Covid-19 and the industry

Here is the story of the effects of the Covid-19 lockdown on the South African cycling industry as told by Seamus Allardice. Or at least the effects as of week one of the lockdown …

 

These are strange and frankly stressful times. We are all worried about our health and in most cases the health of more vulnerable family members.

But we are also worried about our fitness and mental health from being locked in homes and flats for five weeks. Along with those concerns, nagging in the shadows of our minds for some and screaming front
and centre for others, is the financial impact of Covid-19.

Its impact will extend far beyond the initial 21-day lockdown period. With Moody’s joining Fitch and S&P in cutting South Africa’s sovereign credit rating to junk, there is no doubt we are in a recession. What does that mean for the cycling industry? And how is the initial lockdown affecting businesses and individuals across the breadth of the trade? It makes sense to start with those that were hit first, cycling events.

 

PRE-LOCKDOWN: EVENT CANCELLATIONS AND POSTPONEMENTS

Events

This story being for Full Sus I’ve chosen to focus on the mountain biking events. Though it goes without saying that road and all manner of other mass participation events, like trail runs and triathlons, are in the same boat. South Africa’s biggest cycling event only just scraped through unscathed.

It seems impossible now, looking back just three weeks later (at the time of writing) that the Cape Town Cycle Tour went off without a hitch. At that stage the only confirmed Covid-19 patient was in Kwa-Zulu Natal and we all existed in a pre-Corona bubble. Some people, it should be said, were already calling for events to be called off and for individuals to exercise extreme caution. Hendrik Lemmer, of this parish, was particularly vocal. As someone who earns most of my living through working on events, I had a vested
interest not to heed his advice.

Photo by Peter Kirk.

Looking back, we were perhaps fortunate that the Cycle Tour went ahead. Though I haven’t spoken to Dave Bellairs or anyone else from the Cycle Tour Trust my sense is that another cancellation would have been a near crippling body blow for the largest timed cycle race in the world. But the weather played along and with the roll out of, the now ubiquitous, hand sanitisers it turned out to be one of the best editions of the Cape Town Cycle Tour in recent memory.

A week later the world’s premier mountain bike stage race wasn’t as lucky. Speculation mounted on social media as the Absa Cape Epic neared. Would the race go ahead? The organisers insisted it would. Hindsight is not kind on their pre-race bullishness. But once again I feel the emotional investment of 18 months of planning and preparation clouded the issues. And remember no official government statement had been made at that point.

The pre-race press conference, on Thursday the 12th, was an eerie affair. Hardly any journalists attended the event and everyone tried their best to practice social distancing. Though that proved difficult and
perhaps even pointless, given it was staged in a conference room with air-conditioning re-circulating air. Regardless no mention was made by the Specialized riders that they were on the verge of withdrawing from the race. It was indicative of the disorientating speed of developments that I don’t believe the riders were even considering withdrawing on Thursday morning. By Friday their decision had been made. Austria was closing its borders and with multiple support crew members hailing from that nation the team withdrew entirely. Specialized’s withdrawal kicked the rumour mill into overdrive. Would other teams follow
suit? Would the race still go ahead? I’ll admit I had work to do that Friday which never got done. Instead I spent the day locked in baseless speculation and refreshing Twitter. When the news that IRONMAN South Africa, which was scheduled for late March in Nelson Mandela Bay, was being postponed I felt the writing was on the wall for the 2020 Absa Cape Epic.

At 19:27 the official announcement was made. The 2020 Absa Cape Epic was cancelled. By Sunday evening the race’s decision to cancel was null and void. President Cyril Ramaphosa’s declaration of a state of disaster, on Sunday 15 March, and banning of any gathering of more than 100 people would have brought the race to a premature close regardless of what the organisers had wanted to do.

Logistically the Absa Cape Epic, like joberg2c, had no choice but to cancel the 2020 event. Shorter stage races have been able to postpone their affected events. But eight and nine day races are simply too long to move. It was in that moment of cancellation that the economic impact of Covid-19 really began to affect the cycling industry.

