Unlimited - Moonstruck: Inside Icebreaker

The large meeting room in Icebreaker’s warehouse-chic HQ in Wellington’s Dixon St is abuzz with shapely young women stripping off and pulling on prototype jumpers and t-shirts for size and fit. Down on the floor in the middle of the open-plan office, a sales team member is working through a sheaf of orders. Others scurry about preparing racks of end-of-line oddments and factory seconds in preparation for Icebreaker’s annual “friends and family” night, when staff invite their mates along to an evening of bargains and booze. Dave Dobbyn pumps through the office sound system.

As Icebreaker, the little company that put New Zealand merino on the map, prepares to celebrate its tenth anniversary this year, it still has the look and feel of a gigantic student party. And the master of ceremonies, its wide-eyed and tousle-haired managing director Jeremy Moon — his arm in a sling from a mid-winter skiing accident — looks to be having as much fun as when the party began a decade ago.

Behind the partying, of course, is a serious business that has, at times, struggled to keep up with its own momentum. For many New Zealand outdoor clothing retailers, Icebreaker has become the brand they daren’t do without. Retailer Outside Sports has devoted nearly half of the ground floor in its recently opened, three-storey 15,000 sq m Queenstown store to the label. Mat Woods, part-owner of Dunedin-based R & R Sports, says Icebreaker has “a lot of real estate in our stores, around 10%, which is about the maximum we can allocate to one brand”. John Schikker of sportswear store Racers Edge in Wanaka: “Icebreaker is bread and butter for us. You know you’re going to sell X amount every day you open, sunny or cold.”

Word is spreading fast in offshore markets too. Although the privately held company won’t disclose turnover or specific export volumes, Moon says over half its revenue comes from offshore sales. After starting its export drive with Australia in 1998, Icebreaker is now sold in 1,000 stores in 17 countries.

Corry Taylor, UK distributor of top-line outdoor labels Mountain Hardware and Royal Robbins, took on the Icebreaker label three years ago after initial scepticism that the market would be willing to shift from synthetics to merino. He’s since secured a place for the brand in 200 stores in the UK, Scandinavia and Germany and reports 150% market growth in the last year. “There’s been a tidal wave of enthusiasm — it’s the hot ticket at the moment.”

Across the Atlantic in Vancouver, paddling store OceanRiver is into its third season of Icebreaker. “It’s awesome,” says expat Aussie store manager James Rogers. “People love it. It was slow to take off, but we’re getting 200% year-on-year growth.”

In Wisconsin Carol Lynn Benoit, clothing buyer for Rutabaga, which purports to be the world’s largest paddling shop, says the company’s first season of selling Icebreaker has been “very successful. The quality of the product is top notch.”

Yes, Icebreaker is on a roll. Why has it all gone so right? And, in a market increasingly crowded with competitors wanting a slice of the merino clothing market — all proclaiming the virtues of this “miracle fibre” with missionary zeal — can the good times last?

Breaking the ice
Brian Brakenridge, one-time merino farmer, tourist lodge operator and now Rangiora real estate agent, felt his heart warm recently when, wandering down London’s Regent St, he passed two people wearing Icebreaker gear. Earlier, he’d been at a property expo and four people had come in wearing the brand.

Brakenridge wasn’t just being patriotic: it was more a case of fatherly pride.

In the early 1990s Brakenridge and his Canadian-born wife Fiona were running merinos on remote Pohuenui Island in the Marlborough Sounds. “We were getting bugger all for this beautiful fibre. Ninety percent of it was being bought by the Aussies to blend with their wool. It was worse than a commodity, it was an additive.”

On a trip to North America, they got chatting to the owner of an outdoor store in Washington who had come across some fine merino fabric at a French expo and tried unsuccessfully to get hold of some outdoor clothing made from the stuff. The Brakenridges undertook to source some for him.
Back home, they convinced a Christchurch manufacturer of merino baby smocks to run up some adult garments. It was the beginning of a cottage industry that saw the Brakenridges marketing merino thermal-wear, initially under the label New Zealand High Country, and later the more inspired name of Ice Breakers.

In another chance meeting Brian Brakenridge met the late Sir Peter Blake, who was at the time preparing for the Jules Verne round-the-world race. Blake tried out some Ice Breakers underwear and was so impressed he ordered that his crew be outfitted with the gear. In a story that has become part of modern-day Icebreaker marketing mythology, Blake lived in one pair of underwear for 40 days straight without changing, a triumph for the no-itch, no-stink attributes of New Zealand merino fibre. (He later greeted Brakenridge in a Wellington bar with the words: “Ah, Mr Brakenridge, the sheep farmer responsible for stopping my undies from smelling.”)

