Hanging 10

For nearly 30 years, Mambo has been putting art onto anything that can be worn, hung, ridden, driven or played. Angus Kingsmill tells Christopher Niesche how a change in  business model helped the iconic Australian brand to surf even bigger waves.

“Would you like me to put shoes on?” asks Angus Kingsmill.

It is not the sort of question you would ordinarily expect from a managing director, but the head of surf wear maker Mambo (Twitter @MAMBOAUSTRALIA) is not an ordinary boss.

“I’ve got pants on and that’s a start,” Kingsmill adds during an interview at the Mambo headquarters in Manly, a beachside suburb in Sydney.

From the outside, the headquarters looks like any other nondescript small industrial building. Inside, there is a ping pong table, some video games and a skeleton with a bowler hat sitting in a chair – and of course the artwork and designs that have made Mambo a household name in Australia.

The barefoot boss and the quirky décor exemplify the laidback nature of the company and can make it easy to overlook the considerable success Kingsmill and his partners have had with the business since they bought it around six years ago.

They have shepherded the company through the global financial crisis (GFC) and increased its turnover tenfold while, at the same time, letting staff come late to work if the surf is up.

Kingsmill and a consortium of investors – the Nervous Investor Group – bought the business from the ASX-listed Gazal Corporation for around $10 million in 2008.

The business was founded in 1984 as an after hours project at the screen printing business of entrepreneur Dare Jennings. Featuring shirts with quirky designs by well-known local and international artists such as Reg Mombassa (also the guitarist of Australian rock band Mental As Anything), Robert Moore and Robert Williams, the brand quickly earned a place of affection in many Australians’ hearts and wardrobes.

Works such as the farting dog and the drunken koala and kangaroo under the beer tree raised eyebrows, but have also met with critical acclaim, with Mambo work featuring in exhibitions around the globe, including in the UK, Italy and our own Art Gallery of NSW and Sydney’s Museum of Contemporary Art.

Later this year, the National Gallery of Victoria will host a three month exhibition to celebrate Mambo’s 30 years of irreverent art.

But it has not always been plain sailing for the company. By the time the Nervous Investor Group bought Mambo from Gazal, the brand was in “almost a dormant state” with just 100 outlets distributing its products around the country.

Kingsmill saw potential.

He had noticed how Mambo outsold rivals Billabong, Quiksilver and Rip Curl at airport surf stores from his time as general manager of the Beach Culture chain “because it was so quirky and unique – the tourists loved it”.

“We saw that treated and managed well, the brand had a lot of legs to be revived and not only grown in Australia, but expanded across the globe,” says Kingsmill, who has a background in surf wear and sunglasses marketing, and small businesses ownership.

When Kingsmill and his partners Brett Merriman and accountant Tony Woodward bought Mambo, investors and banks were queuing up to put money into the business, but the GFC struck soon afterwards and they were left without access to funds.

As a manufacturer, Mambo would take orders from distributors and would then arrange for factories in China to produce the products.

The factories wanted cash up front, but Mambo’s distributors didn’t pay it until months after the product was delivered and selling on shelves.

The company was in a bind: it had a business model that was hungry for cash flow, but no access to funding.

So the partners did a quick review and found the business model was unsustainable and its growth options were limited because of its distribution model.

“We asked ourselves: ‘What are our core strengths in this building?’

“Mambo is a brand and it’s always been about the unique art and the irreverence in the marketing,” says Kingsmill.

“We didn’t actually have a fantastic pedigree in manufacturing or logistics.

“So we made a decision to focus on what we do best. That is to ensure we get the best artists in the country and the world and place some great art on clothing and let other specialists do the production.”

The result was that Mambo stopped manufacturing its own products and moved to a licensing model, where it takes a double digit percentage of total sales in exchange for the use of its brands and designs.

The company now licenses to manufacturers of 20 different product categories, ranging from clothes and sporting goods to accessories.

“Our margins are not what they were before, but the volumes are so much greater because we had no capability ourselves to produce products like bikes, skateboards, watches or sunglasses before,” says Kingsmill.

“We’ve got the ability to now expand globally where we set up similar licensing deals, provide the artwork and the style guide, add some marketing support to that, and then get a percentage of sales from all those different partners.”

The change has paid dividends, with wholesale turnover increasing from about $10 million when the company was bought to more than $100 million.

And, the business is no longer so dependent on cash flow. It is financed from within and debt free. The licensing arrangements also allow the owners to accurately forecast the coming year’s cash flow and profit and loss. This has essentially de-risked the business.

Kingsmill says people often expect that hundreds of people work at Mambo, so well-known is the brand. But in actual fact, only 15 people work in the company and eight of them are artists.

