business case of a niche low-volume vehicle can be approved because of shared capital investments with other vehicles produced in greater quantities, it also makes sense.

The fundamentals are not that different when it comes to bicycles.

Manufacturing processes require significant capital and scale, and they are tightly intertwined when it comes to material and components supply, so you might as well produce as many bicycles as possible in the same place.

Carbon-fibre processing for bicycle frames has been centralized at a few Taiwanese companies for more than a decade.

In addition to the engineering and production, there is the distribution and sales. Again, consolidation makes sense because it creates scale for manufacturers and ease of market penetration.

The bicycle industry is bound to follow in the tracks of the automotive model. In fact, it has already started. Although the bicycle industry is still fragmented, the brand merger and acquisition process is well under way.

Cerv?lo owner Pon Holdings also happens to own Gazelle, the largest bicycle manufacturer in the Netherlands, and Germany-based Derby Cycle, which is one of the three largest bicycle players in Europe?

With its latest acquisition, Montreal?s Dorel Industries will gross more than $1 billion in annual revenue from bicycles. Its portfolio of brands, from Cannondale and Schwinn to GT and Mongoose, is already significant, and will likely continue to grow.

Accell Group NV, another Dutch player, also has a significant portfolio of brands, including Lapierre and Raleigh. It reported first-quarter revenue this year of more than half a billion euros.

It will be interesting to see how far these bicycling conglomerates go with the platform engineering and sharing game. Although it is pretty hard to see what?s under the sheet metal or plastic panels of an Audi A3 or Volkswagen Golf, it is pretty easy to see what a bicycle is made of.

Different bikes can be made in the same place. They can be freighted in the same containers. They can be distributed through the same warehouses.

But they can?t really look the same, or they will be perceived to be the same. As car companies learned the hard way, that does not work well as a sales model.

Julien Papon is the president and founder of Vitess Bicycle Corporation. His column appears every two weeks during the summer. Email: wheels@thestar.ca.

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