Successful Winthrop-based tackle manufacturer fights off—and adapts to—competition from China
Photo by Jeff Silker
If Tom Langhoff were a fish, he’ d be a minnow at best, likely considered a tasty delicacy by sharks swallowing him whole.
He stands only 5’ 3” and from the side looks slender as a rod and reel.
Fortunately, he’s not a fish.
Physical height and build aside, Langhoff nonetheless stands Paul Bunyan-tall and -wide in the U.S. tackle manufacturing industry. You have to deeply respect someone willing to walk away from a stable, 20-year career with awesome benefits in 1987 in order to help right a listing tackle manufacturer—and take on personal debt, while drawing only $11,000 that first year.
Today, his Winthrop-based JB Lures has thirteen distributors, 2,500 SKUs, up to $1 million in annual revenues and tackle manufactured in three Minnesota locations. And his alluring product line can be purchased in Gander Mountain, Cabela’s, Wal-Mart, Scheels, Pamida, Sportsman’s Warehouse, and thousands of other locations.
And to think it all came about due to a dreadful HIV scare.
Born in Nicollet in 1948 when it had a four-bed hospital, Langhoff was raised in St. Peter, Minn., eventually graduating in 1966 from St. Peter High School. He then packed his bags for the Medical Institute of Minnesota in Bloomington, in order to take a self-described “crash course” in medical technology. Finishing in 1967, he was hired as a lab technician by Renville County Hospital in Olivia, Minn., primarily to perform various blood services for area nursing homes. In time, he would stretch his love for being a lab technician in Olivia into a satisfying 20-year career.
Then came the brush with HIV.
“We had an AIDS patient at the hospital—or at least he said he was one,” said Langhoff, his voice drawing to a controlled whisper. “He was a drug user and bit me. That was the straw that broke the camel’s back. I knew I had to get out of that job.” The memory of it would remain fresh: he had to be tested for HIV each of the ensuing six years.
Fortunately, he had the right people as friends to guide him. One morning in 1987, a fishing and hunting buddy, Dr. Chester Anderson of Renville County Hospital, told Langhoff of two Winthrop men who had a tackle manufacturing company and were selling product out of a retail store, even product to Kmart. Anderson said that Langhoff should seriously talk to the men about buying in, and that Anderson himself would join in.
It would be the ultimate in cold calls.
JB Lures had started two years earlier in Jim Rath’s basement. Rath, a former local schoolteacher no longer able to work outside the home due to kidney disease, had enough physical stamina to tie fishing spinners at home. He and partner Brian Lindstrand (JB Lures stands for “Jim and Brian”) had built a modest retail outlet on U.S. 15 in Winthrop. And they definitely weren’t interested in selling a portion of their business to bring in an unknown partner.
But in time, the cold call paid dividends. Lindstrand, for personal reasons, warmed up to the idea about three months after their meeting. So in a matter of weeks, Langhoff and Dr. Anderson would buy their way in to partner with Rath. Three years later, in order to expand the business, the trio brought in a fourth partner, Gary Dorn, another of Langhoff’s hunting and fishing buddies. Today, Langhoff owns more than 75 percent of JB Lures and Dorn, a silent partner from Nisswa, Minn., the rest.
Langhoff remembered, “I started on the road with JB Lures in an old ‘66 station wagon. I’d go into an account and couldn’t sell anything because no one knew me. That went on for several months. Little by little accounts began trusting me. Maybe the second call they would buy only one little card of product and hang it in the corner, but at least it would get me in the door. I’d sell direct to retail stores, such as the Bobber Shop in Mankato.”
Marv Koep, an owner of one of those retail stores, offered Langhoff a valuable tip a year later, by suggesting the company radically change its product packaging and graphics. Langhoff listened, intently, and soon brighter graphics and packaging helped catch a number of new accounts.
“The company really struggled those first ten years,” Langhoff said. “We were doing everything direct with our little sales staff of two. We sold product direct out of vans or took orders. For more income, I picked up another line to sell, Cannon Tackle. They had minnow buckets, and rods and reels, and the small commission we earned from it paid our overnights and gasoline bills. It worked out pretty good.”
They then landed the big one—or at least thought they had. By 1993, JB Lures had nearly 700 direct accounts and business was gaining steam. Yet there were far more fish in the sea to catch, a limitless number, and instinctively Langhoff knew it.
