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Old 04-11-2009, 03:55 AM
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Carl@Semroc Carl@Semroc is offline
Junior ??? Rocketeer
 
Join Date: Mar 2005
Location: Knightdale, NC
Posts: 1,470
Default Estes-Cox by the numbers

Many thanks to Barry for giving us such insight into the model rocket business. Semroc is one of the small model rocket manufacturers that is always curious about the "real world" of the business beyond the very modest sales that we are able to generate.

We have followed with great interest the pending release of the Estes-Cox retro designs and have wondered how much they would impact the total market and in particular the amount that Estes-Cox is producing. Barry said "when I sell I have to have 100,000 units to make a product interesting to us.” I estimated the selling price of the 39 new Classics kits (the Phoenix Bird was repeated) and the 10 new Wal-Mart kits to be roughly $17.75 each (49 kits at a total of $890 for one of each). Assuming Estes-Cox has already ordered enough to be "interesting", that means there are about 4,900,000 new kits in the pipeline at a gross sales value of $89 million dollars. Other companies doing business with China in the hobby industry have told me the "magic number" of 10 is used as a multiplier to get the selling price from the cost of goods received from China. That would mean Estes-Cox has already invested $8.9 million in the new line, if that number is valid. Assuming each customer buys two of the kits, that means over two million customers are required to consume these new kits.

Since they all have balsa parts, I just had to estimate how long it would take us to produce that kind of volume. The 49 kits require a total of 68 balsa parts since some have couplers and reducers, in addition to nose cones. That means 6,800,000 balsa parts are required. Our two machines can produce a total of about 900 pieces of comparable size in a 12 hour day. That means we would have to keep both machines busy 7500 days to make enough parts for the initial orders of these kits! That works out to be about 29 years! At 62 years old, I might not live to see that many balsa parts turned. That is impressive!

Barry also said that "we have spent almost 800,000 dollars in testing-destroyed over 2,400,000 dollars in non compliant product and over 500,000 in rework where we could do it to get product into compliance." That is an impressive amount of money. At about $4K per SKU, that is about 200 different products to test. And Estes-Cox destroyed more product last year than we would probably sell in the rest of my working life!

We had been trying to estimate the size of the market, but since Estes-Cox IS basically the market, it was good to hear Barry's estimate that "we are about 15 to 30 times as large as Estes best years in the 70’s " A former Estes employee told me that there were about 380 employees in the early 70's and they had gross sales of about $10 million per year. That would mean Estes-Cox is between about $150 million and $300 million in gross sales per year now. That is also very impressive!

All of these facts have answered my three unasked questions that are answered with questions:

Q. "Where was Estes-Cox when the BATFE threatened the industry with their illegal regulation?"
A. When you are a $150 million a year company, why get involved in a fight when you are not directly involved that could spill over and destroy your company just by coming to the competition's aid? No brainer. If I was smart, I would probably feel the same way.

Q. "Why does Estes-Cox avoid NAR events, advertising in LAUNCH magazine, and appearing regularly at public outings?"
A. When your market involves millions of individual customers, why waste time and resources on hundreds? Also, a no brainer. Fortunately, those hundreds are our customers!

Q. "Why did Estes-Cox shut down their forum and refuse (until lately) to participate on the public model rocketry forums?"
A. See the last answer. There are less than a thousand active participants on YORF and TRF of which just hundreds are Estes-Cox customers. Why care what they think? This is also a no brainer. You cannot reach the millions on a forum. The few on the forums want a diverse, niche product line with just hundreds of potential sales on any given product. Again, that is great for Semroc, but a waste of time for a giant.

I have a better understanding of the market now and just how tiny we are in relation to Estes-Cox. I had estimated that we were about 1/100th the size of Estes-Cox. Now it is clear that we are probably not even 1/1000th their size. That is humbling for me, but the good news is that there is much room for growth!

And Barry, if you come to a national event or are ever in central North Carolina, I will buy you dinner. Thanks for what you have done to grow the industry. Best wishes on your retirement.
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Carl McLawhorn
NAR#4717 L2
semroc.com
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