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Old 04-11-2009, 03:55 AM
Carl@Semroc's Avatar
Carl@Semroc Carl@Semroc is offline
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Default Estes-Cox by the numbers

Many thanks to Barry for giving us such insight into the model rocket business. Semroc is one of the small model rocket manufacturers that is always curious about the "real world" of the business beyond the very modest sales that we are able to generate.

We have followed with great interest the pending release of the Estes-Cox retro designs and have wondered how much they would impact the total market and in particular the amount that Estes-Cox is producing. Barry said "when I sell I have to have 100,000 units to make a product interesting to us.” I estimated the selling price of the 39 new Classics kits (the Phoenix Bird was repeated) and the 10 new Wal-Mart kits to be roughly $17.75 each (49 kits at a total of $890 for one of each). Assuming Estes-Cox has already ordered enough to be "interesting", that means there are about 4,900,000 new kits in the pipeline at a gross sales value of $89 million dollars. Other companies doing business with China in the hobby industry have told me the "magic number" of 10 is used as a multiplier to get the selling price from the cost of goods received from China. That would mean Estes-Cox has already invested $8.9 million in the new line, if that number is valid. Assuming each customer buys two of the kits, that means over two million customers are required to consume these new kits.

Since they all have balsa parts, I just had to estimate how long it would take us to produce that kind of volume. The 49 kits require a total of 68 balsa parts since some have couplers and reducers, in addition to nose cones. That means 6,800,000 balsa parts are required. Our two machines can produce a total of about 900 pieces of comparable size in a 12 hour day. That means we would have to keep both machines busy 7500 days to make enough parts for the initial orders of these kits! That works out to be about 29 years! At 62 years old, I might not live to see that many balsa parts turned. That is impressive!

Barry also said that "we have spent almost 800,000 dollars in testing-destroyed over 2,400,000 dollars in non compliant product and over 500,000 in rework where we could do it to get product into compliance." That is an impressive amount of money. At about $4K per SKU, that is about 200 different products to test. And Estes-Cox destroyed more product last year than we would probably sell in the rest of my working life!

We had been trying to estimate the size of the market, but since Estes-Cox IS basically the market, it was good to hear Barry's estimate that "we are about 15 to 30 times as large as Estes best years in the 70’s " A former Estes employee told me that there were about 380 employees in the early 70's and they had gross sales of about $10 million per year. That would mean Estes-Cox is between about $150 million and $300 million in gross sales per year now. That is also very impressive!

All of these facts have answered my three unasked questions that are answered with questions:

Q. "Where was Estes-Cox when the BATFE threatened the industry with their illegal regulation?"
A. When you are a $150 million a year company, why get involved in a fight when you are not directly involved that could spill over and destroy your company just by coming to the competition's aid? No brainer. If I was smart, I would probably feel the same way.

Q. "Why does Estes-Cox avoid NAR events, advertising in LAUNCH magazine, and appearing regularly at public outings?"
A. When your market involves millions of individual customers, why waste time and resources on hundreds? Also, a no brainer. Fortunately, those hundreds are our customers!

Q. "Why did Estes-Cox shut down their forum and refuse (until lately) to participate on the public model rocketry forums?"
A. See the last answer. There are less than a thousand active participants on YORF and TRF of which just hundreds are Estes-Cox customers. Why care what they think? This is also a no brainer. You cannot reach the millions on a forum. The few on the forums want a diverse, niche product line with just hundreds of potential sales on any given product. Again, that is great for Semroc, but a waste of time for a giant.

I have a better understanding of the market now and just how tiny we are in relation to Estes-Cox. I had estimated that we were about 1/100th the size of Estes-Cox. Now it is clear that we are probably not even 1/1000th their size. That is humbling for me, but the good news is that there is much room for growth!

And Barry, if you come to a national event or are ever in central North Carolina, I will buy you dinner. Thanks for what you have done to grow the industry. Best wishes on your retirement.
Carl McLawhorn
NAR#4717 L2
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Old 04-11-2009, 06:20 AM
mperdue mperdue is offline
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Thanks for your summary. I've also been mulling the numbers around and have generated similar questions. The answers are staggering.

On a related front...

Q. Who is buying the existing Estes rockets?

Q. Where are they flying them?

Q. What can we do to find these people and get them more involved with the hobby?

Q. How do we find the educators using rockets and get them involved (or get involved with what they are doing)?

I can't answer those questions but it'd be very good for the hobby if someone can figure it all out.

