Confluence names a turnaround expert as new CEO

Confluence has finally named a new CEO, self-proclaimed turnaround expert, John Bergeron. Bergeron’s appointment comes nine months after former CEO Bill Medlin’s ouster on April 29, 2002. During that time, Confluence has been managed by interim CEO, Bill Sharp of American Capital Strategies, a publicly traded capital investment firm that is currently the majority owner of Confluence Holdings Corp.

Bergeron has quite the resume. In 1987, he was the CEO of the U.S. branch of Swiss Army Knife, then part of Precise International. During his six-year term, Swiss Army sales grew from $5 million to $35 million, with 50 new product introductions, including the Swiss Army Watch. Company staff only grew by 20 percent, because, Bergeron states, he implemented solid systems, processes and training programs that maximized staff talents and minimized waste.

When Precise was sold, he went to work for Forschner Enterprises where it became his role to step into and run troubled portfolio companies. One such company was Spectra Star, a $20 million kite company that had burned through a $4 million investment from Forschner in only six months, accumulating $12 million in debt along the way. Bergeron fired the founders, brought in a controller and two others from Forschner and then took a hard line with suppliers. He told them to supply the kite company and get 50 percent of the old invoices and 100 percent of the new ones or cut off the kite company and get nothing. Suppliers played ball and, in six months, Bergeron sold the company for $16.5 million enabling full payment to creditors, vendors and reps, and partial ROI to investors.

More recently, in 1999, Bergeron became president and COO of Thermos, a company that had lost $320 million over a 10-year period leading up to Bergeron’s appointment. In short order, he closed two factories in the UK, expanded one in Ontario, downsized one in Mississippi, expanded a factory in Peru, started a factory in Uruguay, laid off 1,050 staff, and opened a sourcing office in Hong Kong. He also killed many SKUs, moved the company into non-vacuum technology (taboo talk under previous management) and launched new products including soft coolers and private label — you know, like the Nissan brand Thermos in places like Starbucks? In one year, the company went from losing $9 million to making $2 million in 2000. By 2001, the company made $4 million and last year profits were $9 million.

Now he’s looking at Confluence and feeling bullish, especially since American Capital recently bought another investor out and converted the company’s debt into equity, relieving Confluence of a tremendous interest burden.

“I am coming in at an ideal time,” Bergeron told SNEWS. “What held the company back in the past is they were cash poor. Now, having refinanced the outfit, we can pay our bills on time and invest cash into capital expenditures we need to do.”

Looking at Bergeron’s experience, it is easy to see that his operating standard is to cut costs through operating efficiency, run a staff lean and mean, compete very hard for market share, and push innovation and new product development to solidify a company’s branding and expand distribution opportunities. There is little we heard in our interview to indicate he’s seeking to change what has worked so well for him over the years.

“You can’t stand still as a company, and my experience will play well here. You have to be constantly upgrading your production and your sourcing to improve pricing without affecting quality. You have to be able to anticipate your customer’s needs and not simply be in a position of reacting to them.”

Sounds good, but we wondered how Confluence and Bergeron could envision the company and its innovations growing the market.

“Obviously, we would like to help grow the market and the key to market growth is by capturing the imagination of the consumer,” Bergeron told us. “However, unless there is some dramatic change in the weather, or some kind of unique enthusiasm that is built through the media as a result of an Olympic success or another celebrity endorsing paddlesports, we realize that this is a flat market so if it does not grow, I am very satisfied by simply growing our market share and happily eating someone else’s lunch.

“We will measure our competitors very carefully, engage their thin points and exploit them. There are many examples in every industry of companies who were market leaders for years and either don’t exist now or are currently marginal players. The ranking order can be turned and we intend fully to be at or near the top,” he added.

When asked how he planned to compete, Bergeron launched with enthusiasm.

“First, we have to change our pricing structure. We are a cost plus pricing company. We took our cost, added our margin and this was the price, which if you look historically, was sometimes well over what the market would bear,” Bergeron said. “Now, everything will start with the market. If the market price is $200 and we can only make a product for $200 before added margin, then shame on us. We have suffered from myopia by looking inside to determine prices and trends, and then hoped the market would adapt to it.”

To do that, Bergeron acknowledges they will probably look outside the company wherever appropriate.

“The days are long gone of mass production in this industry. It is mass customization in an arena that has typically been over SKUed with customers saying almost 40 percent of the time that they want this boat, but in this color, and outfitted this way,” said Bergeron.

His solution is to maximize profitability and production flexibility by combining inside production skills with outfits here and abroad that are so skilled they can match what Confluence would be able to do in-house for less cost.

“Next challenge is to expand distribution. By being slightly clever, you can accommodate many different channels without alienating the specialty accounts that put you on the map. Specialty accounts give you credibility, and are vitally important to a company. They make, or should make, the customer special through special product, special presentation, special merchandising, special programs. While specialty accounts will never generate the dollar volume of more mainstream accounts, a company is foolish if it alienates them because to do so damages your overall credibility.”

Bergeron’s model supports one that company marketing director, Kelley Woolsey, has long believed in, and that is using the same brand to meet many different levels of trade from price-point to high level.

With all the talk of cost-cutting, SNEWS asked Bergeron about layoffs, and he bristled.

“Last April, we had a big layoff and that is a management mistake. Management needs to look into a crystal ball and know what the people needs will be and solve manpower problems through attrition,” said Bergeron. “I am, by nature, very stingy on headcount. I never want to fire anyone. Staff are dependent on you and any interruption to their life is a very serious thing.

“What we will do here is maintain a very skilled cadre of people, but I will not expand it unless it is obvious we need to because if management makes a mistake, which does happen, we don’t want that mistake to be taken out on the poor employee doing the grunt work in 100-degree North Carolina heat. For now, if we have expansion needs, the first thing we will do is look to outsource it and put the project up for bid,” said Bergeron.

SNEWS View: A planned 30-minute interview turned into an hour or more, simply because Bergeron is so passionate about his role, his vision and the company. Confluence has landed a good one, and they’ll need all his talent and experience for certain. Bergeron will be leading a highly skilled team, no doubt, but competition is fierce and the paddlesport market is not exactly one that is garnering much attention from consumers or financial sectors of late, simply because it, like many other recreational markets, has been flat. Part of Confluence’s challenge too, has been one of consistency of communication. IF, and note that is a BIG if, Bergeron and team can focus Confluence with a consistent message that the company’s core retail base will trust, the goals of expanded distribution make loads of sense. Our initial take is that Bergeron says what he means and will back up anything he says with action. His past performance certainly supports that. He’s also no nonsense and loves the hunt, so if you’re a competitor, be ready to rumble in a straight-up manner. Heck, this could be fun to watch — at least from our perspective.