After eating dinner at home one night, he received a telephone call from the president of mega-distributor CSI Sports of Sartell, Minn., asking Langhoff if he was interested in combining forces. A distributor such as CSI Sports certainly had the potential of hooking more accounts than the 700 JB Lures had, expanding the company reach far beyond Minnesota borders. CSI Sports dangled tempting bait and Rath and Langhoff bit. They signed with CSI Sports a one-year exclusive contract.
“But we almost went broke over the deal because our pricing wasn’t right,” lamented Langhoff. “That year we had to adjust pricing because the distributor needed its points. I also had to agree not to sell product for Cannon Tackle on the side. It was a tough year that knocked us down in sales almost to where we’d begun. By the end of the one-year contract, we were looking for more distributors. We were lucky to get through it all.”
The company had a solid-gold reputation for manufacturing quality product and accurately filling orders fast, so it wasn’t that difficult finding other distributors who would promote and sell their product. Of the company’s eventual thirteen distributors, Maurice Sporting Goods of Northbrook, Ill., would successfully sell the JB Lures line into mass merchant Wal-Mart. Another, United Hardware, worked on gaining distribution in 7,000 hardware store customers.
And it all paid dividends in another way: Having fewer accounts on the road freed up Langhoff to sell direct to large fish like Gander Mountain, Cabela’s, Holiday, and Scheels. Before long, JB Lures had expanded to 2,500 SKUs and three different packaging styles. This brash yet necessary transition from direct to almost exclusively distributor sales, which had started so awkwardly and nearly completely wiped them out, was now the company’s salvation. Up until 2003, everything seemed rosy and growth projections seemed reachable.
That is, until China.
Langhoff explained, “About three years ago, competitors copied some of our winter tackle product line by manufacturing it in China and selling it here. They showed their product to some of our accounts, like Wal-Mart, and got theirs in because of lower pricing. Later, some big-box stores we make private label product for decided to take that directly to China, too.”
“The big advantage is price,” he said.
“Certainly, their workmanship doesn’t always look like ours.” He shifted weight in his chair.
“And another disadvantage is the lead time. It used to be 90 days, then 120, and in a few months it will be probably 180 days from the time of ordering before receiving it from China. And customers buying the Chinese-made product have to buy it up front before it’s unloaded from the vessels. I give them dating. They are buying on price and nothing else.”
Believe it, the thought has crossed Langhoff’s mind on more than one occasion to ride the outsourcing wave and redirect at least a portion of his manufacturing to companies in Costa Rica, Dominican Republic, Mexico, even China. But to do so would destroy many of the personal relationships directly responsible for the company’s success the last 20 years. One such relationship has been with Steve Frank of Kasota Tackle Manufacturing in Kasota, a former employee, who does some of the “big heavy work” in tackle manufacturing like spinning lead. Another relationship has been with Jeff Bethwick of Scenic Tackle in Bemidji.
And there has been the company’s 40 or so independent contractors, many of whom have been stay-at-home moms with young children, who work out of their homes assembling spinning rigs for sale to walleye fishing enthusiasts. These self-paced, benefit-free workers have created their own hours, and over the years enabled Langhoff to compete in pricing against product originating from other countries.
“We give them a box of line and spinner rigs,” said Langhoff of the independent contractors. “They put the rigs together. I’m not sure if we’re the nation’s largest maker of spinner rigs, but we’re certainly one of them. We make the exclusive private label for Gander Mountain, Cannon Tackle and others. And we manufacture spinner rigs for hospitals, clinics, night clubs, banks, even Schell’s Brewery, for promotional giveaways.”
As the pricing war with Chinese product unfolded, Langhoff in time began realizing that it wasn’t a death knell, only a wake-up call. To become more competitive, the company this April launched a fully loaded Internet store, in which customers from anywhere in the world could order product. The company website had been in existence since 2003, but until recently was little more than an advertising presence. In the neighborhood of 1,750 SKUs have been placed online, which amounts to about two-thirds of all SKUs. The company’s thirteen distributors haven’t appeared upset—probably because the online store has offered retail rather than wholesale pricing. Besides, not one distributor carries every SKU, so the online store gives potential customers not covered by the distributor net an opportunity to purchase.
