Because The Music & Sound Retailer is targeted to, and written for, music products dealers with brick-and-mortar storefronts. We always make it a point to ask our “Five Minutes With” interviewee about the company’s efforts to serve its dealer partners. It’s fair to say D’Addario & Co., Inc., is renowned within the music products space for catering to retailers. Speaking to company CEO Jim D’Addario this month, we came to learn the processes he’s put in place to ensure products are of high quality, in stock and ready to ship. He also discussed the virtues of family-owned and -run businesses, described the contributions of individual D’Addario family members, and explained how the family and the company’s DNA is intertwined.
Jim D’Addario, past winner of The Retailer’s Music & Sound Award for Lifetime Achievement, is a legend within our industry, and he remains one of its most incisive minds. Enjoy the conversation.
The Music & Sound Retailer: Most of us in the MI industry are well aware of D’Addario’s family history in the music products business and that D’Addario is still very much a family company. Tell us a bit about your connection to that family history. What initially grabbed your interest and set you off to work in the MI industry?
Jim D’Addario: I was very fortunate to have the opportunity to go into a family business that was interesting to me, and about which I was passionate. I played piano and guitar starting at 10 or 11 years old; the conversation around the dinner table was always about the string business; and every time I visited my grandparents’ house, I couldn’t resist the factory in the basement. So, this literally became part of my DNA. It was in my blood from the get go. When I studied music in college, it was kind of a half-hearted commitment possibly to being a music teacher. I wasn’t quite sure—or I didn’t think I was sure—that I wanted to go into the family business, per se. But I knew it was there, it was interesting to me and, if there was an opportunity for me to be involved on a level where I would be able to contribute, I would be interested in it. So, again, it was in my blood.
My dad was smart enough to offer my service to Martin Guitar when I was in college. He’d sold Darco music strings to Martin in ’69, and they were looking for a rep for the New York area. I got to call on dealers for Martin as their rep. It was a tremendous education for me. I got to meet the retailers. I got to see what it was like in the stores…how the accessories, at the time, were not being displayed at all. And I got to meet some great people who ended up becoming mentors and friends for life. And, you know, it all started from being in the family business.
The Retailer: D’Addario is known for being a dynamic and nimble company. Tell us about the growth, development and evolution of D’Addario in the recent past. Discuss the addition of lines and categories, as well as necessary changes made over the decades.
D’Addario: Going back to the early days of the brand, D’Addario, when we started this company over in ’73 and introduced D’Addario strings for the first time in ’74, the only thing we did was make strings. We were good at it, and we were getting better and better as we designed new machinery and new processes and as we discovered new alloys like phosphor bronze and nickel-plated steel. We became the thought leaders in the string business. We were able to establish ourselves as one of the string experts out there. Obviously, there were other companies that were successful, as well. If you looked at our packaging at the time, it read, “Making fine strings is our only business.” We certainly couldn’t use that slogan today!
Then, things started to change in the distribution channel. In the early ’70s, we had close to 50 distributors. And there were distributors in almost every city. We sold to them all, and we didn’t sell to retailers. So, we relied on the distributor to be our representative. But, of course, they had a big catalog, and you really couldn’t count on getting their attention. If you created a consumer demand for something—like, when we created half round bass strings or phosphor bronze acoustic strings—they had to stock them and it was successful. All the peripheral stuff—mandolin and banjo and all the things that round out a string line—we couldn’t really get traction on, though.
In the early ’80s, we started to sell directly to retailers in the U.S. It was initially a little phone operation; eventually, it morphed into what it is today with a combination of road reps and phone reps. However, we quickly realized that we might not be that interesting to a retailer if the only things you could buy from us were D’Addario strings. So, we began to look at other products. We acquired the Kaplan violin string company in 1981. That got us back into the bowed family of strings. And, in 1986, we started distributing Vandoren in North America. We were the Vandoren distributor for 23 years or so. Now, we had several products we could sell…additional products to sell to retailers. That formula was pretty successful.
So, we always just sat back and said, “If there’s a strategic acquisition, distribution or association that we could make, we’ll consider it.” That’s how we evolved into changing our organization and growing it into all of these other accessories. In 1995, we took on Evans. It was a great challenge to take a tiny brand that was pretty famous, but small, and make it world class and a leader in the field. We’re at it 21 years now, and we’ve had great success with it. And then, in ’98, we took over Planet Waves, which was a little strap company from Plainview NY. We started to make great guitar straps, and we decided to expand that into a full line of accessories. We developed picks and cables and capos and care products…all the stuff we have in that fantastic line. And then, in 2004, we were able to purchase the Rico company and really get into manufacturing reeds and mouthpieces ourselves.