By some accounts, Mambo lost its “cool” image in the 1990s, in part because of the Mambo Loud Shirts. These brightly coloured shirts with their garish designs were meant to be Australia’s answer to the Hawaiian shirts.

“Unfortunately, it seemed like big corporations fell in love with them as did overweight, middle-aged tourists. So, the shirts were being seen on all the, if you like, wrong people for the demographic to whom Mambo appeals,” says Kingsmill.

As a result, the company trod carefully when moving into mainstream stores like Myer and Big W as part of its new strategy.

“One of the bigger challenges has been balancing the irreverent art of the brand with the core values and customer expectations of our major retail partners,” says Kingsmill.

The solution was to differentiate its ranges for different outlets – leaving out the more irreverent or political work that might make major retailers nervous and selling those designs online instead.

Mambo’s board comprises of just three of the original investors in the company, with Merriman as chairman and Kingsmill and Woodward as members. Meetings are usually conducted in shorts and t-shirts. “I guess there’s a slightly more casual, friendly air about it, but it can get heated, particularly when times are serious and there’s a lot of healthy debate in there too.”

Each of the directors brings different skills to the table: Kingsmill’s are in marketing and a background in surf wear, Woodward’s include finance and Merriman, who owns clothing and footwear importer Elan Polo Australia, has extensive management experience.

The board also draws on the experience of the Nervous Investor Group, which Kingsmill says includes “some pretty big players in business”, who he declines to name.

Kingsmill admits that he does not spend a lot of time thinking about governance, but acknowledges its importance.

“We’ve got to run our business by a set of principles and, yeah, I certainly depend on our CFO and my fellow directors to ensure we are running things the way we should be doing so,” he says. “Although we must look at governance and adhere to doing everything correctly, we have to do it with a certain spirit and sense of humour. There is a balance between running this joint tightly and doing it within a distinct Mambo culture.”

The board meets every four to six weeks to review matters such as cash flow, capital returns and dividends, sales and profit forecasts, human resources, strategy and any of the other issues that typically arise in a business.

The directors report to their investors twice a year, but in between they also keep them informed about sales, new territories and marketing initiatives. Between meetings, Kingsmill has considerable freedom to make decisions on the running of the business. He talks with Merriman almost daily, and other decisions involving the board can also be made outside of meetings.

“So, if there are decisions that need to be made that are too big a call without getting [Merriman’s] input, we can make snap decisions. We are a very nimble business,” he says. “And, if it’s something that’s more requiring of [Woodward’s] strengths, it’ll either go to my CFO or we can very quickly get in contact with him. As a result, very little has to wait, typically, till board meetings.”

A licensing model means that Mambo is very reliant on its partners for its success, so the board spends a lot of time working on contracts.

The board also has a very strong focus on trademarks and intellectual property, which after all is far and away the company’s most valuable asset.

“We own this brand and we have to be on constant watch globally that there’s nobody infringing our trademarks so, often at those meetings, we’ll have our lawyer there,” says Kingsmill.

Mambo also has to ensure that the 31 artists it uses do not encroach on other people’s copyright. However, being Mambo, it will sometimes also flout this principle.

In 2008, the company teamed up with the Chaser comedy team to produce “Hat in the Cat” shirts – a take-off of the famous Dr Seuss story, which in the Mambo version featured a hat protruding from both ends of a cat. Unsurprisingly, Dr Seuss Enterprises threatened legal action and Mambo replied in the style of a Dr Seuss book and generated some useful publicity along the way. The anecdote also demonstrates the increased freedom the board has compared with the publicly-listed Gazal Corporation.

“That sort of thing just wouldn’t have been able to be done by Mambo with its governance and boards and that sort of thing,” he says.
Outside of work, Kingsmill, 50, spends time with his wife and two teenage children, and keeps fit by playing various sports, in and out of the water. He lives just six minutes’ drive from work, and says running Mambo is a bit of a dream come true.

“I get a trip out of the fact that I remember that first time I went into a surf shop and saw Mambo and it jumped out at me, and I remember the purchase at the time, thinking how unique and different it was and, yeah, I get a bit of a buzz out of running this great Australian brand. Beyond that, I love these guys I work with – the artists and everyone in here. They certainly keep me young – the passion, the creativity, the love they have for the brand and the fun we all have.”

That love of the brand that’s shared by Kingsmill and the other staff is a key factor in allowing Kingsmill and his partners to turn the company around, while at the same time retaining its unique culture.

“We work hard, play hard, and try to have fun on the job,” says Kingsmill. “It’s almost an unwritten rule that if the surf’s fantastic, you know, it’s acceptable to come in a bit later. But, at the same time, you’ll have people working until 10 or 11 o’clock on a lot of nights and that’s a very passionate group of people who actually love their work.”