While timing could not have been worse for the Absa Cape Epic, the race’s dominance of March meant that the rest of the mountain biking calendar had time to react. While I can’t speak for Farmer Glen Haw and Craig Wapnick, but I assume they jumped into action as rapidly as Dryland Event Management did. Henco Rademeyer, of Dryland, phoned me on Saturday to prepare press releases for their April events.

“We were fortunate enough to be able to move the 36ONE Mountain Bike Challenge and the Glacier Cradle Traverse” Rademeyer explained. “This was possible due to the assistance of the event sponsors, partners and venue owners.”

Having nearly a month to change arrangements in the case of the Glacier Cradle Traverse and five weeks in the case of the 36ONE MTB Challenge certainly helped ease the blow. My personal feeling, as someone
who entered an event which has also been postponed in light of the Covid-19 pandemic, is that clear communication is key. The events which were able to take advantage of the time afforded to them to make a firm decision have fared better in the court of public opinion.

Despite being cancelled entirely in 2020, joberg2c has received limited backlash. “joberg2c was one of the events which was impacted by Covid-19. It was a hell of a difficult and strange situation for everyone concerned to be in,” Craig Wapnick, the race founder, confessed. “It was uncharted territories. But after consulting with our lawyers to understand what our rights are, after having paid out various expenses we realised the position we were in, six weeks before the event, we realised we could cancel the race under the force majeure clause.

“But that’s not our style,” Wapnick added. “So, we looked for other ways to ensure the rider comes out on top. Every event is going to be slightly different, with different circumstances, and I certainly don’t wish what happened to the Epic on anyone. joberg2c has always been about trying to do what’s best for the riders, the communities and obviously still run as a sustainable business. So, we decided to offer riders who had entered the 2020 race a carry over, with a slight fee, to ride 2021. Primarily this has gone down really well with the majority of riders; they see it as a very generous offer to keep the event alive. joberg2c is basically not having a year and nor are the schools and villages we support. We, along with the schools
and villages, are taking a knock so that 2020 riders have something to look forward to.

“The R4 500 payment per rider is hopefully going to go down well, with riders seeing the fairness of it all, as joberg2c is having a nonyear,” Wapnick clarified. It is interesting that event insurance has been mentioned by some people. But event insurance does not cover these sorts of things in most cases. So, it’s new territory. But we are going to survive this and that’s why we have asked the riders for their support. In doing so we hope we have made the carry-over doable for everybody and are providing something to look forward to when the virus subsides.”

While joberg2c was forced to call off their 2020 race KAP sani2c were able to postpone from May to early December. “We had to postpone the event, and we really had no choice because so many worthy organisations in our communities rely upon sani to run their businesses,” Farmer Glen Haw, of sani2c,
stated. “We have schools who rely upon KAP sani2c to pay teachers and to do various things
at the schools that would be impossible to do otherwise. They would be very different schools if there was no sani2c. Firstly class sizes would be so much bigger. And there would be children leaving the school, because parents who can afford to send their kids away to other schools would do that. Generally, those are
the parents who are really involved in the local schools. They tend to be the parents who have the time and resources to help run the schools. So, it’s a massive picture and for us not to run would mean those organisations would lose out on a year of income from the fundraising that they do at KAP sani2c.

Photo by Shaun Roy/Cape Epic

“As far as postponement goes, we had a look at dates,” Haw continued. “We had a lot of people who had already entered, so they paid money in and they stood to lose a lot. But we have costs that we incur running the office, clothing that we had already ordered and stock that we had already bought. Plus, staff that work year-round on sani and depend on the race, so that’s a monthly cost for us. For us to cancel an event would therefore mean that the riders would lose out a lot. So, we moved the dates into December. Obviously, we are respectful of the historic dates of various events, like Berg and Bush and Wines2Whales.
So, we moved as early as we could to avoid full rivers and bridges being washed away. KZN is a summer rainfall region and we cross the mighty uMkomazi River, which is no small river at all. The later we go in the summer the fuller the river gets generally. So, we’ve gone for as early as possible in December, before everyone starts shutting down, from the 1st to the 5th.”

