It was in the late 80's to early 90’s. At that time, mountain biking was becoming big in Europe, it became big in Germany. I was studying economics in Munich, and I was sharing an apartment with a friend of mine, Michael. He was into mountain biking, he did downhill racing, he took part in Kaprun, at that time the World Cups were open to everybody. I was just a normal bike rider. We saw that mountain biking was coming up and we thought we could do something with that as a business. When you are a student, you are always short of money, so we thought about selling some bicycles. It was not Cube, it was just some bicycles we bought from a wholesaler.
A year later we thought it might be good to import some bikes on our own. We got information on what the demand was, of what was going on, looked at we were riding on our own. We thought that if we imported bikes we could get them cheaper, and we could build them according to the local demand because at the time the major brands were all Americans: Trek, Marin, and Specialized… The market was dominated by the American brands, so we sat down together several times - we were four people at that time, all people from this area. We were all studying in Munich at that time, but we never came to a conclusion about when to start, there was always somebody who said “Ah, not this year, I have to pass my exams”, something was always wrong with the timing. So I said to Michael, we have to start right now. That was 1991.
In 1992, we ordered our first container, we got a contact address in Cologne, he was Chinese, in contact with a German-Chinese who was living here. We contacted an assembling factory in Taiwan, they told us how it could work, what we had to do. We asked for samples and placed an order for 160 bikes. The problem for us at that time was how to finance it. We both were studying, I had some money on my own, my father gave me some money and Michael got some money from his sister. The first container came and the bikes were good.
Did you set the geometries for these bikes or were they kind of stock from the factory?
We set the geometry, Michael was studying engineering. We set the geometry on our own, but at the time, it was really easy. You did not have to be an engineer. We took the bike magazines, checked the geometry sizes, checked the geometries from our competitors and we set ours between the best bikes we had chosen. There was no real need to be a product developer at that time. It was a complete Shimano Deore groupset and some Ritchey components, no suspension forks at that time, nothing. Then when we opened the container... Everything was ok and we sold the bikes pretty fast. We ordered a second container that year. The problem for Michael, who I started the business with, is that he could not get money from his sister again, so he had to leave the company. He said that I should do it on my own.
Since then, I have been the only one who is responsible for it, but Michael is a friend of mine and he is still working in the company and he is head of developing our full suspension bikes. We still have a really good relationship. From the four of us at the beginning, the two others founded the company Ghost a year later. We started earlier, they started a bit later but we are all still in the industry. That was the beginning, I was still studying. There were no employees, I did everything on the weekend. I had the possibility to use my father's warehouse, he produced chairs and that made it easy for me as there was a zero cost structure. The only thing I had to pay for was the bikes and that is all.
In the first year, we sold two containers, 480 bikes, one small and one large container. In the second year, we grew a bit. I found some people who were running bike shops at the time, tiny shops for sure. I found some guys who said they would start selling for me, I found Claus [Wachsman, Cube's Sports Partner and team manager for their EWS team], and he said he could work as independent sales reps for me. In 1993, we went to the first bicycle show to show our bikes. It was the first Eurobike, it was a small stand at the time, just 30 square meters. What I forgot to say is that at the beginning, we did not start with Cube, the first bikes were called Slickrock. We changed that as someone had already registered it a few months before us. It is something we found out only a few months before we went to the show. Right before the show, Eurobike 1993, we changed our name to Move. The show was four days, but I was there only on Sunday, the last day because I had to pass my exams. There was Claus, Johann and Angie. They were the sales reps and they saw each other for that first time at the show. I remember when I entered the hall we were in, I saw people running around with Move tee-shirts and I thought: Cool, we created t-shirts! Then I found out it was another brand, a Swiss bike magazine... We had to change our name again, but it happened really fast and a month later, we created the name Cube.
Often people ask me, why Cube, is there something behind it? There is something behind it, but it is a kind of strategy. We were sitting together, it took us two or three days, we were looking for a short name, to get it on the downtube, so we thought four or five letters maybe. It should sound international or be an international name, sound good and it should be neutral, neutral because the brand should get the chance to develop. It was my former wife who had the idea, so we chose the name Cube, and it is still going now. The problems with the names we had at the beginning did not end there, a few years ago we were contacted by Nissan because of their Cube car. I went to Japan twice to have personal discussions with them and it was not so easy, it took years. Sometimes it is really good to work with Japanese, but it takes time.
