The lockdown restrictions implemented during the pandemic ushered in a boom time for gear companies. Demand spiked for acoustic and electric guitars, with many players taking the opportunity to learn the instrument for the first time – or to finally buy that high-end electric guitar they had been coveting for years.
But what comes up, must come down, and two years on, the market had become more challenging for guitar manufacturers, with Fender CFO Matt Janopaul revealing that almost $100 million of gear sales were cancelled by its retail partners in 2022 as consumer behaviour changed.
Speaking to PYMNTS, Janopaul explained how the gear giant needed to pivot and quickly, moving from a drive to produce more to selling more.
“We had 16 million people pick up a guitar during the pandemic, 30 million worldwide. And Fender really benefited from that,” said Janopaul. “Then, of course, we get to 2022 and people decide to start taking vacations or doing other things with their disposable income. Guitars were no longer the priority – and the tough call I had to make was dealing with retail partner cancellations of orders in the magnitude approaching $100 million.”
In real terms, that is approximately 600,000 guitars and 200,000 guitar amps. Fender’s leadership had to put the brakes on a production setup that involves factories in the US, Mexico and Asia, plus orders that are fulfilled by third parties.
There were reports in 2022 that the firm had laid off 300 employees at its California plant, and Janopaul admitted that cutting costs was essential.
“You want to make sure you shore up your balance sheet very quickly,” he said. “And then immediately go, frankly, into sales mode… We set targets. We said, ‘Here’s where we want to be by the end of the year…’ We looked at every single piece of our operating expense infrastructure and said, ‘Where can we either cut costs or slow things down?’”
Fender might have slowed down production. There might be more sales offered via its online retail platforms. It is unlikely, however, that guitar players will notice much difference.
Fender has sat out NAMM for the past couple of years, and CEO Andy Mooney says that is unlikely to change any time soon.
Speaking to MusicRadar in July, 2022, Mooney said virtual presentations were not only more cost effective but offered a more effective platform for present their products to retail partners. “With our online presentations, we can go right down to the sales associate level of retailers, at a fraction of the cost of participating at NAMM,” he said.
Demand shocks are not the only feature of the post-pandemic landscape for gear brands. Supply chain issues, from inflation to shortages, were complicating production.
“There’s concern across the board,” said Mooney. “Some components that last year cost 30 cents, this year are costing $30, so it’s literally making bringing some products to market completely impossible.”
The challenges of the market did not stop Fender from enjoying its second-biggest year ever in 2022. Nor have do they seemed to have slowed product launches, which continue to arrive, with the brand expanding its portfolio of artist signature guitars as well as its core lineup. On 22 August, Fender launched over a dozen new acoustic guitars as the California Series was expanded.