“There is no further cost to the riders who have already entered,” Haw clarified. “And we are looking forward to riding the trails in summer. It might be tricky. People might realise why we normally run it in May. But you never know we might hit it lucky. Regardless it will be a memorable KAP sani2c!”

With the lockdown ensuring that all events until the end of April had to be postponed, the events falling outside that window, had to make educated guesses as to weather or not they would be able to continue. It seems highly unlikely that joberg2c, the 36ONE MTB Challenge, the Swartberg 100 Gran Fondo and KAP sani2c were cancelled or postponed prematurely. But things are a little trickier for the PwC Great Zuurberg Trek. At this stage it is the race that is the latest in the year which has been postponed.

Originally scheduled for the 29th to the 31st of May the three day stage race has been moved to an, as yet, unspecified later date. “From PwC GZT’s side we had a look at the timeline which China and other countries have followed,” race director Siska van der Bijl explained. “We seem to be three months behind China and when we made the calculation it looked like the event would fall smack bang in the middle of the pandemic’s local spread. So, together with PwC we couldn’t see the Covid-19 crisis being over in two and
a half months. The other thing that played a role was the fact that while we had contracted suppliers, we had yet to pay deposits for most of the services. And those that we had already paid could be carried over to the postponed event.

“Even before the President’s first address riders were reaching out to us, asking what we were going to do,” Van der Bijl recounted. “Riders were asking about their accommodation bookings and enquiring as to whether or not they should book flights. Because of the uncertainty of that we wanted to give the riders
the chance to not book flights and not get themselves further out of pocket. After making the decision to postpone we reached out to all the riders with two alternatives. Firstly, we offered them the opportunity to take part at a later date in 2020, though the calendar is fast becoming very full in the latter part of the year.
Or if they can’t make the 2020 date, we are offering them a full carry-over to 2021.”

Riders

The effects of the postponements and cancellations don’t just impact on the amateur riders who make up the bulk of the field. While most events are doing what they can to limit the inconvenience and financial burden on their entrants there is also the issue of the elite racers. They are likely to be among the people
most affected by an extended break from events being able to take place.

It is not just in terms of missing out on prize money; which in the majority of cases supplements small basic salaries and allows the country’s top mountain bikers to continue to race. But the primary impact is the loss of publicity and hence the athletes’ reduction in value to their sponsors. Some will no doubt be supported through thick and thin by their sponsors. Others meanwhile will find themselves in trouble.

Two of the major local men’s teams are in the final year of their contracts with title sponsors. In the absence of the Absa Cape Epic those sponsors will be hard pressed to recommit to the teams. If the marketing departments within the companies forking out millions of Rands to foot the bills for bike racers look at their
2020 return on investment the picture will not be rosy. Especially as the decision to continue sponsoring the team needs to be made sooner rather than later and this therefore being made in a recession, when marketing budgets are assured to shrink, and before any major races have taken place.

Meanwhile South Africa’s Olympic hopefuls – Candice Lill, Mariske Strauss and Alan Hatherly – have had the rug pulled from under their feet. Strauss is recovering from Covid-19 herself, but her Absa Cape Epic partner and the former u23 World Champion are confined to indoor trainers; like the rest of us. What that does to their motivation remains to be seen, but while they might be expressing positive sentiments on social media you can be sure the situation is different behind closed doors. They are only human after all. They, like the rest of us, find the current situation unsettling and find focus harder to maintain, I’m sure.