Finally, we found a solution on how we can work and co-exist. In the end, it was all because we are in the same group of goods – vehicles. Bicycles and cars are not the same, but they are under the same category. We found a way to co-exist, it took some time and the problems that appeared in the beginning, arrived again 10 or 15 years later. Finally, we are happy with our name. The first year, we only imported complete bikes. After a while we realized that it might be better is we import disassembled bikes because of the import duties. At that time, there were 17% import duties on complete bikes and I think 5% on components. So if we got them pre-assembled, we could assemble them here cheaper and get the bike as a whole cheaper with the lower import duties. It was still very small numbers, 1,000 to 1,500 bikes a year while we did that. It was not in a professional way that we were doing that, just 100 square meters in a corner of my father's warehouse. There was still nobody employed, we did it with some friends of mine on the weekends, during the holidays, etc. It grew step-by-step. We grew from 500, to 1,800, 3,000+, 5,000+ and in 1995/96, we got our first building.
My father built something for me, he is an engineer, he had a construction company until the mid-80's when he quit and built a production plant of 600 square meters for warehousing, for everything. But it was a huge step for me, in 1995/96 I got the first employee and we grew to 5,000 bikes a year, maybe a bit less in 1995. It was also the time that we changed from buying bikes disassembled to components and frames. At the beginning, we were working with the same supplier but told him to ship the bikes disassembled. Then we got our first bikes that we had to assemble on our own and again it grew. We built up another production space, another 200 square meters with simple building machines. Went to shows, found more and more dealers, in the late 90’s, we found our first distributor. It was a Danish company, his brother was doing Principia, and we started to grow from there. We started to have our own product management, engineering - it all came step-by-step. Things became more complicated, as at the beginning it was just steel frames, there was no suspension, not even in the front. We enlarged our bike range to some road racing bikes, to triathlon, to whatever and in the mid-90’s we started with our first full suspension frames, our first aluminum frames, things grew bigger.
With new materials and things getting more complicated with the suspension, did you start to have engineers here rather than having to rely on the ones at the factories?
It is true, we had to pay more attention to that. But, to be honest, we did not have 3D drawings on the computer. This happened later, from 2004/2005 and onwards. But yes, we had to pay more attention to geometry with suspension forks, without suspension forks. It was the time when things changed quite a bit. When we started, it was at the perfect moment to start, it was very easy. You did not have to invest in tooling for carbon frames, in tooling for tubes, tubes were just round. There was not really any engineering needed. Many, many new shops came up,
I am only able to talk about Germany but I think it was similar to other countries when mountain biking became bigger. Many new brands came up, people did not know what to buy, so we had the chance to get into the shops. Now that the market is more stable, shops have been working with brands for 10 years, 20 years or longer, it is much harder to get into the shops. And it is an investment - you need to create a frame, it is a really big investment compared to 20 years ago when you just had to choose between different types of tubesets. That was the beginning of everything. Today, when you want to make a full suspension bike, you have to compete with people who have designers and engineering teams. In our development department, we only create frames. We now have 16 people, either industrial designers or engineers. You cannot compare it to the early times, now it is just engineering that you have to do to bring a new product on the market.
The German consumers tend to have a very precise idea of what they want for their bikes. Have you found, as you become more international, that you had to adjust the way you approach the specs, the geometries? Have you found it difficult to transition from a German to a more global brand?
For sure, our developments were mainly influenced by the German magazines and they created this type of market I think. They told you what you needed or didn't, mainly the bike magazines, later on the mountain bike magazines. You are right, before we only thought German, because the few bikes we sold outside Germany did not influence our thinking a lot but what made us really strong was the point when there was a competitor, Ghost, just 20km away from us – who were friends of mine. So if an American company shows you what to do, you can always say they are bigger, they have different advantages, whatever. But if you have a friend, a few kilometres away and you think he might be better than you or work harder than you, and when they opened up their brand, their business, I thought it was terrible for us. I thought they were doing the same as us and we would have to share our sales with them. It happened maybe a bit but in the end, it was super positive for both brands. We always thought: what would the other do and how can we be better?
Something interesting with Cube is that you have a traditional sales model, you work with dealers in a traditional way and yet you are quite aggressive on prices. You are only a few percent more expensive than the direct sales competition. How did you choose to go this route and what did that mean for your business and the kind of choices you made over the years?