But by 1994, despite the Blake coup, the Brakenridges were producing only a small amount of product, sold mainly to tourists through their Pohuenui lodge and a store in Blenheim. The couple knew that if the business was to grow it would need capital, and a concerted development push.

Moonstruck

It was around that time they met Jeremy Moon, a 24-year-old Otago University marketing graduate, who was then working for CM Research, and restless to have his own business. Over lunch, Brakenridge threw Moon an Ice Breakers top and the light went on in the young entrepreneur’s head. “I’d grown up with wool as being itchy, prickly and heavy. This was light, soft, machine washable and gorgeous.”

Moon immediately started researching the synthetic-dominated outdoor clothing market. He recognised an opportunity to create an entire new product category from a fibre that was grown in New Zealand’s mountains, had enormous thermal qualities, could be worn next to the skin, and didn’t pong when worn for weeks on end. “The company was built around commercialising that insight.”

He quit his job, mortgaged his house, bought half the Brakenridges’ company, and spent three months writing a business plan.

Moon is nothing if not an ace networker and an astute listener, and from the outset he enlisted the advice of retired BNZ executive Peter Travers, who he had met through Travers’s son Hamish, a university friend. Travers immediately saw huge potential in the business proposition: “It was very exciting and Jeremy was clearly the person to lead it.”

Travers mentored Moon, teaching him how to do financial projections, how to smarten up his business plan and, more importantly, emphasising the need to bring in the right sort of investors — those with influence and patient money. “Peter stressed to me the importance of creating this as a special club for carefully chosen people, because it was such a special and rare opportunity. He said, ‘if you get five investors in, I’ll be the sixth’.”

Moon drew up a list of ten people to whom he sent the business plan and a request to invest, again working his already impressive network of contacts. Among the names were Todd Corporation chairman Noel Todd (Moon was mates with his daughter Juliet), Jamie Hall (head of Moon’s former employer, CM Research), CS First Boston chairman Brian Johnson (Moon was friends with his daughter Amanda), and IT specialist Denis O’Neill. Sir Peter Blake and fellow outdoor adventurer Graeme Dingle were given shares.

As Moon tells it, as soon as Todd heard that Travers was in, he was in, and when word got round that Todd was in, the offer was oversubscribed. In what sounds like the easiest capital-raising on record for a startup company, investors (including Moon’s parents Ross and Joan) stumped up a total of $250,000.

From this clever blending of small cottage industry, mercurial young entrepreneur, and the old boys’ network, a brand was born.

Brand new brand
Although Brakenridge’s stake was greatly diluted by the capital raising (he now holds about 2%), he remained on the board of directors for about six months until his remote location forced him to withdraw in favour of Denis O’Neill, who remained on the board until a couple of years ago. Other founding directors were Travers and Todd (chairman), who have served as the sage heads to Moon’s youthful enthusiasm, enforcing strict governance from the outset.

Nearly half the company’s seed capital — around $100,000 — was invested in brand development before a single item of clothing was made. For six weeks in early 1995 Moon, branding expert Brian Richards, and a team from Design Works brainstormed the vision behind the brand with nothing in front of them but a small piece of white merino fabric. “The outdoor clothing story in the 90s was about sweaty men climbing mountains as quickly as possible,” says Moon. “Icebreaker was to be about the relationship between people, and between people and nature. Brian brought this beautiful idea of kinship with nature to the table as a story-telling platform.”

Refinements almost Shakespearean in their subtlety were made to the language of the brand: Ice Breakers became Icebreaker (“it’s active rather than passive,” explains Moon); the word ‘nature’ rather than ‘natural’ would be used (“natural had connotations of hippies, nature had connotations of adventure and the bush and sea”); the word ‘wool’ (itchy, heavy) was banished — the product was to be known as merino.

Then came months of design work: clinching the logo, choosing fonts and colour palettes, and even producing a brochure packed with photographic images depicting men and women at one with nature (but still not a single product in sight).

And how did the sage older heads around the board table feel about this talkfest that was chewing through the new company’s capital without a cent of revenue being earned? “There were many times when I thought, ‘Is this going to work?’ ” recalls Todd. “But because it was a unique proposition everything was on the plus side.”

Eventually, in November 1995, the first Icebreaker garment was produced for sale. Compared with the finely tuned brand platform that had been developed, it was a crude and basic offering. Moon describes it as a “kind of confused thermal underwear that you could wear as
outerwear” that came in either blue or white. Initially Moon did the designing himself, later helped by his first employee Michelle Mitchell, a flatmate who ditched her law career to join the startup.