LOCKDOWN AND IT’S FAR REACHING EFFECTS

Bike shops

It is of course not just events and riders who are affected by Covid-19. The lockdown, which came into effect on Thursday 26 March at midnight, was preliminarily scheduled to run for 21 days. With only grocery stores, supermarkets and pharmacies open during this time bicycle shops have been particularly hard hit.

Not only did many Western Cape stores lose out on the expected income they were banking on earning at the Absa Cape Epic, but now their workshops are closed and sales in the physical store have stopped. One store reportedly purchased over R100 000 in spare parts, as they run a large service centre in Tweede Kamp. With no joberg2c or KAP sani2c on the near horizon either that stock will be lying in boxes for six months, before they will be able to start recouping their expenditure.

Photo by JB Bardenhorst

One of Cape Town’s newer store owners replied to my query as to how it was going with a simple: “Business is not good.” Without the size of Cycle Lab or the support of an international brand, like the other two people I approached for comments, he is not sure if his shop will survive the lockdown. To make matters worse he also runs a small importing business. “That’s also *ucked,” he flatly stated. Some landlords are reducing rent but shops have other expenses to cover still, including staff. I’ve heard unconfirmed reports that stores are retrenching or simply letting staff go. In order to keep cash coming in, shops that can, have turned to heavily discounted online sales.

“It’s business unusual at the moment,” Damian Murphy, the Group Marketing Manager for MoreCorp, owners of Cycle Lab recounted. “These are trying times at the moment. The MoreCorp Group, MoreCycle and Cycle Lab are very much a company based around getting outdoors and helping people do the sports they love. Cycling and golf are our two major pillars in the group. With people not being allowed to cycle or play golf it has obviously had a monumental impact on our business. We still have the brick and mortar retail stores and we still carry all those overheads at the moment, but we’re not generating any feet through the doors. Which means we’re not generating any revenue through the doors.”

“That is putting a massive amount of strain on us as a business and causing us to make some drastic decisions,” Murphy elaborated. “We’ve had to make some changes to policies and are now doing all we can to make sure that when the lid is lifted on this that we are still able to trade. We are trying to do this as responsibly as possible because we cannot afford to be reckless for safety of the industry as a whole.
That being said we’ve made the call to be very aggressive online, with our sale to help us liquidate stock which we have on hand. This will help us mitigate the losses we will suffer during the lockdown.”

As someone who is currently shopping for a new bike, although I can’t decide whether to upgrade my mountain or gravel bike first, the Cycle Lab and other online sales have been very attractive. But before I go splash a significant amount of cash on a bicycle, I need to know that I’ll have an income in May. And like many in the cycling industry that is far from clear to me at this point.

Some have been, and will hopefully continue to remain, a little more fortunate. “Specialized Stellenbosch is a company owned store and Specialized have been really supportive,” revealed Craig Boyes, of Specialized
Stellenbosch. “They were very quick to stand up and tell us, the retail staff and the Specialized South Africa staff as a whole, not to worry about anything financially at the moment. I think that plays a huge role. There are a lot of people in this country, especially small business owners, who may not be able to sustain a multiweek lockdown while paying their staff. So, from my side and the store’s side we’re very appreciative of how we have been dealt with.

“Despite coming from a bike shop background, having been with Specialized for five years and having been with the Stellenbosch store since day one, I’ve never experienced anything like this,” Boyes confessed. “Countrywide and worldwide this is new to all of us. Before the lockdown was announced, Trevor [Marshall, the store manager] and myself had a talk about what we would do if the lockdown came into effect. So, we could prepare as best we could.

“The guys from the shop have taken it really well,” Boyes continued. “We’ve been super positive about it and have tried to keep the best vibes going among the staff. I think in times like this it is really easy to fall into a negative rut. You have to be aware of what is going on and be honest with yourself, but still stay positive. To help the other guys from the shop stay positive we’ve been staying in touch and doing Zoom
calls, just to make sure nobody feels excluded or left out.

