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2 Looking to the future

2.1 The role of the bicycle and bicycle use

The future of mobility, sports and recreation

The world of mobility, sports and recreation will change drastically over the next few years and this also applies to the role of the bicycle. This transformation is being driven by various major interconnected trends.

  • Changes in consumer behaviour. Consumers are becoming more critical and are making more conscious choices. They attach more value to a healthy balance of work and free time. They also want to be fitter and stay fitter for much longer, and use their free time to exercise, play sports and to get out and about more. Of course price is important, but consumers are much more concerned that brands, products and services are a good fit with their personal and social identity. Healthy, green and socially responsible are now more important factors when consumers think about meeting their needs in terms of mobility, sport and recreation. Mobile technology and the smart phone are giving consumers the opportunity to tailor their purchasing to those needs. They are looking for more inspiration, experience and first and foremost easy purchasing options.
Mobility as a service, a new model for consumption and ownership. 
  • New technological possibilities. Technological progress is constantly creating new opportunities to increase the functionalities of bicycles and bicycle use. Bicycles are becoming ever more complex and will appear in ever more varied capacities and forms. The use of new materials and technological applications will make bicycles lighter, and increase comfort and safety. The electric bicycle is the biggest innovation of the past few decades in the world of bicycles. The e-bike has expanded the world for many people by bringing mid-range cycling distances and hilly or mountainous areas within their reach, whether for commuting, getting to school and back, delivery services, or sport and active leisure time. The connected bike will offer even more built-in functionality. Data technology and connectivity will result in new integrated mobility solutions, combining the use of cars, public transport and bicycles to improve access to busy urban areas. In addition to these developments, there are various underlying trends that are expected to further boost the role of bicycles and bicycle use in consumers’ daily lives in the years to come.
  • Growing wealth. The world population continues to grow and the level of economic prosperity is increasing rapidly in many developing regions. This is bringing more advanced bicycles and bicycle-related products within reach for a growing middle class with greater purchasing power.
  • Rapid urbanisation. More and more people are moving to cities. Three out of five people across the world are expected to live in a city by the year 2030[1]. This will lead to an increase in mobility in urbanised areas, which will result in greater problems in the areas of traffic safety and traffic congestion. Regulations and infrastructure will be designed to respond more effectively to these problems and discourage the use of cars in metropolitan areas and encourage the use of bicycles.
  • Ageing population. Low birth figures and longer life expectancy have resulted in a rapid ageing of the population, especially in Europe. More than 22% of the world’s population is expected to be over the age of 60[2] in the year 2050. Older people are staying healthier, more active and more mobile and are therefore also a key driver behind the growth in bicycle mobility.
  • Increased attention for healthy living environments. Road transports are responsible for a large proportion of the global emissions of greenhouse gases and the increase in air pollution. CO2 emissions are highest in urbanised areas. Higher concentrations of fine particulates will result in greater public health risks. Policy makers such as national and local governments will legislate to reduce the use of polluting modes of transport and at the same time promote cleaner, greener alternatives such as bicycles.

Policy makers are targeting sustainable mobility.
  • Increased attention for sustainability. More and more materials and products are being recycled to minimise value destruction. Many initiatives have been developed on the circular economy front. These include initiatives in the broader context of mobility in general and specifically in the field of bicycles and bicycle use. For instance, there are numerous small-scale initiatives that aim to produce new bicycles from used ones, as well as initiatives geared towards responsible recycling and the reuse of batteries from e-bikes for other purposes. All good initiatives that could generate economic returns and at the same time contribute to a greener world.
  • The rise of the sharing economy. Rapidly growing tech companies with app-enabled applications are the driving force behind the sharing economy. Sharing is becoming increasingly popular, especially in urban areas. Ownership is becoming less important, and use is gaining ground. Mobility is also making the shift in the direction of use. And this is not just affecting cars, it will also apply to bicycles in the future.
Cars, public transport, bicycles and e-bikes come together in new mobility concepts.