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Old 04-11-2009, 07:48 AM
CPMcGraw's Avatar
CPMcGraw CPMcGraw is offline
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Location: Mobile, Alabama
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Originally Posted by mperdue

Thanks for your summary. I've also been mulling the numbers around and have generated similar questions. The answers are staggering.

On a related front...

Q. Who is buying the existing Estes rockets?

Q. Where are they flying them?

Q. What can we do to find these people and get them more involved with the hobby?

Q. How do we find the educators using rockets and get them involved (or get involved with what they are doing)?

I can't answer those questions but it'd be very good for the hobby if someone can figure it all out.



I'm in an area where the only available flying field is a schoolyard, and my only opportunities to fly are on the weekends (during the school year), and in the summer break periods. My observation about who buys rocketry items is limited to what I see in WM, and the occasional visits I make to the local Hobbytown USA, Michaels and Hobby Lobby stores. The engines that disappear first (WM sales) are always the A and B classes, with the C class consistently remaining in large numbers. The variety of engines at the other places is good, but it is offset by the very high prices ($8 something for a pack of A and B engines!) being charged for them. The volume of kits on the pegs at the HT, HL, and M stores varies from "dwindling" to "good", but again, offset by the prices. When I shop for kits, it's usually when the coupons are available for big discounts.

You'd think the internet would be a big help in spreading the message about rocketry, but it does seem to be grouped into narrow niches. It's like a specialty hobby within a specialty hobby.
Craig McGraw

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Old 04-11-2009, 08:29 AM
Jerry Irvine's Avatar
Jerry Irvine Jerry Irvine is offline
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I concur with Carl.

Technically all you would have to do to compete with Estes is enter their distribution channel successfully. I suspect the traditional hobby distributors would likely pick you up, then shortly afterward overwhelm your production capacity. Having actually sold through that channel myself, one can make it work with a markup of "only" 7:1, but 10:1 buys apartments all over the world.

I share your dinner offer and throw in a week at a lakefront mountain resort in California. Barry seems to have an affinity for travel.

The biggest single problem on model rocketry retail merchandising is inventory control. If there was a way to compel rapid restocking and shelf count increase of the most popular SKU's, gross sales would rise substantially.

Just Jerry
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Old 04-11-2009, 08:47 AM
Rocket Doctor Rocket Doctor is offline
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Do you think that Barry is going to give actual facts and figures on the company sales, I don't think so.

The pricing for the WM kits average around $10.00.

And you also know that the price of black powder has gone up and there are only a couple domestic manufacturers of black powder still around.

To spread the word around about model rockets should be done through the current NAR sectiions, 4H , Scouts, Civil air Patrol and the like.

The biggest problem being, there is a lack of launch fields, and, for those still available, many restrictions. I have gone through this many times, the school board says that atheletic fields are for SPORTS, and everything else is secondary. I also had councilmen state that model rockets are dangerous, that you would need the fire department standing by and the police as well. The key to this is EDUCATION. In this case, the mayor stepped in and said that wasn't so and we got to use the field.

There is an element in this country that feels that model rockets are NASA type rockets and that any launch is a laucnh out of Cape Kennedy. When they hear rocket, thay equate it to a Saturn V.

Also, we are in such a society that if you look cross eyed at someone, they want to sue you. It doesn't take much to file a suit, which, many companies could not afford. It's easier to pay off the plantiff then to defend your company (and I'm not talkig about Estes).

The only ones who make out here are trial lawyers.

It just gets tougher and tougher in todays society to go forward when you have so much going against you.

What about gas powered airplanes, many municipalities ban gas powered planes, or, flying at all. Noise , pollution, what happens if one crashed LITIGATION.

And, many site owner require a million dollar insurance policy inorder to use their property .

It certainly isn't like it use to be back in the 60's and 70's, they were great times, not only for the products/kits and sanity.

When Estes is sold, I'm sure the "observations" will continue. Let's hope that the new owner is looking out for the consumeers , time will tell.
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Old 04-11-2009, 08:55 AM
bob jablonski bob jablonski is offline
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Thanks for crunching the numbers. Boy that total makes me feel Starlight is about as big as a gnat on a hippo's........compared to them.
Mr. Bob
See you in a few weeks in WI.
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Old 04-11-2009, 09:10 AM
Bravo52 Bravo52 is offline
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I think Carl's assumptions are flawed. There are two possibilities with regard to the reasoning. First, that the numbers provided by Barry are intentionally misleading in order to not give the competition any insight (no matter how little) into the business. Or second, being intentionally misused to represent something not intended.
From my perspective, it's both. I liken the former to something along the lines of me asking Carl how much money he takes out of SEMROC a year. That would include everything from "expenses” to a traditional salary. The response might be something ranging from I make a comfortable living to my personal tax return says my gross income was one-hundred sixty four thousand. My guess is Carl would respond with the former........ I know I would.

