Business in Colorado - May 2021
Outdoor Industry: An Enviable Engine to Manufacture Economic Growth
Staff Writer 2021-06-02 03:35:38
An Enviable Engine to Manufacture Economic Growth
As outdoor brands look to reshore production, they’re finding mountain towns and rural communities are not only great places to test gear—they can also support tech-fueled manufacturing operations.
The numbers are undeniable: The outdoor industry (OI) is an increasingly important, yet undervalued, cog in the U.S. economy.
Colorado might just be the epicenter for the phenomenon. The outdoor industry currently generates about 10% of the state’s gross domestic product, producing $62.5 billion in annual revenue—including $9 billion in tax revenue— and employing more than 511,000 people, according to the most recent state report, The 2017 Economic Contributions of Outdoor Recreation in Colorado.
For comparison’s sake, the American Petroleum Institute has estimated the annual economic impact of oil and gas in Colorado as $31 billion.
The state’s outdoor industry “is bigger than agriculture, it’s bigger than automotive, and it’s bigger than pharmaceuticals,” says Nathan Fey, executive director of the Colorado Outdoor Recreation Industry Office.
But it’s also decentralized, so sector-specific data is elusive. OI encompasses experiencebased businesses (such as fishing lodges, climbing guides and ski resorts), as well as the toys necessary to take full advantage of them: fly rods and reels, crampons and carabiners, and skis and snowboards, not to mention outdoor apparel, tents, trailers and sleeping bags.
For decades, the country’s leading OI brands have offshored manufacturing of most products that they designed and engineered here to partner factories in Asia, but that trend hit a wall in 2020 in the form of COVID-19.
In this pandemic-altered era, more and more companies are looking for domestic manufacturing options as supply chain disruptions, brand imperatives and new tech-fueled production processes reshape manufacturing in the U.S.
Before the pandemic struck, OI manufacturing was growing modestly in the U.S. In 2019, it provided more than 244,000 jobs, according to the latest Outdoor Industry Association and the Bureau of Economic Analysis figures. The total economic impact grew from $51.7 billion in 2017 to $55 billion in 2019.
It looks like the upward trend will only accelerate from here. Plenty of outdoor gear is ripe for domestic production but only if the infrastructure can support it. And when it comes to reshoring, Colorado is near or at the top of most brands’ lists.
There are success stories all over the state. In Denver, Guerrilla Gravity makes mountain bikes and Never Summer Industries crafts innovative snowboards. Beyond the Front Range, companies like Mayfly Outdoors (parent of Ross Reels, Abel Reels and Airflo) in Montrose, Moots in Steamboat Springs and Mountain Racing Products in Grand Junction are leading the way on the Western Slope.
Brands are relocating from other states and overseas, as outdoor companies disperse from the Front Range to places with easier access to the great outdoors.
“I think it’s the start of seeing more clusters emerge,” says Fey. “We’re seeing more early entrepreneurs relocate and set up shop in rural parts of the state.”
The building blocks of labor and capital investment need to scale in order to catalyze a broader shift for OI manufacturing. Regardless, there’s a lot to be said for manufacturing boats on a body of water or making skis at the bottom of the slopes.
Take Wagner Custom Skis, which crafts skis in the heart of Mountain Village at Telluride Resort. “Our competitive advantage has to do with the technology that we’ve created here,” says Pete Wagner, who founded his namesake company in 2006. “What we’re doing is we have an innovative way of doing mass customization for design and manufacturing that’s more agile and faster, and ultimately produces a better-performing product.”
In Montrose, Mayfly Outdoors has doubled down on OI manufacturing by consolidating production for its brands at a development of its own making: Colorado Outdoors, an OIoriented, mixed-use project on the Uncompahgre River. Mayfly opened its new, 41,000-squarefoot headquarters and manufacturing facility as the 164-acre revitalization project’s cornerstone in summer of 2019.
David Dragoo, president of Colorado Outdoors and founder of Mayfly, says it’s all about having the requisite infrastructure to rethink manufacturing processes: high-speed Internet, high-capacity electrical systems, high-bay ceilings and an open floor plan.
“Any future technology that we need, we have the capacity and infrastructure to execute it,” says Dragoo. “And that’s the key—you have big-city amenities in a small town. That’s been one of the biggest differences for us in Montrose.”
Other OI companies like what they see at Colorado Outdoors. Wedge Brands is set to break ground on a facility at the development by the end of 2021, and Dragoo says several other as-yet-unnamed tenants have committed as well.
Beyond immediate access to the Uncompahgre, the lures are many. The Colorado Outdoors project is located in a federally recognized Qualified Opportunity Zone (QOZ) as well as a state of Colorado Enterprise Zone. Both programs offer numerous tax credits and incentives to lure companies, including zero long-term capital gains taxes, cash incentives of up to $10,000 per qualified job created and a state tax credit of $2,000 per job created.
Dragoo says a strategic local economic development plan goes a long way for OI manufacturers, no matter where they are based.
“I think Montrose is a great example,” he adds. “They have a [QOZ] and are aggressive in their recruiting. They’ve become a partner.”
Other public-private partnerships are laying the groundwork for more growth on the Western Slope. A number of incubators and accelerators are working to foster the next generation of outdoor companies in Colorado.
“Montrose, of course, has the Catapult Innovation Lab as its new location after leaving the Gunnison-Crested Butte area,” Fey says. “They’re expanding their accelerator to different locations around Colorado.”
Likewise, outdoor gear retailer Moosejaw is working with Western Colorado University’s ICELab on an accelerator program to help OI startups get early-stage traction. That project is now in its second iteration, having already launched three companies in its first cohort.
“Obviously, having access to a brick-and-mortar retailer and placement for products that come out of that accelerator program is really exciting,” says Fey.
Taking cues from advanced manufacturing, OI has plenty of runway to reshore in places once considered too far off the beaten path. In Colorado, companies can leverage the whitewater, powder and singletrack for testing and iteration, and its central location and ever-improving infrastructure and logistics make manufacturing viable in the unlikeliest of locales—say, a ski town or alongside a gold-medal fly-fishing river.
Then there’s the cachet that comes with manufacturing in Colorado’s rarefied air. Touts Fey: “There is a certain prestige that comes with being made here in the state and being part of the outdoor rec ecosystem.”
This article was reprinted with the permission of CompanyWeek Media. Read the full-length version at companyweek.com.
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