So, the goal was to stick to small goods because it’s what we know, but also to become more important to our B2B customers by having more product offerings. We don’t have exclusive retailer arrangements because accessories are sold at just about every store; so, we don’t have to worry about authorized dealerships and so on. We’re pretty much like the Gillette of the music industry: You don’t really have a music store without having D’Addario accessories. And I think we’ve created a brand that’s important to the retailer and to the export distributor that acts as our conduit in those markets. So, the goal was to make our company more viable and important to those B2B channels. And I think it’s been a successful strategy.
The Retailer: With such a strong team of leaders—many of them D’Addario family members—working for the company, give us some insight into what your key roles and responsibilities are now. What’s the best part of your job? What makes you excited to get to the office each morning?
D’Addario: Well, I’m lucky to have quite a few of the next generation—my brother’s kids, my kids and our nephew—involved at various levels in the organization. Everybody knows John’s son, John D’Addario III, because he’s our President and he’s out in front; however, there are so many other family members who also play important roles. There’s our nephew, Peter D’Addario, who’s our National Sales Manager. John III’s brother, Michael, runs all our operations here in New York, and he does a fabulous job. My brother John’s daughter, Suzanne D’Addario Brouder, in Chicago, runs the D’Addario Foundation successfully, and it’s growing beautifully. His son-in-law, Esteban Ynoa, is one of our most creative engineers. My daughter, Amy, our Director of Brand, instigated all the rebranding that you’ve seen. My son, Robert, is running a separate division called Cleerline Technology Group that sells cables, connectors and fiberoptic cable for the home theater and datacomm business. My son-in-law, Pat Zerbo, is working on expanding our exerciser line into the physical therapy and sports markets.
So, we’ve got a really good group of kids here. They really split up nicely into different areas of responsibility, and our succession plan is quite strong. I try to devote my time to the future of the company, which is kind of what I’ve always done. I was able to do that when my brother was active as my partner. He was good at the day-to-day stuff, and I was always working on the future things. So, I’m keenly involved in new product development. I mean, that’s what I love to do. My desk is covered with samples of competitive products and products we’re developing. I work with a very, very strong team of engineers and designers on new product, as well as on new machinery and processes to make our products.
So, that’s really what floats my boat. That’s what gets me to come to work every day. I think that’s where I add the most value: having the vision to listen to the brand managers and the marketplace, and then coming up with solutions that our customers are looking for. That’s one of the things I do well, and that’s what I enjoy doing. I probably would like to continue doing that indefinitely. I don’t see myself retiring from that part of the business, because that’s not really work for me. I do that remotely at 5am sometimes; it’s three hours of uninterrupted design time before I get to work. That’s my sweet spot, and I don’t see that changing.
Obviously, I might not be modern enough 10 years or 20 years from now to be relevant, but we’ll see where that goes! [Laughs.] In any case, I’m 66 right now, and I’m still enjoying it.
The Retailer: Are there particular characteristics of D’Addario—qualities the company has—that make it stand apart not only from its direct competitors but also from music products companies as a whole? Is there a “secret sauce” at D’Addario that makes it so special?
D’Addario: I think there are a couple of things. When my daughter, Amy, instigated the rebranding, we had VSA Partners in Chicago do a brand book for us. They really took apart our DNA as a family and a business. We created this beautiful piece that we give every new employee. It talks about our attributes, our character as a company and our brand purpose. The thing that stands out to me, which is something I got from my dad and that, I think, I have successfully turned over to the next generation, is a huge appetite in the curiosity department. If you’re not curious about how to make something better, or how to sell more of something, or why a particular product might not be selling in the marketplace, or how to display a product better…if you’re not asking those questions, then you won’t succeed. Particularly not today, with everything moving at such a fast pace.
So, I would say curiosity is probably the key attribute of our DNA as a family and a company. That makes our company, I think, stronger and more creative than some of our peers. Look at all of the products we’ve developed. When we create a warehouse or a customer service process, we’re looking to be best in class. We’re always asking people outside of our industry how they do it, and seeing how we can learn from them.