Summary

Demand for mobility is on the rise. We will see an increasing number of transport alternatives in the future. Consumers will make a more conscious choice for a particular form of transport, and between ownership and use. And more and more people will opt for cleaner alternatives. The purchase and use of and access to these solutions will have to be simple, whether they are for commuting, leisure activity, health, sports or a combination of these activities.  

Thanks to the characteristics of bicycles, they will always have a strong position as an alternative and clean mode of transport for commuter travel. . Initiatives such as the ‘smart city’ concept, which is aimed at making increasingly congested cities more accessible and more pleasant to live in, will also help bikes to maintain this strong position. The use of bicycles and e-bikes will therefore only increase in this changing environment. So we have every reason to be optimistic about the future.

[1] [2] Source: World Health Organization

Diavelo/Pininfarina Evoluzione: Eurobike Award 2016 & German Design Award Special
The E-voluzione is the result of a collaboration between Diavelo and the famous Italian design agency Pininfarina. Developed on the basis of a holistic design philosophy, the key parts such as the central motor, the battery (patented technology), the handlebars, the grips, the cockpit, the cables and the lighting system have all been integrated seamlessly in the bike. The E-voluzione was praised for the level of innovation, the functionality and the design. The bicycle won the Eurobike Award 2016 and the German Design Award Special and not surprisingly was one of the most discussed e-bikes of 2016.

 

2.2 Ambition and strategy

Ambition

We are at the start of a new phase in our development as a company. A phase that will be marked primarily by changes in lifestyle and consumer shopping behaviour, and driven by technological possibilities. We have opted for a clear focus on (e-) mobility, (e-bike) sports and recreation. We are increasing our focus on consumers. We will increasingly market our bikes and bike-related products and services via multiple sales channels (omni-channel approach), in close cooperation with the specialist retail trade. Once Accell is marketing its products via multiple channels, consumers will have omni-channel purchasing opportunities. This is how Accell Group will respond in the most effective way possible to the purchasing and use preferences of individual consumers. Our ambition is to maintain a permanent lead in the bicycle industry in terms of our consumer focus. This is how we intend to continue our growth in the years ahead and create more value for our customers, our shareholders and our employees.

We also want to use our expertise in sustainable mobility in a broader, social scope, to play a trendsetting role in terms of improving the living environment and encouraging people to lead a healthy lifestyle. We want to contribute to the reduction of CO2 emissions and the improvement of the air quality in cities. We want to play an active role in and contribute to solutions for growing congestion in cities and improving traffic safety. And we want to be advocates for the health benefits of more exercise and sports. These are all themes that are a natural fit with our company and as such also have a positive impact on the social and friendly image of bicycles, the bicycle experience and our success as a company.

Strategy

 Our focus on (e-) mobility and (e-bike) sports and recreation means that we will also be focusing increasingly on the higher end of the market. That is where we see the greatest growth and value potential, and that is also where we can differentiate ourselves most effectively.

 The continued development of e-bikes in general and e-performance bikes in particular offers ample opportunities that will enable us to open doors for consumers in terms of new applications and uses of bicycles. More and more people in all age groups are discovering the benefits of the e-bike, which enables them to cover longer distances and mountainous or off-road terrain in an environment-friendly way and at the same time give them an opportunity to challenge themselves physically and work on their condition. In the wake of this, the connected bike will offer a host a new opportunities in terms of measuring performance and health, navigation, maintenance and safety. We will continue to strengthen our market leadership with innovations that will surprise consumers and we will continue to tighten the focus of and expand our range of products and services for (e-)mobility, (e-bike) sports and recreation. And we will do this both organically and by means of acquisitions, as well as in cooperation with partners.  

We will also do this by increasing our focus on consumers and strengthening our connection by means of a proposition that enables us to make the best possible use of the potential strength of our brands, the supply chain and our network of specialist retailers. This will enable us to respond as effectively as possible to the purchasing and use preferences of individual consumers. 