“We’ve also been keeping ourselves busy with online tech courses, ” Boyes added. “So, the guys in the workshop are keeping themselves busy with that. We’ve also been using the time to clean up the back-end of the system, removing duplicate customers and the like. The idea is that when we do open, we’ll be on the front foot and will be better prepared to help any customer who comes in.”

Manufacturers

Local cycling industry manufactures find themselves in an equally difficult position to the vast majority of the industry. For them lockdown means no production, no local sales and no exports. In the case of Santini, who are based in the Lallio suburb of Italy’s worst Covid-19 effected city, Bergamo, they have been able
to refit their factory to produce masks. That, or producing the other essential of our time, hand sanitiser, is sadly not possible for Squirt Cycling Products.

Squirt is arguably among South Africa’s biggest cycling success stories. Exported to 42 global distribution partners, it is available in most places bicycles are ridden. “We stopped production the day the lockdown came into effect,” explained Squirt Cycle Products’ Danie van Wyk. “Of course, we had to send the factory workers home to isolate. Regardless of the loss of production, we undertook to pay their full salaries for at least March and April, because we will need a motivated workforce when the virus is beaten.

“We are proactive and are using simple communication methods, like WhatsApp, to keep our employees informed and updated on the governmental health measures,” Van Wyk said. “Due to the restriction on overland transport, all stock on the factory floor could not be shipped. In South Africa all sales of our products have ceased and all products awaiting shipment at the port in Cape Town could not be loaded. Oversees distributers are experiencing a drastic drop in sales, and have put their orders on hold indefinitely due to their country’s isolation and transport restrictions. Delivery of raw product to the factory is postponed indefinitely too, so it may take a few weeks once the lockdown is lifted to go into full production again.”

“In the meantime, we are using our digital platforms to continue marketing,” Van Wyk concluded. Though Van Wyk and Squirt Cycling Products seem secure in the short to medium term, the uncertainty of the situation has everyone a little nervous. An extension of the lockdown or a return of Covid-19 in a wave of reinfections in the winter could well place even the most well-run companies on the back foot.

Importers

Admittedly this is an area subject to much conjecture. One major distributor of bicycles and components I approached was unwilling to speculate, saying that it would take at least six months to assess what the future holds. What is certain is that the future holds higher prices for South African cyclists.

With the Rand plummeting in value and the aforementioned sovereign credit rating downgrade things are looking less than rosy for the economy. Add job losses to the mix and even those with the money to buy a new bike may be thinking twice. It’s certainly put my planned upgrade on the back-burner.

Though I don’t take any pleasure in being a doomsday prophet I expect the number of importers to shrink. The larger distributers have the capital to weather the storm, particularly those backed or owned by the international brands themselves, but the smaller companies will struggle. Importers brining in small
numbers of boutique bike brands will have to box very clever to survive much beyond the
lockdown.

The Winners

That said, there are of course winners too. Smart trainers flew off the shelves at bike shops across the country like never before, in the days between the lockdown being announced and it coming into effect. Good old-fashioned indoor trainers were popular too. And by all accounts Zwift is struggling to cope with the load. Though that sounds like a good problem to have. Other cycling industry winners are the
nutrition and supplement brands, who are able to continue selling through their supermarket and pharmacy outlets. Beyond that it is hard to see any short-term winners.

Solutions

The solution then is to use this time wisely. To make the most of being at home, I hope with loved ones. And recharge your batteries as best you can. I for one will be using the Covid-19 lockdown enforced opportunity to reassess my business; such that a one-man show, writing about cycling, is a business. In recent years I’ve made my living covering events, but that may well have to change.

To what exactly I don’t know. But at least I have the time to make a plan now. It’s something I’ve never really done before. I’ve found myself swept from race to race trying to keep up. And I have a suspicion I’m not alone in that. The scattered approach of so many people, events and companies involved in
cycling, points to that. So, maybe some time to reassess, re-evaluate and readjust to the changing industry is what we all need. As Jocko Willink says: “Good.”

 

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