“It’s hard to believe, but all the online business will be fulfilled here in our Winthrop retail store,” Langhoff said. “Much of our product is already stored in bulk form in bins. With a bin the size of a small dish, we can store two to five thousand small ice-fishing lures. Other products are already ‘bulked up’ for our distributors. As for certain items in big-box stores or in larger retail stores, instead of keeping two to five hundred on hand, we will now keep a thousand. I don’t see any problem keeping up with online sales.”
Another avenue for staying competitive has been designing new products. Most U.S. companies partnering with China wait a year or two before even thinking about knocking off a competitor’s new products in order to get a feel for potential sales. If the product seems to be selling well, they will manufacture a copycat the second or third year. Langhoff could patent all his new products—such as a line of spoons with vents to spit water when jigged—but the effort hasn’t been worth it considering the dollars involved.
To cut costs and remain competitive, he also has insisted on being hands-on. “I write the checks,” he said from behind his desk. “And I buy all the raw materials—we try to stay with the best material for the price. I buy in volume and try to always take early-pay discounts. My wife and I do all the trade wholesale shows.”
Wife Sam was working at JB Lures this day, wearing protective clothing and painting thousands of lures in a specially constructed paint booth.
“I also personally keep track of all 2,500 SKUs on our computer system,” Langhoff added. “For instance, I can tell you exactly how many of each we sold to each customer last year. Without computers this business would be tough. I’ve heard my accountant say that sales people aren’t normally organized. He said I’m doing very well for being a sales person.”
Langhoff, 57, for a minute, mulled over the idea of selling his 75 percent share of the business and he tried predicting what would occur. If he sold, he said, the new owner likely would drop hundreds of SKUs, relocate the headquarters, and outsource much of the manufacturing to foreign lands. In essence, a buyer would be purchasing the JB Lures name and reputation—and in so doing would potentially end many of the relationships Langhoff has worked so hard to build the last 20 years, from independent contractors, suppliers and industry peers to relationships with customers.
One final interaction, in particular, seemed to reveal insight into his character, of his personal philosophy, of his business direction. “There isn’t as much loyalty left in the U.S. anymore,” he said. “This used to be what could be called a good ol’ boy’s industry and now if a buyer can get something a little cheaper he will. In this climate, it’s too bad you can’t count all the old favors and good deeds you’ve done for accounts. It doesn’t seem to matter anymore. As for me, I’m blessed to have these [loyal independent contractors] working for JB Lures.”
Each year, his accountant religiously has asked about future business plans—and in 2006, Langhoff’s answer went in a new direction. “I told him I wanted more time off,” he said. “I have grandchildren in Fargo and Bemidji that I don’t get to see much. I love to hunt, to fish and I’m not getting any younger. If I can keep the business rolling, and keep things happy—I just need time off. Many businesspeople need time off and don’t take it for themselves.”
Langhoff credited his wife “Sam” for providing emotional support in lean years.
“When we were struggling in our infancy, she hung in there with me,” he said, his voice cracking with emotion. “When things were going bad, I’d always say it would be right. But she always believed in and stuck with me. She made sacrifices. When you are in a business like this, sometimes you have to get through hard times to get to the good.”
My salary in the beginning was $11,000 a year, which meant tough going. My wife kept her manufacturing job until 1990, the year the business looked like it would succeed. She had started working part-time for the company right away, soldering at our home in Olivia. We moved to Winthrop in 1998. Our building here in Winthrop is a combination warehouse, retail store and showroom for distributors.
As long as you’re doing what you like, and enjoying it, you shouldn’t retire. Too many people look forward to it. I’ve heard some of my best friends say they can’t wait until they retire. I ask, What are you going to do? They say they’re going to sit in a chair. That can’t be much fun. Even if I sold out, I would still want to work the trade shows and maybe buying the raw materials while working for someone else. —Tom Langhoff. owner.
On Being Short
I’m 5’ 3” and haven’t found my height a detriment. In the past when I was selling directly to retail customers and attending retail industry trade shows, most of the reps there were representing products like mine. For many years, they were a little jealous no one was representing JB Lures. I was my own rep. Now I’ve become their friend. Perhaps being short helps people remember me. There are a few “short” salespeople in my industry, and I know exactly who they are. —Tom Langhoff
© 2006 Connect Business Magazine. All Rights Reserved.