Our idea was always to create the best bike in each price level. Therefore, we always try to keep our overhead small. That is what we still work on. We try not to have too much money that we have to spend in areas outside the bike. We said that our best marketing tool is not in the magazines, it is the product itself. We put all our efforts into our bikes and that is how we created a bike that is really competitive and pretty close or sometimes even better than the direct sellers.
Looking at the business model of the German companies, from what I understand, it is a very different approach from Americans. Obviously, the business still has to make a profit but with German companies, who are more family business, you can make decisions that are a bit more abstract, a decision will maybe not make 10% more sales but that will make the company stronger for the future.
I think what helps for sure is that we are not a public company. Decisions are made by me, especially the difficult decisions. The good thing or the bad thing is that I do not have to ask somebody. I am the one responsible for the decision in the end. This structure has the advantage of being faster. If a decision has been made, I can do it right now, I do not have to ask somebody else. The other advantage that we have compared to some big companies, public companies, is that we do not have to look at shareholders’ value. We can think long term and I think that is a positive thing.
What sort of decisions have you made in the past that can example this? Like you chose an international name to begin with: back then you had an idea that at some point you looked to be a global company.
One year ago, we knew that Shimano would increase the pricing by several percent, so we decided to buy several million Euros of their components to stock them. That was a good decision for us as we knew we would need them afterwards. I think many public companies would not have done that because on the balance sheets, with short-term thinking, that would have to be shown up in the three-month reports, it would show a negative result: the stock level is too high… For the shareholders, it might have given them the wrong information from their point of view. That is just a small thing but that is the kind of decisions.
Are you planning to go to the US? I think that maybe Americans will not appreciate what is behind the company?
You are absolutely right. If one day we decide to go to America... It is not that people are waiting for us. It would be super, super hard, it is a tough market with very strong companies who occupy the market already. Trek or Specialized are there, they are the big market leaders, I think, I do not know the market that well, but they are not waiting for somebody else. Trying to be successful is incredibly hard and whether we ever will be it, who knows? Maybe one day we will try something over there.
We understand you are forecast to sell 600,000 bikes next year, while Specialized is around a million at the moment. That is quite impressive to me considering you are not selling in the world's biggest market.
Yes, but I would say that until now the time was not right. And we are still growing here and I think we won’t do more than 600,000 this year, we will be a bit below. I do not care about this number too much. I think that once the time is right we will try it, but at the moment, it is not necessary that we do it. I think the risk to start something over there also exists. Spending too much money at the wrong time could lead to weakening our company as a whole and this is a risk we do not want to take right now.
Cube seem to have taken a different approach to many of the German brands with their sponsored athletes. For instance, you have had the Action Team for five years now, since before people knew who Nico Lau was or even what Enduro was. Is that a conscious decision?
We understood the American strategies. They sponsor big riders, they have big teams… We did not have the financial power to do that, so we thought there were two options: we either try to copy them, but we will never be as good as they have more money. Or we choose another way. The other way was to put all our efforts and money into our product. That is what we did and I think by trying not to be like the others we had a chance to grow.
Enduro still today in Germany is not that big of a deal. How come you guys chose enduro?
We thought at first that enduro was real mountain biking and mountain biking is, of course, our core business and it makes us visible outside, but we want to get some feedback about what real mountain bikers need. There are two reasons, yes, one is marketing but the other is feedback to develop our products.
Guys like Nico really help you push the bike?
Yes, I mean we have some really good riders in-house here. They are enduro riders, but not professionals, but to have this final 1, 2, 3, 4, 5% to develop a bike that is something that helps.
What do you see as the next big challenge for Cube in the next few years? What keeps you up at night at the moment?
To make our brand a real global brand is a big challenge. And to become a real global brand we also need to be on the American market, that is a challenge. I mean the Asian market is also there, it is a different segment, but we think that now we are in competition with the big global brands like Trek, Specialized, and Giant. They work worldwide and if we want to be competitive in the future we also have to think about working worldwide, I think it is important. The other challenge that we are facing is that our distribution channel now is through dealers and we see a growing market share going to direct sellers. We think there is space for bike shops in the future, we think a lot about that. People are saying that multi-channel will be the future, for me, it means we need shops as it is one part of the channel. The other thing is that shops have to do something on the internet, or we have to do something for them, but working together somehow and I think to find the right way to work together with the dealers, to make all of us successful is one of the major challenges we are facing right now.