What is next for Fender?

Founded in the 1940s by Leo Fender, Fender (now known as Fender Musical Instruments Corporation) is associated with numerous icons of the music industry from Jimi Hendrix to Bruce Springsteen, Bob Dylan to Kurt Cobain. Yet while its reputation and brand has seems to overshadow the fact that like most American manufacturing companies which suffered great losses and challenges during the last few years, Fender has to continually keep up with the immense changes in the music consumption habits and tastes of people happening nowadays.

While Fender is the world’s largest guitar maker, there is competition from guitars made in China, which cost a fraction of the price. And while Fender has been manufacturing lines of inexpensive (or reasonably priced) guitars for a while now, growth and profitability without sacrificing their brand is still crucial. Weston Presidio, an investment firm actually owns nearly half of the company, has been looking for ways to revamp Fender and on march this year intended to make the company publicly listed. But despite criticisms that Fender was “selling out” it actually did not push through and investors hesitated. The photo above shows companies controlled by Weston Presidio.

The viability of Fender has been uncertain even before though. When Leo Fender sold the company to CBS in the 1960s and all the way to the 1980s it struggled to keep its identity inside within a corporate ownership, after all shareholders were probably less concerned on the craftsmanship the gave the warm and unique sound of its guitars and more on the products being sold and cutting costs. Yamaha also started to become more popular during this time that brought more competition. Eventually Fender started manufacturing abroad and branching out into new products such as steel string acoustic guitars and ventures with Sabian Cymbals among others. Nonetheless many players regard the quality associated with the Fenders made during this period as something special, and a lot believe the biggest competition for the new Fenders today are the old Fenders.

But fan testimonials aside, the recent economic slump in the US and Europe has been hard on Fender. For investors there have been more criticisms to fender than compliments. At the initial stock offering on March, the company was valued at $366 million, which was considered high for a company of Fender’s size. Moreover it was criticized why Fender would go public when its sales were declining and simply “made no sense”.

Bill Mendello (Right side in the photo) who is a board member and 4.8% owner of Fender is more optimistic though. While he still believes in the possibility of a public offering in the near future, he states that “I love Fender — it’s the greatest company in the world,” he says.

During the 1980s Mendello was a top executive in CBS when they still owned Fender. Also during that time Mendello together with the late Bill Schultz (left side of photo), then president of Fender, convinced CBS to invest heavily in Fender and in revamping its marketing. Eventually there were management problems though and with Fender losing money, instead of liquidating the company, Mendello and Schultz bought it. Schultz was also associated as the “man who saved Fender”.  Mendello also says that “We’re herefor the long-term, and we’re going to do what’s right for Fender.” Lets hope its for the better.

-JOEY

http://www.nytimes.com/2012/09/30/business/fender-aims-to-stay-plugged-in-amid-changing-music-trends.html/partner/rssnyt?pagewanted=2&_r=3

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2 thoughts on “What is next for Fender?

  1. Damn good article man, it’s weird because although I’ve never owned a Fender I’ve always felt a great respect for this brand, I guess it comes from all of their guitar hero endorsers we all love. Regarding the actual business, looks like nowadays their marketing strategy is based on making partnerships with 2 kinds of companies a) app developers like IK Multimedia (check this out http://www.musicradar.com/news/guitars/ik-multimedia-announces-amplitube-fender-1-2-554182) and b) engaging brands or lovemarks like Red Bull (see this http://www.redbullsoundstage.com/blog/2719/). This is a great opportunity for the future of Fender since the first ones will still be their core business but oriented to the next generation of musicians, and the second will create loyalty and awareness as this kind of brands will share some of their assets with Fender. In terms of marketing, apps and Red Bull makes total sense for getting Fender to the next level.

  2. Wow, again thanks Joey for bringing some info about instrument producers! As Jaime said, it is kind of weird a renowned brand like Fender is facing such problems…I guess they should develop new marketing strategies not get rid from the market.

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