Daisy Diversifies Lines To Hit Revenue Target

St. Nick is packing more than a Red Ryder BB Gun this December.

Daisy Manufacturing Co. has enjoyed three straight years of double-digit sales growth triggered by the same component that made its legendary BB guns the stuff of Christmas dreams — imagination.

Since the August 2001 arrival of Ray Hobbs, Daisy’s chairman, president and CEO, the Rogers air gun maker has diversified its product line and added more than 25 new items to its retail portfolio. When Hobbs came, there weren’t even any new products on the drawing board.

Now everything from Daisy’s opening price-point Shatter Blast targets, at $9 a pop, to its $525 Avanti Elite air rifles are expanding the firm’s range at the retail counter. Hobbs, who retired in 1999 as the senior vice president of merchandising at Wal-Mart Stores Inc., said the “dynamics and strength” of the Daisy brand were “solid as a rock.”

What the 122-year-old company needed, he said, was a broader aim.

“The brand is priceless,” Hobbs said. “We do a good business with our basic lines such as the Red Ryder. Our museum sponsors a limited edition set every year that collectors can’t wait to pick up. But what’s driving our business, and our whole segment, is the development of new products.

“We have a three-year plan now that calls for sustained double-digit sales growth, and a good percentage of that could come through additional startups and potential acquisitions.”

Hobbs is a minority owner in Daisy, which does business as Daisy Outdoor Products. It sells traditional air gun items such as BB and pellet rifles and pistols, ammunition for those guns, gun cases, slingshots and other accessories.

Daisy’s majority stakeholder is Charter Oaks Partners of Westport, Conn., a venture capital firm with interests in more than 10 corporations.

Charter Oaks bought Daisy in 1993 for an undisclosed sum. Marvin Griffith, a former owner of Daisy, and others spun the firm’s paintball division out of Daisy in 1998 to form Brass Eagle Inc.

Brass Eagle went public but was taken private again last year when it sold to K2 Inc. of Carlsbad, Calif., as part of a $77.8 million acquisition.

Because Daisy is privately held, Hobbs said, it does not disclose its revenue. But he did say Daisy sells about 250,000 Red Ryder units annually (compared to 1.52 million in 1952), and overall 2004 sales are on track for the largest year-over-year increase in a decade — 20 percent.

Chris Killoy, vice president of sales and marketing at Sturm, Ruger & Co. in Southport, Conn., is also a board director for Daisy. He said Hobbs’ ability to forge a team and focus on common goals is behind the success.

“He’s an excellent team builder and leader,” Killoy said. “He’s been very hands-on and understands not only the company, but its customers ranging from trade customers like Wal-Mart and Bass Pro Shops that actually buy the product to the end users.”

According to the National Rifle Association, about 3.2 million BB guns and pellet rifles are sold annually in the United States. BB Guns make up about a third of that total.

Daisy’s biggest competitor is Crosman Corp. followed by Marksman Corp. and Gamo Precision Air Guns Inc. Additional details about the segment are sketchy, but Hobbs said Daisy is the largest player with about 60 percent of the market share.

Hobbs said “brand movement,” or venturing into additional segments is most likely what the future holds for Daisy. He said there’s a chance it will delve into the camping and fishing equipment markets.

“There’s also a potential for archery and some other categories where, because the Daisy brand is so well trusted, that we could move into some of those additional businesses,” Hobbs said. “First Nature is a good example of a brand where we knew how to do some things with plastics and were able to create a strong company.”

Birds, Brass, Bullseye

Daisy launched its First Nature division in 2002. The subsidiary makes wooden and plastic bird feeders, birdhouses, hummingbird feeders and hummingbird nectar. It even has a new metal-clad feeder that Hobbs said is nearly squirrel-proof.

That same year, Daisy also landed a more than $1 million contract to make drill rifles for the United States Navy. The units are non-functioning guns, but they had to pass rigorous quality control tests that included being dropped from 25 feet. Daisy is in the running for a similar U.S. Army contract that would be substantially larger than its one with the Navy.

“We anticipate [the military contracts] to be a good piece of business for a long time,” Hobbs said.

