What happens when the product your business relies upon suffers a sudden drop in supply?
20 March 2016
That’s exactly what happened when avian flu wiped out a huge chunk in the world’s supply of goose down feathers in 2013. During this time, PHD, a small firm in Harrogate that produces high-end jackets and sleeping bags for expedition climbers thanked the goose gods for its good contacts.
‘White gold, they call it,’ says Peter Elliott of PHD, describing a rare form of goose down with a warmth-to-weight ratio that apparently makes all the difference halfway up Mount Everest amid changeable temperatures and a backpack containing water, ropes, food, GPS and an oxygen tank. ‘No other natural or synthetic insulation comes close to matching it for lightness, warmth and “loft” [compression],’ adds Elliott, who as well as joining PHD’s chief Peter Hutchinson as the company’s managing director also accompanies the founder on big expedition climbs.
Made in Harrogate
From its olde-worlde factory in Yorkshire, the company makes what are considered to be the most technical down-filled sleeping bags and jackets in the world. At one end of the factory, custom-made jackets are hand-stitched on sewing machines to the exact specifications of expedition climbers while, in another corner, jackets are finessed using computers. Elsewhere, a new 50-gram sample of down feathers is being tested in a lab to verify that they match the precise levels of lightness and warmth promised by the supplier.
The two Peters meanwhile are testing new ideas they came up with on a climbing trip to the Isle of Arran. Elliott is set for another trip soon; this time to visit some goose and duck farms as well as one of his down suppliers. The peculiarities and intricacies of the world of down feathers has become the centre of Elliott’s world since he joined Hutchinson in 2008.
Goose and duck farmers sell feathers as a meat by-product to a small band of firms who amass copious quantities of down of different grades. Once the feathers are washed and processed, they’re sold to outdoor clothing and bedding companies. Yet only a handful of firms operate in the segment of the market that PHD operates in: supply of the highest-quality goose down. Elliott makes a point of being in the know on farms and processors.
He carefully guards information from his competitors. It comes down to insight and contacts on the best farms around the world and the processing plants he considers the best at treating feathers without damaging the natural oils. ‘Birds flying in temperatures of 30°C degrees or more in the summer and -25°C in the cold create the best quality down,’ says Elliott. ‘You get better feathers where there’s a farmer who appreciates the value of well looked-after birds. I only find that out by going around and meeting farmers.’
Calm in a crisis
All of that know-how came to the rescue three years ago when avian flu hit China (where 80 per cent of the world’s down supply comes from), causing chaos in the market and sending every buyer of down around the world into a tailspin. Much like the reaction to the foot-and-mouth crisis in the UK in 2001, the Chinese government ordered the slaughter of 60 per cent of the country’s birds, leaving an enormous down shortfall all over the world.
Even though Elliott doesn’t buy from China, he was luckily tipped off to the crisis and its consequences by a supplier. ‘One person was sheepishly talking to me about what was coming and another one a few days later told me what was in store.’
Fight or flight
Advice from suppliers led to Elliott to do something the company rarely does: place massive orders of high-quality down, effectively stockpiling for several months rather than the monthly purchases it normally makes. ‘We were able to buy large volumes at sensible prices simply because we were close to our suppliers. We buy relatively small amounts compared to the big brands so it was a bit easier for us but we could have been in a bad place if we weren’t alerted as early as we were.’
News of avian flu in China officially came out weeks later, precipitating a surge of companies attempting to snap up whatever they could at effectively any price. ‘Buyers for some big brands were travelling around down processing sites with bags of cash,’ says Elliott. A once relatively flat and stable market was transformed with prices soaring from a stable £39 per kilogram to £67 at the peak of the outbreak.
‘It’s important that all the suppliers know us and appreciate where we come from,’ he says. ‘The higher-quality down we look for requires a lot of skill to produce and process sensitively and we only work with suppliers that have high standards in animal husbandry,’ he says. ‘Almost all tend to be family farms. But very few of the children are following in their fathers’ trades so there’s a real danger that availability will become even rarer.’
The avian flu crisis has made Elliott more determined than ever to stay on top of the world’s goose down supply and ensure PHD stays at the very top of the market – and the mountains.
Creating a niche in outdoor equipment
PHD’s business model is counter to the rest of the outdoor industry – and it seems to serve it well.
The formula for selling outdoor equipment is rather simple. Make products that fit within the price range of rivals, factor in a decent margin for the big retailers, work with what’s left to make products to hit that price and make money, and, of course, spend an overwhelming amount of the budget on marketing, which can amount to up to around 60 per cent of the total cost.
PHD takes a rather different tack. ‘We have no ceiling on cost unlike most of our competitors,’ says Elliott. Everything is sold directly to the people who will end up wearing jackets or spending a night up a mountain in one of its bags. And not
even a penny is spent on marketing or PR (as evidenced when trying to pin the company down for this story).
It doesn’t make other products related to climbing and exploring; no T-shirts, tents or boots. ‘It might sound mad to an outsider but we strictly focus on this tiny specialist area. It makes sense to us; our only pressure is to keep innovating.’
Customers appear to be coming back. In fact, PHD’s founders claim that customers are often deeply engaged in making products better, with a steady stream of feedback, ideas and observations for the two Peters.
This story is taken from Courier Feb/Mar 2016.