Hobbico Bankruptcy

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I suspect Estes was one of the cash cows for Hobbico. According to some research I did Estes employs 200 people and has sales of around $34 million. There will be buyers for Estes.

Rocketron

Wow! 200 employees, that's a lot compared to a lot of hobby companies. The model train company I work for has about 50 million in sales I think with 110 employees.
Yes, someone will buy them ;)
 
I suspect Estes was one of the cash cows for Hobbico. According to some research I did Estes employs 200 people and has sales of around $34 million. There will be buyers for Estes.

Rocketron

That headcount is way outdated. For the past 15-20 years or so they are somewhere around 30-50 employees. Heck, they only have one R&D guy where they used to have three or four. When most of your product comes on containers from China, many going direct to distributors, you don't need that many in warehousing. The only manufacturing they do there is motors. No more wood shop, no more print shop, the machine shop only produces parts for the Mabels. Very little packaging. I know in 2010 they produced the Saturn V run there at the plant (somewhere they posted photos...) but it looked like they brought in temporary help for it or the office staff pitched in. Marketing staff, customer service staff, finance staff, inventory tracking staff, IT staff.

For example and in comparison, I worked in a furniture company with $20+ million in sales and we had 17 staff covering all those positions. Manufacturing was done overseas, and 80% of our product went directly to our customers. And we had a warehouse staff of two to handle the rest. And now the furniture company is even smaller; they now farm out IT, Marketing, and warehousing.
 
My first thought in all of this is who will wind up importing Futaba? Certainly not Horizon. In the end it is a sign of the times. As it has been already said, real craft hobbies are no longer in vogue. I can't stomach going into what passes as RC stores anymore. They are't what they were 20-30 years ago, they are more toy stores now. Cheap and disposable. I have been lamenting this for years. Enough to make me take a much longer step back to Ukie planes and diesel power while those little gems can still be purchased.
 
In the end it is a sign of the times. As it has been already said, real craft hobbies are no longer in vogue. I can't stomach going into what passes as RC stores anymore. They are't what they were 20-30 years ago, they are more toy stores now. Cheap and disposable.

Reality slap!! You're right and so was I to feel like we are a dying breed. The true craftsman in a hobby these days has died or thinned out severely. BUT, we're not gone....yet. These forums shows us both, those that take the easy path and those that won't blink an eye to fabricating something they need or want. Today's kids might see where a fin got lost from a kit they bought, and ditch the kit because it was incomplete. Unlike a craftsman who would simply cut one from a piece of scrap. This is an exaggeration to some extent but you get the picture. "You mean I gotta glue my own fins on? That sucks"

Your RC store note reminds me of the drastic path taken by Radio Shack just before they started to crumble. Used to be, I could go in RS and get stuff nobody else carried so I could finish some electronic project. My last couple of visits were a disappointment. Phones for days and RC toys were abundant. The real electronic stuff was narrowed down to a little bit of wire, a few small tools and a handful of connectors. Nary an electronic piece or part anywhere. Sad........
 
Again, I think you need to step back and see what is being done in RC beyond the hobby shop. There is a huge amount of scratch building still going on, in foamboard, foam built up etc, above and beyond traditional wood. However those are people who grow toward it after trying out the rtf planes, A lot of hobby shops don't carry the parts and things I need for scratch building so I order that online. I dont' think that the craft of RC is dying, it's just that many more new people are trying out RC that probably would not have before due to the hurdle of building. It's also creating better flyers I think because I found that people who built their own planes were much more cautious when flying them, while if it's just an arf you tend to push it more, getting into trouble is how to learn how to get out of trouble, if you know what I mean. Of course there are bozos who will remain bozos. The problem is that it's much easier to just carry/stock an arf where everything is in one box than carrying lots of little bits and pieces, people get bored so companies are continually coming out with new arfs to get sales, margins are tight, online competition is high for those.
 
I think just because Macy's declares bankruptcy, it doesn't mean people don't wear clothes any more. I think we're being a little dramatic about the demise of rocketry, especially with all the SpaceX and ULA and NASA stuff going on now. I would imagine we are at the beginning of a little resurgence, in fact.

Instead of working to become a more efficient distributor—especially with regards to online fulfillment—Hobbico bought up brands as a beachhead, thinking, "If people want X product, they'll have to have us as a distributor."
Unfortunately, they took on a lot of debt to buy those companies, and meanwhile didn't improve the efficiency of their distribution operations enough to service that debt. By not improving their distribution, they in effect went down with the hobby stores.

In their restructuring, they'll wash out a lot of that debt to the detriment of their bond holders and lenders. Those will be the big losers, along with Hobbico admin. Meanwhile, though they might be a bit distracted, some of the brands (if they are profitable or easily sellable) will continue to operate under receivership. Rather than try to compete with Amazon in distribution as Hobbico did, the brands will probably either get spun off or purchased by product companies. That's a better fit.

Well, at least that's how I see it.
 
On this week’s Rocketry Show podcast, Charlie Savoie said that Aerotech’s business is booming, so take that as another data point.

He also said Estes is discontinuing its 29mm BP motors. Hadn’t heard that one.
 
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...Instead of working to become a more efficient distributor—especially with regards to online fulfillment—Hobbico bought up brands as a beachhead, thinking, "If people want X product, they'll have to have us as a distributor."
Unfortunately, they took on a lot of debt to buy those companies, and meanwhile didn't improve the efficiency of their distribution operations enough to service that debt. By not improving their distribution, they in effect went down with the hobby stores....

becoming exclusive distributors is the way to get retailers to buy from a distributor.

