Nautilus has “terrific trademarks,” says M. Carl Johnson III, its new leader. Ensuring consumers believe that too is one of his goals over the next year or so.
Accomplishing that will be easier said than done for the interim chief executive officer, who started March 2 after the departure of former CEO Bruce Cazenave.
The Vancouver-based exercise equipment brand is focused now on regaining its footing after a rocky fourth quarter ended 2018. The company’s stock price has taken two precipitous drops already this year. One of those declines followed a forecast by Nautilus executives that revived sales would not be forthcoming before the third quarter.
Another drop came after the quarterly results were released. The next day the board of directors accepted Cazenave’s resignation. After seven years with the company, he has accepted a new job, as president and CEO of direct-to-consumer retailer Bluestem Group.
Following a pre-established succession plan, the board turned to its chairman for immediate leadership as it launched a search for a permanent CEO.
Corporate headquarters: 17750 S.E. Sixth Way, Vancouver
Brands: Nautilus, Bowflex, Schwinn, Octane Fitness, Universal
Sales: 2018: $397 million 2017: $406.184 million
2016: $406.039 million
Profit: 2018: $14.66 million
2017: $26.3 million 2016: $34.2 million
Employees: 458, including 315 at its Vancouver headquarters
M. Carl Johnson III
Title: Interim chief executive officer and board chairman, Nautilus
Career highlights: Retired in 2015 as executive vice president, marketing and chief growth officer, Big Heart PetBrands, a division of J.M. Smucker Co.; executive vice president, brands, Del Monte Foods; senior vice president, chief strategy officer, Campbell Soup Co.
Education: B.A., government and economics, Wesleyan University; M.B.A., University of Chicago
Also: Johnson completed a 2016 Fellowship at Harvard University’s Advanced Leadership Initiative and a 2017 Fellowship at Stanford University’s Distinguished Careers Institute.
That process could take at least nine months, maybe more. So Johnson has been spending the past two weeks making the hasty transition from plugged-in board chairman to hands-on, day-to-day leader.
He brings a background replete with marketing, sales and upper management experience at some of America’s best-known consumer brands, including J.M. Smucker, Del Monte Foods, Campbell Soup, Colgate-Palmolive and Polaroid.
Last week, he acknowledged the company has challenges ahead, but was confident the strength of the Nautilus brand and its subsidiary brands would lead along a profitable path.
Johnson believes the company can improve brand awareness among people who exercise or think about exercising. And it will be looking forward to a do-over on the marketing of its Max Intelligence platform, a digital training and coaching system that pairs with its Bowflex Max Trainer M6 and M8 cardio machines. Nautilus expects some of its other machines to pair with the technology. But first the company needs to figure out how to market and sell it to consumers, following a disappointing roll-out before and during the holiday shopping season.
Throughout a nearly one-hour, question-and-answer interview with The Columbian, the first interview he has granted since taking over the company, he made several references to Peloton — usually without identifying Nautilus’ competitor by name. That high-tech fitness company, which launched in 2012, enables users to stream live classes as they ride a Peloton stationary bike. The product has taken the exercise category by storm and Peloton is believed to be close to an initial public offering, perhaps even this year.
Johnson made clear that he wished to look ahead, not back, particularly at his predecessor. Johnson emphasized, twice, that Cazenave resigned to take another CEO position and was not forced to leave the company.
“We thank Bruce for his contributions,” Johnson said. “We had a very good run under his leadership from 2012 to 2016. O.K., (2017) was a little disappointing. And then we had the fourth quarter of ’18 happen.”
What follows is a transcript of the interview with Johnson. Questions and answers have been edited for length, clarity and brevity.
The Max Intelligence platform is a digital training and coaching system that pairs with the Bowflex Max Trainer M6 and M8 cardio machines. Max Intelligence, introduced last autumn, is a subscription for $149 a year or $14.95 a month. What happened with the marketing of the product?
A lot was riding on the launch of the Max intelligence digital platform and the new Max trainer models. And we just suboptimized the marketing and the advertising. We spent good money on that and we had full confidence. But the message didn’t get through. And we had a competitor advertising at, like three (times) our level. And as you know, we historically have been the number one advertiser in the industry — $65 million to $70 million a year, which is no small amount of money. So when you’re outspent in the key quarter by three or four to one, that obviously has an impact.
And then you combine that with the time of year, right? So if things are not working well, you get that double whammy. Or a triple whammy. With a good record and so forth that we had under Bruce, you know, there was a, “Hey, we’ve had a hiccup and we’ve got to address it.” But he obviously decided to take another job. OK, we move on. And I think it’s fair to say that we’re not looking in the past, we’re looking forward.
Can you say how you’re figuring out how to craft a message about Max Intelligence that resonates with consumers?
That’s getting probably too proprietary. And we do not want to signal our competition. But suffice to say that we’re leaving no stone unturned to understand at a deep level the best way of positioning our product.
So, generally speaking, what you want to find is a point of difference that is meaningful in terms of motivating people — and not just to buy, but to use — and is differentiated … there are many benefits — or, in our case, features — that you can talk about in a category. … You want to find the one or two motivating benefits — functional or emotional or some combination — that moves the needle to purchase.
The company has said publicly that another marketing campaign for Max Intelligence can be expected in the third quarter. Between now and then how will Nautilus be connecting with the consumer?
We’re not sitting by idly. We have done some in the digital area, social area, but that’s clearly something that we can do more of. We want to change the direction as soon as we can and we want to do it smartly. So the beauty of digital is that it’s a medium that lends itself to testing. Right? You try this, you try that, and you see what works and what doesn’t and what it costs. So we’re launching a broad-based effort in the digital, social PR space. And as soon as we’re ready to talk about that, we certainly will.
What can you say about other new products? How will Nautilus go about continuing its research and development?
We start with the consumer. What are the needs out there that are not being met? You understand the structure of the marketplace. Strength versus cardio is a big break. And the other break, obviously, are the workouts happening at home or away from home? And so you look at that market structure and see where the white spaces are — in terms of what people are looking for that they’re not getting. And so there is an ongoing research effort that identifies that.
Thirty employees have been laid off this year. What do you think the employment outlook might be for the remainder of 2019?
We’re focused on engaging and motivating our employees we want to retain. First of all, I’ll just say I would stack this executive team up against any teams I’ve worked with at some of the biggest companies in this country. And the workforce here is highly talented. The culture here is very supportive. I mean, people walk through walls if you invite them to participate. Then share where we’re going and why.
I don’t know how many meetings I’ve been in, but people are speaking freely. You know, the idea is to create an environment that is safe to speak up and contribute. That’s what I find here. There’s so much to be done. There’s so much opportunity.