During peak production time, from July through the pre-Christmas rush, Daisy employs more than 250 full-time people. Thirty of those are at the firm’s Rogers headquarters. The remainder are at Daisy’s gun and BB manufacturing plants in two Missouri cities — Neosho and Salem, near St. Louis.

Daisy relocated its manufacturing facilities to Missouri in 1997, primarily because the Rogers plant was vertically integrated. Hobbs said building everything on site from scratch was labor intensive, and reducing plant space and outsourcing parts for an assembly operation made more sense.

The firm took on a quieter local corporate image, but Hobbs set out to change that by focusing on sales and reloading enthusiasm for community involvement (see story, p. 17).

The Rogers Daisy Air Gun Museum Inc., a 501(c)(3) operation, even recently moved to a more visible location at the corner of Second Street and Walnut Avenue in downtown Rogers.

Hobbs and his wife Debbie own the building that houses Daisy’s 2,300-SF museum. They lease the space to the company.

Hobbs worked for Wal-Mart for 24 years. The Clarksville native then became a merchandising consultant for firms like Hanna’s Candle Co. in Fayetteville and Bass Pro Shops in Springfield, Mo.

He was named interim CEO at Bass Pro in 2000 and stayed for 14 months before being recruited by Daisy. Hobbs said his retail experience made his transition into manufacturing easier.

“In my role at Wal-Mart, I worked with a lot of vendors,” Hobbs said. “I brought a lot of that experience so that when we’re introducing new items to companies like Wal-Mart, I understand what they’re looking for in terms of packaging and in price point.

“So when we do bring new things out, they’re closer to being successful and don’t have to go through a lot of changes.”

Target Marketing

Behind its famed Red Ryder, Daisy’s Model No. 880 is its second most popular item. Hobbs said the 880 is the No. 1 seller for its category at Wal-Mart.

Many of Daisy’s new items, or stock keeping units (SKUs in retail parlance), are higher-performance products such as the Avanti 853-C — a $225 air gun with a Lothar Walther rifled barrel imported from Germany. But the firm has also diversified its mid-market offerings such as the $100 PowerLine TargetPro 953, which is patterned after the Avanti but with cheaper components such as a composite wood stock.

Youth groups and community organizations conduct national education programs for BB and pellet guns that attract nearly 2.3 million annual participants (see chart, p. 19). Although Daisy keeps that younger demographic in its sights, Hobbs said there’s no denying the allure of classic Daisy products, such as the Model No. 1894 for Baby Boomers.

“There’s an emotional attachment to a lot of our products,” Hobbs said. “Everyone has seen the ‘A Christmas Story’ movie with the boy and the Red Ryder. So many grandfathers and dads have passed Red Ryders down over the years. Getting one is a rite of passage.”

Executives like Joe Spivey, the business development officer for First Security Bank in Rogers, agree. Spivey, 45, got his first Daisy BB gun, a Model 1894, when he was 11 years old.

“They used to advertise in Boy’s Life magazine,” Spivey said. “I couldn’t wait to get my new issue because I always looked so forward to seeing the Daisy ads. They had a way of pulling you into the magazine and making you feel like you were Davy Crockett or Daniel Boone.

“Most of their air guns were made to look like the real firearms, and what I think Daisy did the best job of was blending in the teaching of how to shoot safely. They taught responsibility.”

Tommy Johnston, a territory manager for healthcare supplies firm Huntleigh Health Care LLC in Fort Smith, drove all the way up to Rogers for the Nov. 14 opening of Daisy’s new museum. He said getting to see Daisy’s evolving models as snapshots in time was well worth the 70-mile drive.

“They built a little BB gun that reminded me as a kid of the old West cowboys, where us young boys raised in the country could play like we were big cowboys, too,” Johnston said. “Everyone remembers their first Daisy. It was just something special.”

Under the Gun

Hobbs said margins in the industry have been pressured by a number of factors. BB gun stocks are primarily made from birch, fir and walnut wood, plus composite material. Although wood costs have increased, there’s been more pressure on steel prices.

The air gun barrels are made from steel and zinc. The BBs themselves are made out of steel wire.

There are 1,297 BBs in a pound, and Daisy makes 6 million pounds of BBs annually or 7.782 billion BBs. One BB weighs 0.357 grams, meaning Daisy pours out 2,778 metric tons of the little round shot pellets every year.

