Where: Denver, Colorado / Asia
Industry: Consumer & Lifestyle
Alchemy changed the game by manufacturing composite bike frames in the U.S. Growth is now driving a global supply chain.
Owner Ryan Cannizzaro founded Alchemy Bicycles in Austin, Texas, in 2008 and moved the company to Denver in 2012 to be at the epicenter of the outdoor industry boom.
The decision to move was easier than Cannizzaro's choice to manufacture composite bike frames in U.S. At that time, it simply wasn't done, and even today, most bike frames, composite or otherwise, are manufactured in Taiwan for the brands that control the U.S. consumer cycling spend.
That didn't stop Cannizzaro from embarking on a journey to make composite frames in Denver. As noteworthy the production and process innovations have been, Alchemy's commitment to local manufacturing and a Denver-based workforce have also distinguished the company.
Where Alchemy manufactures
"Denver manufacturing has stayed pretty consistent," says Cannizaro. "The same group of guys manufacture all the road and gravel bikes and one mountain bike [out of here]. We made the first full-suspension carbon-fiber mountain bike frame in the U.S., and we still make that model here -- a 27.5-inch bike that people can custom paint."
But growth in the mountain bike category has compelled Alchemy to expand manufacturing operations outside of Denver to keep pace. "We started manufacturing mountain bikes in Asia -- three of our four models are manufactured there -- a complete assembly plant also managing all our inventory," Cannizzaro explains.
"For the most part we're building to order here,” he says. "We're set up as a shop that manufactures to order. But we've been able to team up with a manufacturer in Asia that's capable of building the exact same bike were building here."
The factors that pushed Alchemy offshore likely resonate with other outdoor industry brands. "There were several reasons," Cannizzaro says. "It's more cost-effective to use a manufacturer that's set up to build higher quantities. We would have to scale up here with tooling, equipment, and people. With carbon fiber we can compete on the tools and equipment, but it's more difficult to compete on the labor side. To be able to produce a bicycle at the cost of somebody that's set up in Asia to mass produce is very difficult."
Outsourcing production, he says, hasn't compromised quality. "On the mountain bike side, we feel very comfortable that the frame we're getting manufactured in Asia was up to our standards -- the exact frame we would make here. If doesn't make sense for us to tool up and make the frame here for more money."
The R&D process remains closely integrated with manufacturing in both Colorado and Asia. "You want [the frame] as light and durable as possible so the suspension platform can do all the work. We still prototype and test and ride any model that we're not going to manufacture here, and then we go to the manufacturer in Asia and tell them how we want it built, and that's done based on us building a prototype here, giving it to our sponsored riders, our employees -- anyone that can give us feedback. Once we know exactly how we want the frame made, we have it manufactured."
Alchemy's long-term plans involve manufacturing in both Denver and Asia. "On the road and gravel side -- the carbon and titanium side -- the way we manufacture those bikes and the processes we use, outsourcing isn't an option," Cannizzaro says. "We wouldn't build a bike that way. We put in too many man-hours, too much attention to detail, and the build process we like to use, they won't do in Asia because it's not cost-effective."
He continues, "As we continue to grow with new models, we'll also continue to look at ways to do it cost-effectively here."
Also on Alchemy's innovation agenda is a change in the way the company sells its bikes. "One thing we did at the beginning of the summer, that's working out in our favor, we went to a direct-to-consumer sales channel. We thought we could control our messaging a little bit better," says Cannizzaro. "And we feel that the bicycle industry is making that shift where consumers are more comfortable buying from a website, whether you ship it to a bike shop where it's assembled or we just assemble it here and ship out a complete bike."
Plus, he notes, "It was hard to fund the [account] receivables going through the channels. The retail shops expect to be financed with inventory for quite some time. We were funding it as we were growing, but our receivables were going through the roof. We just didn't feel that for the size of the company we are, we could fund the receivables as we grow."
Another benefit of going direct: "It also allows us to offer a better specification for the bike."
And for Cannizzaro and Alchemy, it always comes back to the bike.