The future of Canadian manufacturing is on trial in a rural Ontario factory, where hundreds of work boots, smelling of fresh leather and branded with the Kodiak bear logo, roll out the door each day.
For the first time in six years, Kodiak boots are actually being made in Canada. It is a homecoming for a Canadian icon -- a favourite of cool teenagers and burly construction workers -- whose production was once lost entirely to China, Vietnam and Thailand.
The Kodiak story is the story of manufacturing in Canada. Over the past five decades, Kodiak, the brand and product, has been scuffed, nicked, and passed around more than a two-by-four at a job site.
It went through six different owners -- including a major bank -- and manufactured boots in three Canadian cities, before production moved offshore in 2000 to contractors in Ho Chi Minh City, Bangkok and Shenzhen.
But some of that production came home last fall to this factory in Markdale, Ont. -- and to a sister plant in Harbour Grace, Nfld. The repatriation offers both hope and a test for consumer goods manufacturing in this country, which is being lost to outsourcing in the developing world.
"At the end of the day, we're going to service customers a lot better through this core Canadian production," says Kevin Huckle, president of Kodiak Group Holdings Inc., of Mississauga, which plans to do a third of its production in Canada.
But Mr. Huckle would not be making Kodiaks in Markdale, located two hours northwest of Toronto, without the confluence of special circumstances. For one thing, he was able to acquire two highly automated shoe plants from the takeover of rival Terra Footwear, a Canadian company famous for fast production turnarounds.
Terra's 110-worker plant in Markdale makes only a few models of high-end Kodiaks with a retail price of more than $140. Even with these more expensive boots, Mr. Huckle is giving away 7 to 8 percentage points in margin compared with making the same boots in Asia -- where he still sources the majority of his boots.
But he wants the domestic production to offer quick, efficient service for Canadian retailers, who may require only small numbers of boots, but need them in a hurry.
With Asian production, he has to contract for long production runs -- more than 1,200 pairs -- and has to carry a lot of inventory. With domestic manufacturing, the plant keeps enough materials around for relatively short runs. Because of automation and location, it can turn around Canadian production orders in 21 days, compared with 90 days for orders from Asia.
Mr. Huckle, 49, who has worked with the Kodiak brand for more than 15 years, found too that Canadian sourcing is good for sales. When he and an investor group bought Kodiak in 2000, they saw it as a pure marketing company that could outsource all its production to Asia. But he kept hearing from customers who felt Kodiak had become just another branded merchandiser with production offshore and little connection to its roots. Also, its core market includes blue-collar workers, often unionized, who like to see a made-in-Canada label. It was simply good marketing to bring some production home -- which further nudged Kodiak to buy the well-regarded Terra operations. Now, "the Canadian production proves our brand's authenticity," Mr. Huckle says.
The homecoming is welcome news to Charles Greb, 76, whose Kitchener, Ont., family pioneered the waterproof Kodiak safety boot in the 1960s. The Grebs sold the business in the mid-1970s, and after the sale Mr. Greb became convinced shoe production is ideal for the low-wage Third World. Only a handful of shoe factories are still operating in Canada.
Now he feels Mr. Huckle can succeed in Canada with a higher-end boot sold on its local content. "The one thing he has to do is say, 'We're now being made in Canada.' " The Kodiak story suggests Canada can produce goods for a consumer market, but it must play to advantages of speed to market, flexibility and technology. To make money, a single brand may need a mix of manufacturing sources, some domestic and some offshore.
Mr. Huckle, who was on a five-country tour of Asia last week, says the developing world is still best for making products with high labour content. Wages in his Asian contract plants are a fraction of the average $15.50 an hour earned at Markdale, which has an in-house union.
This year, he plans to import a million pairs of the lower-priced Terras and Kodiaks from Asia, while targeting Canadian production at 450,000 to 500,000 pairs. Domestic output will be sold in Canada, where Kodiak collects 80 per cent of its $100-million in annual sales.
Kodiaks have travelled a long way since the early 1950s, when the boots were made by Canada West Shoe Co. of Winnipeg. The firm was bought in 1959 by the Greb family, which made Kodiak part of a product array that included Bauer skates and Hush Puppies. The Greb family sold the company in 1975 to the Bronfman family. The Bronfmans in turn sold it to Taurus Footwear, of Montreal. When Taurus ran into trouble, Royal Bank of Canada ended up with the assets.
As vice-president of marketing for Kodiak, Mr. Huckle acquired the firm from the bank in 2000, fronting a group that includes a Boston money manager. Last year, he approached Terra, a Kodiak rival whose owner, the Aleven family, was interested in selling. Kodiak has retained Dan Aleven, mastermind of Terra's injection moulding and water-jet cutting processes, as its chief operating officer.
Even with the Terra purchase, Mr. Huckle continues to juggle offshore contracts. When anti-dumping duties on Chinese work boots recently expired, he said it would not alter his plans for Canada, but it would likely mean moving some production to China from Vietnam.
The well-travelled Mr. Huckle is sounding a little weary from all these sourcing shifts. "We're like Gypsies -- we keep moving on to the next place."
Track of the Kodiak
1950s: First made in Winnipeg
1959: Produced in Kitchener by Greb
1975: Sold to Bronfmans
1987: Bought by Taurus Footwear
1990: Production consolidated in Acton Vale, Que.
1992: Royal Bank takes control
2000: Buyout by Kevin Huckle and partners
2000: Production moved to Asian facilities
2005: Kodiak buys Terra
2006: Kodiaks shipped from Markdale, Ont., Harbour Grace, Nfld.