Hobbs said the firm had to improve efficiencies to offset some of the raw material pricing. The biggest challenge though has been litigation.

The Consumer Product Safety Commission filed suit in 2001 against Daisy claiming that its PowerLine Models 856 and 880 were responsible for at least 15 deaths and 171 injuries, according to the Wall Street Journal.

The agency ultimately agreed to a $1.5 million publicity and labeling campaign by Daisy that promotes safer use of its products.

“At the end of the day, the CPSC investigated and found our products to be safe,” Hobbs said. “As a matter of fact, the new head of the CPSC, Harold Stratton Jr., has even made comments on record saying the product is apparently not dangerous.

“Our lawsuit history has gone way down during the last couple of years, and I believe it is because of the emphasis we put on safety. It’s a tough product line, so you have to do a great job of explaining to the consumer this is a gun, it’s not a toy.”

Of its own accord, Daisy has also launched a new age appropriation campaign, similar to labeling that’s been done for video games. Packages that tell consumers what age group the product is suitable for have already arrived on Wal-Mart’s shelves.

Safety First

Daisy’s Take Aim at Safety Sweepstakes campaign focuses on teaching people how to enjoy the sport of shooting safely. Hobbs said the goal was to come up with something current, something that would appeal to both youth and adults.

Shooters age 13 or older are encouraged to review Daisy’s 10 Safety Tips, which feature members of the U.S. Olympic Shooting Team, and take a brief quiz. Participants can receive a certificate and qualify for a Daisy pin. They will also be entered for a Jan. 15 drawing for a VIP tour of the USA Shooting Team training facility in Colorado Springs, Colo.

Daisy, which makes introductory air rifles that Olympians can use to train, is a sponsor of USA Shooting. It also sponsors the International BB Gun Competition, a number of groups that promote safe shooting such as the Jaycees, 4H and many clubs and civic organizations.

U.S. athlete Nancy Johnson, a gold medalist at the 1996 Sydney, Australia, Olympic games, endorses Daisy at www.daisy.com.

“Shooting is a great experience, and when it’s done right, it’s rewarding,” Hobbs said. “We have a shooting education trailer that goes coast to coast and also promotes safety. A lot of times we see people shoot for the first time, and we work with them and show them the proper way to do it.

“Firearm manufacturers should stand in support of Daisy because we help a lot of people get started shooting and show them how to do it the right way.”

Community Involvement Takes Priority for Daisy

Jill Darling, executive director of the United Way of Benton County, said the $18,888 Daisy Manufacturing Co. has raised for the nonprofit’s 2005 contribution campaign is fantastic.

What’s even better, she said, is the ripple effect the air gun maker’s Chairman, President and CEO Ray Hobbs has had on other executives. Hobbs chaired last year’s drive for the United Way, which raises money for a variety of community needs.

“Ray has shared his story with other CEOs, and that has encouraged them to go back and say, ‘Look at what Daisy does with only 30 employees.’ He’s talked about how their drive has helped morale and really become a source of team building for the company.”

When Hobbs arrived in 2001, the Rogers company didn’t even have its own United Way drive. Since then, its contributions per employee have risen from $83 dollars to more than $630 — making Daisy the Benton County philanthropy’s largest per capita giver.

The firm’s air gun manufacturing plant in Neosho, Mo., also supports the Neosho United Fund, and its BB plant in Salem, Mo., supports the Merrimac Regional Planning Commission.

In addition to its products’ omnipresence at local charitable auctions, Daisy has pledged $50,000 toward a new classroom at the Benton County Sunshine School in Bentonville. The philanthropy serves children with developmental disabilities such as autism, cerebral palsy and Down syndrome.

Susan Gardner, a spokeswoman for Daisy, said the company has even received thank-you letters this year from American troops stationed in Iraq. The company sent a variety of supplies and “morale-building materials” such as slingshots to the soldiers.

In one letter Daisy supplied, a soldier recounted receiving a large box of slingshots and targets:

“I had planned to take pictures and record the occasion on cassette, but I was out of [film] and we were all a bit too excited to remember about the tape,” it said. “It was a joyous occasion for everyone in the third squad. One solder described it was being better than Christmas.”