SALUS MARINE WEAR  INC .

                                                        KITCHENER, ONTARIO

The Story:  In 8 years, Steve Wagner, leveraging his experience as a sporting goods designer and product manager, has successfully carved out a high end market for his stylish, comfortable Salus lifejackets and marine wear Canada wide.  And most of their production remains Canadian.  Read on!

FAST FACTS:

OWNER/FOUNDER:  STEVE WAGNER

BACKGROUND:  PRODUCT DESIGNER AND PRODUCT MGR.  FOR

                               COOPER/BAUER/NIKE, R&D MGR. BUOY-O-BUOY LIFE VESTS                              

YEARS OF OPERATION:  8

LOCATION:  DOWNTOWN KITCHENER

   PRODUCT:  WATER SAFETY VESTS EMPHASING STYLE, PERFORMANCE, AND COMFORT

   SIZE:  35 EMPLOYEES, 17000 SQ. FT SPACE

   GROWTH:  30%-50%  PER YEAR

     Homegrown Salus Marine Wear has thrived by exploiting a sizeable niche market for stylish, comfortable, innovative Personal Flotation Devices(P.F.D's or Life Jackets)  sold through independent sports retailers throughout Canada.  Its obvious from talking with Steve Wagner, the founder of Salus(which means safety in Latin), that from the outset he wanted to use his design and marketing talents to turn the mundane lifejacket industry on its head by producing safety vests people actually wanted to wear rather than throw in the bottom of the boat.  Their patented rounded edge design, use of bold colours and high performance fabrics, as well as models with names like Abacus, Nimbus, Adrenaline, Torrent and Jazz, each specifically tailored to the needs of different water sports(kayaking, sailing, fishing, general boating, white water canoeing etc.) has obviously set Salus apart from the competition.  Their newest product and big seller, the patented Bijoux Infant Vest, uses an innovative design to flip babies onto their back and safely cradle their head should they fall into the water. 

     Steve has basically taken a commoditized product, the orange P.F.D.'s that we have all seen at our local Big Box retailers and created a BRAND that emphasizes Form as well as Function, Style as well as Safety and Performance.  This market driven approach,  so obvious in their annual full colour product catalogues in which the unique featues and benefits of each style are spelled out in detail, is reminiscent of the strategy of Steve's previous employer Nike.  It has allowed Salus to sidestep low cost, offshore competition, and sell the Salus line at significantly higher retail prices through a loyal legion of independent marine outfitters, adventure and department stores throughout Canada.(95% of their sales are still Canadian based)  By doing so, the wholesale margins have been high enough to allow for 100% Canadian manufacturing in Kitchener up until this year when Steve, to accommodate their very rapid sales growth(30%-50% per year) and to adjust to Ontario's rising minimum wage(to $10.00/hr by 2010) decided to import about 50% his volume from a Chinese life jacket contractor.   This contractor, a certified PFD factory already making lifevests for other competitors at the same location, as well as selling fabics and fittings to the lifejacket industry, had been calling on Salus for years trying to convince them to source their finished product from them.  This year they succeeded.         

     While its too early to tell how Salus' manufacturing strategy will evolve, the switch to Asian sourcing for some of their production has not been without its downsides and strategic risks.  Product lead times average 8 months from time of order,  meaning you have to commit to styles and volumes well ahead of the season, container loads of product must be accommodated in additional rented warehouse space, product costs are rising due to a tripling of freight rates the past 2 years, the appreciation of the Yen, and stricter labour codes, quality control and inspection costs have increased, and payment terms are by Letter of Credit prior to shipment putting a strain on cash flow.   Strategically, providing their contractor with detailed style and manufacturing information has created a future risk that their product could be "KNOCKED OFF"  or copied by Asian manufacturers known for disregarding the legality of patents, trademarks, and agreements. Salus acknowledges as much, especially if they were to repatriate their production to Canada. 

     Notwithstanding their rapid growth and business success thus far,  as mentioned above,   95% of Salus' sales still come from Canada only.  Steve explains that the high Canadian dollar coupled with U.S. competition makes penetrating the U.S. market difficult while Europe, which would probably love the features of the Salus brand, has different safety codes in place which would have to be met prior to market entry.  (We didn't even discuss Central and South America or other parts of the world).   While plausible, these reasons may tend to hide an all too common tendency for many Canadian manufacturers not to exploit their technological and design advantages worldwide.  Whether its lack of confidence,  lack of resources, or lack of government support, many Canadian companies like Salus could be "missing the boat" by not selling their Made in Canada products, which are recognized for their workmanship and quality(See Sorel, Bauer, Cooper), globally.

     When our discussion turned briefly to "E" selling over the web, Steve said they have thought about it often but were worried how their current distributor base would react. Currently, Salus' website is nice but conventional and according to Steve needs updating, showing a geographic listing of their distributors across the country as well a description of their products, testimonials, etc.  Contrast this to another local manufacturer, Ingo Sweaters in Waterloo, who sell their beautiful, high end woven products both through retailers and on the web.  With "E"retailing booming(witness Amazon and Ebay), its apparent that busy consumers, especially the younger generation, are becoming more and more comfortable buying product directly on the web.  Its also apparent that some manufacturers are beginning to realize that the traditional "either/or" approach(distributors versus online) to selling their products may have to be replaced by a multiple channel system where consumers can buy over the web at the same retail prices they would buy at in the store.  For Salus, online web selling might be particularily suited in markets around the world where they are not currently represented or selling.  Obviously, given the normal 100% markup from the manufacturer to the retailer on most products, Canadian manufacturers would gain a tremendous increase in product margins and profitability through web selling at retail price levels.  This increased margin through DISINTERMEDIATION(i.e. direct selling to the consumer with an interactive website complete with customer blogs, ironclad warranties and return policys etc.) could translate into increased competitiveness for their Canadian produced products.

     Recently, Salus' marketing strategy of avoiding the Big Box Stores has been threatened by players from this sector threatening to knock off their unique designs in Asia if they continue to refuse to sell to them.  In response, Salus has developed a lower end line called Naya that can be sold to the Bigger chains without hopefully jeopardizing their more profitable, more reliable, Independent Retailer strategy.  Unfortunately, this new Naya line has not prevented one chain from already copying their popular infant vest by altering a few features to avoid their patents, and undercutting their suggested retail prices.  This is an all too common scenario when a product gets enough market recognition to hit the radar screens of the chains.  The million dollar question is whether the balancing act between the Salus and Naya product lines and their Independent versus Big Box distribution chanels will be successful or the beginning of a slippery slope of reduced prices and margins ultimately leading to the need for more offshore manufacturing to maintain company profitability.      

     In summary, Salus Marine Wear is an example of the future of Canadian manufacturing that needs our support and encouragement both as consumers and as taxpayers through government policies that aid their growth.  Steve Wagner is a perfect example of a homegrown entrepreneur who had a product vision that he has made into a thriving reality in our region.  Moreover, Salus is an example of how important design, branding, and marketing are in creating manufacturing companies that will survive in a globally competitive world.  Small companies must begin to "Think Big" like the Nike's, Krafts, and Johnson and Johnson's of the world, allocating more of their limited resources to creating brand and  consumer awareness as well as direct connection to the consumer via the internet,  that eventually translates into higher margins, profitability,  and long term success manufacturing things in our country that people want around the world.