I just spent a full day-and-a-half at a Bloomberg event. It was a Breakthrough Summit, where they invited 100 companies they felt were breakthrough companies…companies that could have outsized growth with the right new products, or approaches, or disruptive processes. They had great speakers there. They had the CEO of Cisco, the CEO of Google and Mike Bloomberg himself speaking. It’s that curiosity, you know? Wanting to learn from the best. What is the best in class? What are the best practices out there, which can you learn from and apply to your business? That’s what I try to teach here. That’s what I think separates us from the rest of the companies against which we compete.
The Retailer: Earlier in the conversation, we talked about the beginnings of D’Addario’s relationship with brick-and-mortar dealers. Given the esteem in which D’Addario is held among dealers, expound on the company’s philosophy as it relates to serving, helping and working with the dealer channel.
D’Addario: We’ve got business intelligence software that we use—Cognos Business Intelligence, from IBM—and we get these dashboards that are graphical and that pop up. The first thing I look at is what my bookings were yesterday. What did we ship? But the most important thing I look at is the value of our backorders. I click on that bar and it shows me every dealer order and every item that was backordered. And everyone in our organization is keyed in on looking at backorders every day, because backorders make unhappy customers. And they also drive your expenses to the moon because you’re constantly reshipping and shuffling the deck and expediting and so on. We keep our backorders down to such a low level. For a company doing $165 million in business, having $50,000 in backorders in total is absolutely insane.
That’s just one cultural example. I tell a new brand manager, “The most important thing you need to know is that the products you developed and that you’re marketing are being shipped to your customers on time.” Because we don’t need customers who think we’re jerks, selling something and then not shipping it. I learned that from my father, beginning on day one. He was a service-oriented guy. We’ll do everything possible to get that order out to the customer the same day, without shortages and so on. And, sometimes, you know, things happen. Sometimes, a raw material is defective. You have your issues. There are reasons for a backorder every now and then. But, if you accept that as the norm, then you won’t succeed.
There was a time when we had half a million dollars in backorders for a little while. We created a new warehouse and the software wasn’t working right. We all went over to the warehouse. When I say “we all,” I’m talking about our family went and worked in the warehouse. I took my entire IT team and I made them move their desks over there. I said, “We will stay here until we fix this, because we’re not going to have unhappy customers.” So, if somebody orders from us, we’re going to ship it. And, when people see that example—the boss out there picking orders—they realize how important their job is and they act differently. It’s a cultural thing.
Service to the dealer, the distributor, the OEM customer, whomever…getting that order out on time, complete, with the highest quality…that’s got to be paramount. Without that, you could have the best products in the world, the best marketing, you name it…it won’t mean a thing. You’re not going to be successful overall.
The Retailer: Do you have any constructive criticism for the dealer channel, either with regard to how it does business with D’Addario or with respect to how best to future-proof itself in the face of a difficult, changing competitive landscape?
D’Addario: I think, in general, in order to succeed today, we all have to offer our customer more value. I mean, when you buy a car, it’s got more features than it ever used to. You can say what you want about cars, but they’re safer and of higher quality today than they ever were. They hardly break. I remember, 30 years ago, you constantly had to get tune-ups, change air filters and spark plugs, and oil filters. When you think about how car companies have added value to the car…well, a dealer has to think the same way.
It’s sad because, for us, we really love the independent dealer network. Those are the guys who can make the biggest difference for us. But, being in the accessory business, it’s very, very easy for somebody to buy his or her accessories online. If you like EJ16 and you buy it online, it’s going to be the same EJ16 you’re going to get at your retailer, right? So, it’s not like we’re making D-28s and I might want to try five of them, right? The retailer somehow has to offer more value. And that could be in the form of string-changing clinics, automatically changing strings for customers, etc. You’d be surprised, just by, for example, giving away some service, how much business you could get.
You’re adding value for the customer. The guy is going to say to himself, “Hey, I don’t mind spending a dollar or two more on that set of strings. The guy helped me. He adjusted my intonation, or he showed me how to put on the strings myself.” So, we can’t just be throwing products at people anymore; we actually have to have a dialogue with the customer and offer that person more value than you can imagine. Then, I think, it comes back in spades.
You can see your business grow a whole lot more. So, the successful independent dealers are the guys who are doing just that. They are offering the customer more value, and it does work. And, if more people did that, I think there’d be more brick-and-mortar stores succeeding, thriving, growing and flourishing.