The specific product characteristics and increasing complexity of bicycles in general and e-bikes in particular means the retail trade will continue to play a key role in providing consumers with the best possible service. Specialist retailers are in a perfect position to provide consumers with advice, maintenance and service. Their presence on a regional level regional location also provides both us and consumers with considerable advantages when it comes to sales, assembly, collection, delivery and returns of bicycle products.

The role of the retail trade will change in a number of ways. The combination of a physical showroom and the online availability of the entire product range offers retailers a healthy foundation for structural improvements to their conversion rate. We will be supporting them in that effort. We will devote a lot of time and effort to help them improve the store experience and to help them develop their know-how of new technology-driven functionality and in terms of offering service concepts with a constant flow of revenues. We will also support them in the development and expansion of online activities and smart data exchange. This will allow us to monitor consumer purchasing preferences more effectively and adapt both the customer journey and our products and services to meet their individual needs more effectively. 

 

  • Winning portfolio of brands. Today’s consumers want a broad product range and plenty of choice. A multi-brand strategy is a good fit with that. We want to protect and strengthen the competitive edge of our brands in our main markets and we strive to maintain our #1 position in the market for electric bikes for mobility, sport and recreation. We do this by optimising our brand positions within the portfolio and creating more coherence, while protecting our intellectual property and taking action against third-party infringements. We are targeting smart and selective growth, and we will do this by choosing product/market combinations with potentially high returns. We are also looking to expand our position in the mid-range and higher segments of the market with products that meet the preferences of local consumers. We constantly develop new products that appeal to existing and potential new clients and we will focus on growth in attractive export markets. 
  • Expansion of leading position in (e-bike) sport. We will continue to expand our strong position in the (e-bike) sports segment via sophisticated brand positioning and continuous new product development. Sports brands such as Haibike, Ghost, Lapierre and Diamondback offer considerable growth potential on an international scale. Growth that will be accelerated by the rapid rise and popularity of our e-performance bikes such as e-MTBs.
  • Increasing added value parts & accessories. We will provide greater added value as a supplier to specialist retailers and webshops. We will develop new distribution channels for smart cross fertilisation between online and offline and in combination with bicycles. Our focus on this front will be on the strengthening and growth of our own popular XLC brand. We will also improve our utilisation of the synergy potential within our European organisation of local distributors by intensifying the cooperation between Accell Group companies and the integration of activities.
  • Developing service-oriented revenue models. Together with our commercial partners, public bodies and local authorities, we are working on new mobility-as-a-service solutions in a number of areas. For instance, for leasing bicycles, renting and sharing bicycles, but also for improving access to congested city centres with a view to an improved living environment. This includes complete concepts for the supply of the required bicycles and the management of bicycle fleets. This is enabling us to create new revenue models with continuous income flows. We are using our new partnership with Beeline Bikes in the United States to continue to assess the potential of mobile services in fields such as maintenance and repairs on location.
  • Application of smart technology. We are focusing our innovative strengths primarily on e-bikes, connected bikes and sports bikes. The use of smart technologies not only provides new functionalities for the cyclist; it also provides us with valuable information for continued product developments. We are devoting specific attention to technological progress in the fields of new materials and production processes, IT and connectivity on this front. We can benefit from the strength and expertise of our country organisations in terms of making choices and the effective deployment of new applications.
  • More efficient operating processes. Smart operating processes are a prerequisite to making the most of the strength of the group and shaping the omni-channel concept. We are focusing primarily on the optimisation of delivery reliability and the reduction of delivery times. We also aim to realise procurement benefits and a structural reduction in working capital through measures such as improved cooperation in the chain, which will allow us to improve planning and inventory management throughout the year. A more centralised management also makes it possible to increase our agility and realise structural cost savings, which will in turn enable us to further increase our competitive edge. This may involve combining activities, the improved integration of the country organisations, greater flexibility and the relocation of production and assembly.  
  • Synergy is a key theme in the tightened strategy and all the above mentioned ‘spokes’. We will develop a strong organisation at holding level to manage the implementation of the strategy and improve support for local entrepreneurship, so we can make the most of its strength.   

