Note: This is Part 3 in a 3-Part series, “Darn Tough Vermont: Success can be a Double-Edged Sword.”
Success can be a double-edged sword.
Everyone in Northfield should consider what Darn Tough Vermont might look like ten years from now.Simply put, the same fate of Chouinard’s Comfort Colors may be waiting for Darn Tough Vermont. As you may recall, Comfort Colors was purchased by the global clothing company Gildan in 2015, resulting in the loss of many jobs in Northfield.
Could the same thing happen to Darn Tough Vermont? Sure.
If we look at one of Darn Tough’s leading competitors, we can get a glimpse of one possible future for Darn Tough Vermont. SmartWool, another provider of premier outdoor sports socks, was founded in 1995 by ski instructors Peter and Patty Duke. The company was purchased by Timberland in 2005, and which was then acquired by VF Corporation in 2011. Today, SmartWool is a brand for a publicly traded company.
When SmartWool was purchased by VF Corporation, residents in Steamboat Springs were uncertain about their future. But SmartWool remains in the Colorado ski town and even expanded its headquarters in 2013.
This didn’t happen by accident. The City of Steamboat Springs wanted to keep SmartWool around. When SmartWool needed to build its new headquarters in a former airport terminal, the city loaned the company $450,000 toward the $2 million project. It was a great economic development initiative. The city continues to earn 3.5% interest on the loan and SmartWool continues to hire new employees.
The Smartwool story is very common. The original owners may have a strong commitment to their community, but they also deserve the fruits of their labors when their brand becomes more valuable than their company’s operations. When a small company creates a high-value brand and demonstrates consistent growth, it’s a cherry ready to be picked by a larger company.
Darn Tough Vermont shows all the signs of growing ripe for the picking, especially if the company achieves its goal of $100 million in annual revenue. By then, Ric Cabot may very likely get an offer no one would refuse, no matter how much commitment one might have to Northfield employees.
This is just a fact of life in a free economy.
So what would happen to local employees if VFC, Gildan or another global clothing company purchases Darn Tough Vermont? Ordinarily, global companies might close up the local operation and transition to cheap, outsource labor. But sometimes the “Made in the USA” slogan is worth the price of keeping operations in the US. The question might be, would a hypothetical buyer keep the overhead of a manufacturing facility and employees, or would the hypothetical buyer contract manufacturers in North Carolina or Tennessee?
Northfield leaders should keep this story in the back of their minds while we celebrate Darn Tough Vermont’s current success. Ric Cabot has been and will always be a model employer in Northfield, no matter what happens in the future. If he gets an offer he can’t refuse — like a $100 million — we should applaud his amazing business turnaround story. Cabot rebuilt his family legacy and will have proven the kind of darn tough company resilience worthy of a case study in future business school classrooms.
There are various future directions for Darn Tough Vermont. If we take the time to consider a potential Comfort Colors scenario, we can then take positive actions to make other scenarios more attractive.
For example, one of the most effective ways to keep a business local is to have the employees purchase the company. An Employee Stock Ownership Plan (ESOP) is one way for an owner to retire very lucratively, selling the company to its workers. An ESOP can even be as enticing as a $100 million carrot that may never come with its huge tax benefits, owner rewards, and worker stability. Vermont happens to have quite a bit of expertise in forming successful ESOP owner succession plans, and in fact the Vemont Empoloyee Ownership Center is hosting its annual conference on June 2nd.
The bottom line is, there are many different ways to help facilitate a successful transition if we anticipate Darn Tough’s possible future. On the other hand, if we choose to not think about the future with candor, Northfield may be caught by surprise like it was with the loss of Comfort Colors in 2015.
There are no judgments of good or bad to be made about any business in Northfield. The process we need to think about in economic development is strategic planning. It’s possible to be very, very proud of Darn Tough Vermont and also imagine things being very, very different ten years from now.
Thanks for reading this three part series and please feel free to leave a comment or send a note with your thoughts.