The Retailer: Earlier, you’d mentioned Suzanne, who’s done a fantastic job heading up the D’Addario Foundation. In fact, D’Addario’s won our “Outstanding Community Service” Music & Sound Award for three years in a row. Can you provide some insight into D’Addario’s charitable and philanthropic activities?
D’Addario: We always felt that we were lucky. We were in a profitable business. We were able to sustain a lot of jobs here in America, which we love to do. And our family has had a wonderful lifestyle because of the music industry and our customers. So, since 1981, when we started the D’Addario Foundation, we’ve always felt that it’s our job to give back. We want to help those who are creating music or who don’t have music education in their area. We want them to be exposed to the wonders of playing music, enjoying it and learning it, because we know how it can effectively change people’s lives. So, we just keep building up the D’Addario Foundation effort. We’re very proud of it.
Last year, we gave more than $1 million in grants and free product through the D’Addario Foundation to music-education programs. I think we’re making a huge difference, and we’re starting to be recognized for that. We’re now taking that effort public, building upon it and seeking third-party fundraising of our own, so that we can do even more.
Michael Dorf, who owns City Winery and the Knitting Factory, does a tribute concert every year at Carnegie Hall. This year’s, for David Bowie, was sold out. The proceeds go to music education. Then, he had a second one at Radio City Music Hall because the first one sold out. He selected our foundation as one of the beneficiaries. We just opened the mail the other day and there was a $20,000 check from him. It’s quite gratifying to know our efforts are being recognized as effective. We greatly appreciate the fact that Michael Dorf looked at us and said, “These guys know what they’re doing. They’re actually doing it right.” Every dollar that we raise—100 percent of it—is used for music education and music performance. We fund all the general administrative costs just through our company. Suzanne is doing a wonderful job.
We’re going to have a fundraising event at The Bric in Brooklyn on September 22. We’re lining up artists to perform, and we’re going to have some very significant people performing for us. I can’t announce the names yet, because it’s not all finalized. It’ll really be our first public fundraising event, all for music education. We know how important it is. It helps kids succeed.
The Retailer: I haven’t heard a lot about anti-counterfeiting and anti-knock-off efforts in the past 18 months or so. Is D’Addario still very much involved in trying to get phony products off the market? If so, what is the latest update?
D’Addario: Definitely. Our “Play Real” program on the package codes has helped a great deal. Every time we find somebody with a false code or a counterfeit product, we research it, follow up and take action to whatever extent we can, including raiding factories if possible. So, we’ve controlled it a bit. Some of the packaging changes we’ve made, along with the fact that we’re watchdogs, have discouraged some of these guys from focusing on our brand. I’m not sure if they’re focusing on other brands or if they’ve moved on to other products. It’s still out there, though, and it’s still a big concern of ours. But I do think we have better control over it. It does cost us quite a bit of money to do what we do, unfortunately. We wish we could be putting that money into music education or into marketing or into developing other products. But, we have to protect our brand integrity. It’s money well spent. So, it’s still there. It’s not as flagrant as it was five years ago. But, it’s still a big problem.
The Retailer: What future plans does D’Addario have in store? What can company watchers expect to see over the next three years…five years…10 years?
D’Addario: Company watchers can expect more of the same. If there were a strategic acquisition available to us—by strategic, I mean a really high-quality brand that isn’t competing with our other brands, something we can make here in America, and something we can improve upon and grow—then we would probably consider it. However, we are not in acquisition mode in any way, shape or form. We’re actually in optimization mode right now; we’re trying to figure out how to do what we do even better.
One clear philosophy we’ve embraced has been to continue with our in-depth vertical integration and focusing on raw materials. So, we are now extruding our own nylon for classical guitar and ukulele strings. We are making all our own high-carbon steel wire right here in New York…hex-shaped wire for core wire and tin-plated steel for strings. Those are all things we had to outsource before. By bringing them in-house and buying the latest equipment, we’re making the highest-quality raw materials for making strings. And we’re going to continue to pursue that wherever we can.
We might do some accessory injection molding, for instance. In-house, right now, we’re working on a new line of mallets for Promark, where we’re molding the balls onto the sticks directly. We’ve developed a new winding process to wind the mallets with D’Addario string-like precision. We’re making some outstanding product. We’re going to reintroduce mallets and, literally, reinvent the category. So, we have a lot of areas where we can reinvent the category with respect to the products we already have. And that’s kind of our focus. Sometimes, it involves making new raw materials. Sometimes, it’s just reengineering a process.