 Sustainable execution of the strategy

We will increase the sustainable benefits of our bicycle products and services by structuring our organisation and operations as sustainably as possible. We have set a number of key priorities on this front: first and foremost, we want to take a leading position in the bicycle industry in the field of sustainable products and operating processes; secondly, we want to create a stimulating working environment with motivated and engaged employees; thirdly, we want embed our values and standards in the organisation and work towards a responsible supply chain.

The full integration of corporate social responsibility in our strategy enables us to increase our value creation on the financial, social and environmental fronts. It also enables us to take into account the impact of our operations on people, the environment and society on a much more conscious level, and to focus more effectively on new market opportunities, growth and innovation.  

Value creation

2.3 Core competencies

 We have summarised what we see as the deciding factors in the realisation of our strategy in the coming years in a number of core competencies.

  • Strong brands. We have a portfolio of national and international (sports) bicycle brands with leading market positions that represent familiarity and quality and give us a leading edge in the roll-out of new innovative products and mobility concepts. We focus our brands exclusively on the middle and higher market segments, and within those segments, we are focusing increasingly on growth categories such as e-bikes, e-performance bikes and sports bikes, where we can clearly differentiate ourselves by providing added value.
  • Scale. We are the largest bicycle manufacturer in Europe and also market leader in e-bikes. Scale provides leverage, purchasing power and gives us the financial strength required to invest in an increasingly complex product and in the development of integrated mobility solutions that include more than just bicycles;
  • Diversification. Our diversification across brands, countries, clients, collections and product ranges means we have well diversified revenue flows. That makes us resilient. Bicycles and bicycle parts and accessories are also complementary products and this combination will continue to strengthen our customer proposition.
  • Innovative strength. In the last decade, Accell caused a major breakthrough in electric bicycles with our revolutionary ION technology. We did this again in recent years, with the introduction of e-performance bicycles. Thanks to the strength of our  organisations, we introduce numerous new technological applications for bicycles and bicycle use every single year. Innovation is in our DNA. 

Haibike XDURO Downhill PRO: Red Dot Design Award & IF Design Award
The XDURO DWNHLL was specially designed to meet the demands of downhill racing and the bike has now gathered fans all over the world. Thanks to the Step-In concept, Haibike was able to integrate the 500Wh battery directly in the bottom part of the frame. The powerful Bosch Performance CX motor is mounted directly onto the frame and does away with the need to use mountain lifts. The design gives the bike great stability and a perfect centre of gravity. This Haibike e-performance bike won both Red Dot Design Award and an IF Design Award.

  • Active dialogue. We are at the very heart of the discussions on the future of (bicycle) mobility. We are in talks at every level with all the parties involved, such as policy makers, public sector bodies, special interest groups, mobility service providers, technology partners, the specialist retail trade and suppliers. The talks cover key mobility issues in society, improved regulation and innovative solutions in which the bicycle can play a prominent role.  
  • Long-term relationships. We have carefully developed networks with both the retail trade and suppliers. These relationships are largely based on years of mutual trust and respect. This is a solid basis to develop, intensify and professionalise cooperation in the years ahead.
  • Culture and local presence. Entrepreneurship is strongly embedded within the group. We are convinced that talented, motivated people make the difference in a safe and stimulating working environment. We see the evidence for this time and again, for instance in employee productivity and engagement, and we will therefore continue to invest in these. Our companies provide work for a broad spectrum of people, from highly educated employees to people with difficulties accessing the labour market. As an organisation, this means we also have deep roots at a regional level, which enables us to participate on a local level, create grassroots support for new mobility initiatives and at the same time provide effective support for regional and local retailers.    

As one of the biggest players in the bicycle industry, we have numerous competencies that differentiate us positively from smaller players and that help make us more effective when it comes to rolling out our plans and therefore help us to further strengthen our leading position in the industry.