Taking on a lot a debt was the management's fault as the company is an employee owned one.

...In their restructuring, they'll wash out a lot of that debt to the detriment of their bond holders and lenders. Those will be the big losers, along with Hobbico admin. Meanwhile, though they might be a bit distracted, some of the brands (if they are profitable or easily sellable) will continue to operate under receivership. Rather than try to compete with Amazon in distribution as Hobbico did, the brands will probably either get spun off or purchased by product companies. That's a better fit....
No sympathy for bond holders.

As for competing with amazon, they sold on the site.

The company got hurt by lost RC sales. They admitted sales where down and manufacturers were now selling direct.

Getting sued by Traxxis, and losing their account, hurt even more.
 
On this week’s Rocketry Show podcast, Charlie Savoi said that Aerotech’s business is booming, so take that as another data point.

He also said Estes is discontinuing its 29mm BP motors. Hadn’t heard that one.
I think that's a bit of BS personally, they just released the Super Big Bertha with a 29mm mount and balsa fins, not many 29mm composite motors with low enough thrust for me to be cool with balsa. Though the fins are stacked like the mega mosquito. I just think they only have so many motor machines and the 29's don't get a lot of time on them due to demand.
 
Could this be a simple mis-statement?

In other words, could he have intended to say that Estes was discontinuing 29mm COMPOSITE motors, not Black Powder?


I tend to agree. I'll accept the truth of that statement when I hear it from Estes. The darned things are hard to get, though.
 
Originally Posted by John Beans
...Instead of working to become a more efficient distributor—especially with regards to online fulfillment—Hobbico bought up brands as a beachhead, thinking, "If people want X product, they'll have to have us as a distributor."
Unfortunately, they took on a lot of debt to buy those companies, and meanwhile didn't improve the efficiency of their distribution operations enough to service that debt. By not improving their distribution, they in effect went down with the hobby stores....

becoming exclusive distributors is the way to get retailers to buy from a distributor.

Unfortunately, that makes two huge leaps of faith:
1). That one can pick winner and looser brands in a rapidly growing market.
2). That the buyer will not screw up the newly acquired business and turn it into a looser.

That process is, at best, a crap shoot, even for professional VCs.
For an average mediocre-managed company (small or large), it's a good way to waste a lot of money fast. Even if they get #1 semi-right, they always mess up #2.


Taking on a lot a debt was the management's fault as the company is an employee owned one.

No sympathy for bond holders.

It is 100% owners fault if they tolerate misguided management. No exceptions.

So that we are on the same page:
- i. No sympathy for all the retires and pension funds who rely on fixed income!
- ii. It is always "someone Else's fault" from the eyes of a worker bee... Even in case of # (i) above.


As for competing with amazon, they sold on the site.

The company got hurt by lost RC sales. They admitted sales where down and manufacturers were now selling direct.

The distributor business model is disintegrating in all market segments, for better or worse.
Between decreasing costs of direct customer access (via internet) and just-in-time supply chain, distributors who are not adding some unique value are becoming expandable.

Many still soldier on despite declining sales (music record labels, department stores, full service brokerage firms, etc), many more try to build their own direct-to-consumer sales channels via web portals.
Many try to bundle in customer support and service to stay relevant (home depot installation services, best buy tech repairs, on-the-site rocket motor dealers).
Otherwise, customers eventually find out that they can get what they want directly from the manufacturer at 5-25% less, by cutting out the distributors. The writing is on the wall.

The only immune market segments are those where distributors had cemented their position through past legal and political shenanigans.
Car dealerships, for example.

a
 
Could this be a simple mis-statement?

In other words, could he have intended to say that Estes was discontinuing 29mm COMPOSITE motors, not Black Powder?

I just relistened, and no, there is no misstatement, although he did preface the discussion as being "gossip". You can hear for yourself here: https://overcast.fm/+DvFkzBT-A/27:03

I wouldn't take it as gospel at this point.
 
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March 26 auction date.

March 27 will be interesting.

I've got a spare $10. Was going out for Mexican tonight, but I can have a sandwich instead. I'll pitch it into the pot to buy the company. Who's with me?
 

Thanks Fred, that's the site I had bookmarked as well.

Very interesting. $6M minimum bid for Estes-Cox, a bargain, right ? And if I read the legalese right 184 interested parties "entered into confidentiality agreements with the Debtors and received a confidential information memorandum." in the Autumn of 2017. That doesn't mean 184 bidders but... get in line. :)

Interesting times.

https://www.jndla.com/cases/hobbico/docket no. 192.pdf
 
I just relistened, and no, there is no misstatement, although he did preface the discussion as being "gossip". You can hear for yourself here: https://overcast.fm/+DvFkzBT-A/27:03

I wouldn't take it as gospel at this point.

The Rocketry Show guys have already walked that rumor back a bit and apologized for allowing the topic to even come up. They acknowledged that letting a competitor bring up “gossip” about a rivals’ products isn’t exactly kosher. I don’t think there was any malice intended - I listened to the show again the other day and their explication - but with all the unknowns about Estes future I’d, sadly, say anything is possible. Hopefully the discontinuation of 24mm “C” motors and the infamous E9 are the only BP motors affected...
 
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