Armed with a battered leather suitcase full of samples, the pair took an island each and hit the road in the first stage of what promised to be a long journey to convince outdoor equipment retailers that merino was cool, and had attributes that synthetics simply couldn’t match.

Well, it should have been a long journey — after all, Icebreaker was expensive, they were up against wool’s bad name, and synthetics were the cheap and technically proven incumbent. But of the 60 retailers Moon targeted, 20 came on board in the first year, and the rest within the next two years. One of the first stores to give Icebreaker a chance was Bivouac. Ten years on, Icebreaker is the single biggest supplier to the six-store outdoor clothing chain.

“They’ve opened up a lifestyle aspect, and softened the focus of a lot of outdoor stores,” says Bivouac part-owner Gary Martin. “Jeremy was doing the hard yards himself in the early days. If he hadn’t been such an enthusiast, it may have died.”

But Mitchell acknowledges they were also in the right place at the right time. “Retailers were excited because it was the first new thing to come into the outdoor market for a long time.”

Because it had the merino space to itself, Icebreaker had time to make mistakes — of which there were plenty. Mitchell and Moon rattle off a litany of cock-ups and hiccups: the first instore merchandising unit that took six men to carry and held hardly any stock; a production run that made garments with sleeves six inches too short; the sudden closure of yarn supplier Alliance Textiles’ Mosgiel plant, putting deliveries two months behind schedule.

Mitchell: “One of the things I learned with Icebreaker from the beginning was that you just keep going no matter what. Things would happen and you’d think, ‘Oh my God, what now?’ but you just had to keep going.”

And gradually the product acquired the sophistication and polish of the original brand idea: professional clothing designer Alison Blain was brought in, and now the company’s design effort is led by design director Rob Achten and ex-Gap and Banana Republic designer Duncan McLain; an ever-increasing palette of colours has been introduced; and the range — just 30 stock items back in 1995 — has grown to 1,000. In its local market Icebreaker is now just as likely to be seen on a receptionist in a provincial law firm as on the ski slopes or a tramping hut.

Rapid growth in demand produced intense pressures, however, and even Mitchell admits having doubts at one time when the company had just a handful of employees and everyone was working extraordinarily hard. System failures were annoying retailers, and the company struggled to sort things out fast enough. “We really got through because of the support of our board, and we were able to upgrade our systems and take on more staff. But it felt very unstable.”

To sort out the chaos, financial controller Dean Watson was hired about five years ago. (He’s reputed to be the only Icebreaker employee ever to come to work in a suit — long since abandoned.) “In the early days it was all fire-fighting and reactionary,” Watson recalls. “We’ve changed that massively and can now do accurate future forecasting. But back then we couldn’t offer the board strategic plans. It was probably a couple of years before we had systems in place that gave the board comfort.”

As demand continues to grow, the company is in the midst of another six-figure systems upgrade. Clearly, producing a hip clothing line under a sought-after logo isn’t enough to keep the show on track. As Icebreaker’s export effort has gained momentum, so too has the complexity of its supply chain. Some 500 tonnes of merino fibre is bought each year under two- to three-year contracts from around 60 high country stations. It’s then spun in Australia; knitted, dyed and pre-washed either in Italy, New Zealand or Asia; and made up into garments in New Zealand or China.

With a nine-month supply chain and demand in the important US market increasing at 100% a year, it’s a finely balanced process. Produce too little and Icebreaker risks burning off enthusiastic retailers; produce too much, and it risks having expensive inventory sitting in its warehouses.

Keeping competitive
And, while Icebreaker could afford to make mistakes when it had the nascent merino outdoor clothing market to itself, that luxury has evaporated. Here in New Zealand, Untouched World, Kathmandu, Swanndri, Survival and Norsewear are among those now producing merino outdoor gear. In the US, there’s Smartwool and Ibex and, in Canada, Mountain Equipment Co-op producing activewear from merino. Even hardcore technical outdoor brands like Arc’teryx have introduced merino lines, and with Nike now putting merino inserts into shoes, it seems only a matter of time before the sporting giant gets into merino apparel.

Moon isn’t intimidated by the competition. Despite the emergence of competing local brands, he says Icebreaker’s domestic sales grew 45% last year. “The game for us will be won or lost on the international market, and we don’t have any serious international competition.”

Mitchell, now the company’s marketing manager, is pragmatic about the competitive threat. “We will keep our space in retail if we keep making money for them. We can’t for a moment be arrogant.”