Batavus Quip: Bicycle of the Year (the Netherlands)
The Batavus Quip was voted the Bicycle of the Year 2016. The Quip is a trendy city bike with a competitive price tag. An extra narrow front carrier makes it easier to park the Quip in a bike rack. The jury noted that Batavus has once again made a real statement with the striking design for the urban segment. The jury also applauded the excellent handling and the use of materials.

2.4 Financial performance indicators and targets

Our ambition and strategy are aimed at profitable growth and value creation for all our stakeholders and society as a whole.

The tightened strategy is aimed at increasing our return on capital. We are targeting the following medium-term (five-year) goals:

  • Net turnover up to € 1.5 billion;
  • EBIT-margin at a level of 8%;
  • Working capital of no more than 25% of net turnover;
  • ROCE of more than 15%.

The roll-out of the tightened strategy will result in extra costs of € 20 - € 30 million in the next two to three years. This is primarily due to additional investments in the supply chain, human resources, innovations and IT. In addition, we will increase our commercial and (online) marketing efforts, which we expect to result in an increase in marketing costs to around 3% - 4% of turnover (2016: 2.5%).  

The revised strategy will have no impact on Accell Group’s financial position or strength, which provide us with the flexibility we need to bear the required additional costs. We have extended and expanded our financing facility with a view to the implementation of our group strategy. In addition, we are able to release extra funds by reducing our working capital requirements.

2.5 Stakeholder interview European Cyclists' Federation

 

‘Accell gives us a strong voice in Brussels’


The European Cyclists’ Federation (ECF) promotes the interests of cyclists and cyclists’ unions from more than 40 countries and lobbies internationally for cyclist-friendly policies. The organisation’s aim is to get more people to cycle and do this more frequently. Accell Group has been associated with ECF as an industry partner since 2011 and supports the organisation in its efforts to promote the bicycle as a sustainable and attractive mode of transport. Kevin Mayne, ECF Development Director in Brussels, explains how both parties are benefiting from this cooperation.



Why do cyclists need representation in Brussels?
“The European Commission produces a lot of policies and legislation related to urban development and traffic. It is important that the interests of cyclists also have voice at the table, and not just the automotive industry and public transport sector. Cycling offers immeasurable opportunities to resolve issues such as increasingly congested cities and rising healthcare costs and should be included in every form of transport policy. But we don’t just operate in Brussels, as we also help national organisations to professionalise and help them to apply for EU funding for national and regional cycling projects.”

What role can Accell Group and the bicycle industry play?
“The ECF started 35 years ago as a consumer organisation. Over the years, other organisations with the same goals have joined us. Accell is one of the founders of the Cycling Industry Club and in that capacity is associated with the ECF as a sponsor. The fact that Accell Group, one of the largest bicycle manufacturers in the world, supports us carries a great deal of weight. They boost our voice in Brussels and add weight to our arguments. Not many people know that the bicycle sector represents some 600,000 jobs in Europe, which is even more than the steel industry. Politicians and policy makers are sensitive to those kinds of economic arguments and that helps us to get issues such as safety and sustainability on the agenda. Another example of the cooperation is the expertise they provide. This can be information on technological developments, such as the speed pedelec, but they also make specialists available for workshops.”

How does the ECF contribute to the development of the bicycle industry?
“I believe the bicycle industry benefits a great deal from our presence in Brussels and far beyond. We are their eyes and ears, we know what issues are being discussed at any given moment and what policy papers are currently being developed. We need to be at the table right now to demand a strong position for bicycles in the mobility mix of the future. One of our biggest successes of the past few years is that the European budget for cycling policies has more than tripled. That is worth over a billion euros to the industry.”

How do you see the future of the bicycle in Europe?
“In pioneer countries on cycling front, like the Netherlands and Denmark, 80% of the population uses a bicycle on a regular basis, but we regularly forget that there are also 200 million adult Europeans who never use a bicycle at all! At the moment, bicycles account for 8% of total European transport. If we can double that figure, that would have a tremendously positive effect on health, the environment and the economy and the cycling industry would benefit from ten million additional bike sales per year. The potential is huge.”