Estes is arguably a successful company. Which leads me to believe the actions taken by its leadership are valid as long as they are legal. I just can't seem to reconcile the position people seem to have taken over the fact that Estes is a "for profit" company. I don't think Estes is in the habit of ripping people off. Certainly they have overstated their intentions with respect to announcing new kits and then delivering them on time (if at all). That tends to make the few a little angry and that drive towards the second point above.

Now from all I've read, SEMROC has had a few pointed conversations with Estes on copyrights and what not, but I would say that really has more to do with protecting potential income (on both parts) than personality. No, I think it has more to do with the old "David vs. Goliath" scenario. I believe that is a great motivator and many smaller companies turn into big ones for that very reason.

I can't argue with the math in Carl's post. The arithmetic is spot on. As far as "Facts" go, I'm a little suspect. I think Carl is being overly generous even if it what was quoted by Barry. Although it does remind me of a Brady Bunch episode.

So for me, I'll still spend my money with both companies because I like SEMROC's products, quality and customer service, however, I still like many of Estes' older kits and I really like the motors they produce.
Jerry Little
TRA #11767
Level 1
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Old 04-11-2009, 09:50 AM
foose4string foose4string is offline
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The numbers are staggering. I already knew how we were a strong minority when it came to sales, but I didn't realize how small. While we may seem insignificant in terms of direct volume, I think we have a large influence on model rocketry as a whole. He is not directly reaching millions by speaking to a forum, but we are his disciples, so to speak. As long as he has champions for the name and product, then he is indirectly reaching potential customers. Carl, you know how this works. You've implemented some of this yourself(with good service, product, pricing, and forum participation). It seems to work and helps the hobby grow and promotes name recognition(half the battle). Granted, many people who have never flown a rocket know who and what Estes is. The product recognition is strong, but most recognize Estes as a hobby supplier first, toy manufacturer second. This may be rapidly changing, but for now, dad or grandad goes into WM and sees the Estes name in the toy section and thinks about the old days of rocketry....days when this was still viewed as a hobby. So, they buy a RTF or starter kit trying to recapture the magic and hopefully introduce to a new generation at the same time. And, how many people are flying rockets that never frequent forums, or care to participate with NAR, or organized club? We happen to be the die hards, but how many are casual builders and flyers? There have to be LOTS.

I had someone ask a few week ago where to buy Estes kits motors for his scout troop. He had no idea to look in the toy section at WM and Toys R Us. I told him about those places, but also mentioned a hobby store that I like( one of the very few left). He went to the hobby store because he knew the selection would be greater there(and I knew the WM selection was slim a the time). Sure, I could have pointed him to the Quest website, told him about Semroc .com, Fliskits, etc. But he needed motors at that point and needed them in short order. Estes, Estes, Estes. Boils down to product recognition and placement. Barry and Co. can take most of the credit for that. As well they should, but they are expanding on what has already been established....which is us.

Last edited by foose4string : 04-11-2009 at 11:55 AM.
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Old 04-11-2009, 10:12 AM
foose4string foose4string is offline
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I also want to add...

Whoever makes the motors is King. That is what makes this hobby(and the RTF "toys") go. Literally. Estes makes great motor. While, I'm glad to see Quest taking a more aggressive approach with supplying motors, they still have a loooong way to go.

So, if Semroc produces motors at some point at competitive pricing and quality(we can worry about volume later ), it substantially levels the playing field. Like Quest, you'd still be playing catch up, but that is a huge step as a model rocketry co. and a strong card to be playing.
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Old 04-11-2009, 10:52 AM
dwmzmm's Avatar
dwmzmm dwmzmm is offline
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When I helped Estes at the Makers Faire in Austin several years ago, several of the Estes
corporate staff there assured me that Estes makes tons of sales at Wal - Mart alone. I talked at length the bring backs of the classics, and was told they're in the works and were
forthcoming, but, of course, couldn't be told specifics.

Reading through the Q & A with Barry, and following the various postings of many analysis
of what many perceive Barry's thoughts, has been very educational and interesting, to say
the least. The next few years should be very interesting for all of us.....
Dave, NAR # 21853 SR.
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