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Tuesday, 26 March, 2002, 11:03 GMT
Business boom for surf firms
Surfer riding wave
Surfwear also appeals to people who do not enjoy the sport
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By Christian Mahne
in Sydney, Australia

Within Australia's booming economy you'll find a golden break rolling across the retail sector.

It's all thanks to the global popularity of surfing.

Fittingly for a nation practised in mixing business with pleasure, surfing is not only the national pastime, it's also one of the country's most lucrative exports.

Behind the surf, sea and sand - a $10bn a year business that's grown from the love of the great Ozzie outdoors, according to Billabong chief executive Matthew Perrin.

Dominating the US surf scene

"The three major brands - ourselves, Quiksilver and Rip Curl all started in Australia. I think Australia in the late 60s, early 70s undoubtably had the strongest surf culture, the best surfers in the world at that time.

"So the brands that started here arguably had the the best image etc and that was easily exportable to overseas markets."

Surfers on beach
Surfing is a $10bn a year business

From humble beginnings in some of Australia's best known surfing towns, three brands have risen to global dominance.

Quiksilver, the now US-owned sector leader, makes two thirds of its $600m a year sales in the United States.

Billabong comes second with annual sales of $200m.

And Rip Curl is third, with total sales of about $100m a year.

Conquering the key North American market is everyone's strategy.

Quiksilver is dominant already.

Surfing beyond the seas

Most analysts agree that Billabong and Rip Curl have several years to go before they reach maturity in the US.

While other retail stocks have been getting hit over the past six months, surf stocks have been surging.

The industry's still growing at 10-12% globally

Phil Zammit

That's because the core buyers of surfwear, the 12-24 year olds, have traditionally defied the recession driven slowdown in discretionary spending that affects their parents.

But for all the big firms the pressure to innovate and keep the youth market hooked is unrelenting.

Surf brands are having to diversify into ski and skate wear to provide a firm all year round sales base.

Alongside the boardshorts and t-shirts. You'll now find watches, sunglasses and even skateboards. In fact, almost anything the core teen market desires.

Surfing the big growth wave

In a sector defined by youth, retail analysts like Macquarie Equities' Phil Zammit believe maturity is still some way off.

"The industry's still growing at 10-12% globally. We think kids are only just starting to appreciate product ranges coming out of these companies and also start tapping into new areas like back to school and so forth.

Surf branded skateboards
Surf brands also sell skate boards

"The new markets, footwear, sunglasses are all starting to roll out new product lines. So there is still a lot of growth to come."

The action sportswear market, of which surfwear is a key part, will grow an estimated 30% this year - compare that with just 1% growth for the retail sector as a whole.

Making money

Given those figures, it's no surprise that the likes of Billabong and Globe have been stockmarket darlings.

In just 18 months as a public company, Billabong's share price has grown from 2.30 Australian dollars to more than Au$9.

That performance is pulling some of the other players towards flotations of their own.

Rip Curl recently appointed former Qantas Airways chief executive James Strong as chairman with a brief to take Rip Curl to investors.

Globally the surfwear business generates margins of about 30% for the key players.

But the popular appeal of surf brands masks one important fact.

It's a lot easier to look the part than live it.

See also:

24 Jan 02 | Business
UK leisure spending booms
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