Having created a new market category for outdoor merino clothing, Icebreaker has kept ahead of its game through constant innovation in styling and performance. Marketing has become increasingly slick, headlined by its glossy annual product catalogue (it cost $200,000 to produce this year’s) that plays on the urban lumberjack’s yen for adventure, and hammers the story of merino’s environmental sustainability and high country origins. And it has worked hard at with retailers, listening to their complaints and suggestions, and tapping into their consumer insight through regular focus groups.

The message from shopkeepers is “keep it up”.

Canadian James Rogers of Ocean River rates Smartwool as Icebreaker’s most significant threat, but says the US company’s offerings are not as good. And he says the rollout of Icebreaker to his consumers is just beginning. “The word is still spreading out here. As long as they keep the clothes snappy and keep doing what they are doing, it’s just going to keep getting bigger.”

Rutabuga’s Benoit says other brands are producing similar pieces but of poorer quality than Icebreaker. “In the past other vendors have had problems with material and production. We have not had any [Icebreaker] items returned as defective or due to poor quality.”

The brand is gaining momentum in Europe, says UK-based Taylor, with huge repeat orders from existing customers. He says staff in outdoor stores are a good litmus test for what will soon be hot and “they’ve gone nuts for it. Retail staff see Icebreaker as very cool. Jeremy’s skill has been to pitch it as a fun, cool brand.”

So, could we be looking at the emergence of a truly global brand? New Zealand’s own Nike? “We’ve been going ten years and there’s easily another ten years of development,” says board member Travers. “The idea of ending up as an icon is, respectfully, something of a distraction.”
Sage advice indeed.

Icebreaker — the numbers

Ownership is spread among 26 shareholders, with managing director Jeremy Moon holding around 40%
The company won’t disclose turnover or profit. Moon says revenue is a “healthy eight figures” — ie, over $10 million
Turnover growth has been 811% in the last five years, according to Moon
Export revenue makes up over half of total sales
Total staff — 52 (Icebreaker outsources all production)

On the sheep’s back
A few years back, Robert Butson was a fed-up farmer struggling with volatile prices for his merino wool. One year he might get $10 a kilo; the next it could be $4.50.

Then his wife Linda met a “funny looking fellow wandering around with a battered suitcase” at a merino conference. It was Jeremy Moon, and initially Robert Butson thought him a “dreamer”.

But that chance meeting between a young urban dreamer and a farmer’s wife was part of a revolution in New Zealand’s merino industry that has helped secure the economic future of high country stations like the Butsons’ Mt Nicholas. Until then, all their wool was sold at auction — there was no other option. Now, nearly half — around 50,000 kg — is sold to Icebreaker under fixed-price contracts of two to three year’s duration. It’s an arrangement that suits Icebreaker because it provides price stability in its raw ingredient; and it works for the farmers because it’s a hedge against inherently unstable auction prices.

The contracts are brokered by the New Zealand Merino Company, which came into existence at around the same time as Icebreaker. (And, typical of the New Zealand village, the managing director happened to be John Brakenridge, brother of Brian, the former merino farmer from whom Moon purchased the original idea for Icebreaker)

“The wool industry really needed some brave people to move towards contracts,” says Butson. “And it needed Jeremy Moon to take a risk on that. It’s made a hell of a difference to our farming operation.”

The Butsons were among the first direct suppliers of merino fibre to Icebreaker. Since then, the contract system has expanded greatly, and they now sell 70% of their wool under contract to end users such as English knitwear manufacturer John Smedley and US sock and apparel maker Smartwool.

The relationship with Icebreaker extends beyond merely supplying raw material. Dramatic photography of Mt Nicholas station, on the remote shores of Lake Wakatipu, has also featured in Icebreaker’s artfully produced product catalogues. Last year the Butsons hosted the “Icebreaker University”, in which around 30 retailers were mustered out of the city and into the high country for a couple of days, to be shown around the environment that produces merino fibre.

“You feel like you’re part of Icebreaker, and you feel proud to see the product out there,” says John Butson.

John Brakenridge says the significance of Icebreaker’s role in the merino industry can’t be overstated. “They’ve been prepared to chart new territory, they’ve forged new markets, they’ve introduced fixed-price contracts which have given the growers confidence, and they’ve given the growers visibility of end product.”

Icebreaker now buys around 5% of the total New Zealand merino clip.

Moonstruck: Inside Icebreaker

Ten years on, Icebreaker is a triumph of great timing, brand-building, networking and design. Rebecca Macfie investigates the master of merino