Keyboard production has been relocated to Salo, Finland, former home
of Nokia’s mobile phone operations.
St. Louis MusicSt. Louis Music is one of the industry’s most dramatic turnaround stories. Since being acquired by U.S. Band & Orchestra Supplies in 2008—hardly an auspicious year for the music industry—the venerable distribution company has gained market share and posted double-digit sales growth every year. At a time when more companies are selling direct, and industry growth is tepid, how does a traditional distributor manage to expand? Mark Ragin, St. Louis Music’s CEO, says the key is understanding the customer and delivering “real” value-added service. It also helps that St. Louis Music has focused on school music and acoustic guitars, two of the industry’s better performing product categories.
The Turnaround Story Of The Decade
Today, St. Louis Music offers a broad range of proprietary products, in addition to more than 200 accessory brands. Its Knilling stringed instrument line is a favorite among educators because meticulous shop adjustment ensures that every instrument is in optimal playing condition right out of the case. The Alvarez acoustic guitar line has built its reputation on a similarly rigorous approach to quality control. With the Apollo and Dixon percussion lines, the company covers all major price points. In brasswinds, St. Louis Music produces the storied Blessing line of student trumpets and trombones. Most recently, SLM acquired Hamilton Stands, the company that literally invented the folding music stand. St. Louis Music is also the U.S. distributor of Sabian cymbals and P. Mauriat saxophones.
St. Louis Music and its current status is actually a story in three acts. The first act involves the founding Kornblum family. Born in what is now Krakow, Poland in 1900, Bernard Kornblum and his family immigrated to St. Louis after World War I. Lacking the money to attend school, he held a series of unsatisfying jobs at a clothing store and a local music store, eventually ending up as a necktie salesman. Reading the newspaper during lunch one afternoon, his attention was piqued by an ad offering violin accessories from the Seilbrun Company of Germany.
Kornblum was an accomplished violinist, and the idea of dealing in music held a special appeal for him. He immediately sent off an order to Germany and agreed to pay for the parts C.O.D. in German marks. In the aftermath of World War I, the German economy was in shambles, and inflation was rampant at over 1,000% per year. As a result, by the time the shipment of violin parts arrived in St. Louis, the bill was fifty percent less than Kornblum originally calculated. Elated at his good fortune, he offered special deals on violin bridges, tailpieces, bows, and strings to every store in St. Louis. A year later he quit the necktie business and, enlisting his brother David, started Kornblum Brothers Music. By the 1930s, the company had expanded beyond violins, selling accessories including Black Diamond Strings and Hohner harmonicas, which are still offered.
Bernard’s son Gene joined the business in 1957 after graduating from the Wharton School. His first job was as a road rep, and as he traveled through Mississippi and Arkansas with a trunk full of catalogs and instrument samples, he quickly discovered that dealers used two criteria to select their wholesaler: the personality of the sales rep and the size of the discount. Building a business on the vagaries of human chemistry and low prices went against both his instincts and formal training, and when he returned to the home office, he resolved to fortify St. Louis Music with proprietary products and brands. This led him to develop the Knilling violin line, and later the Alvarez guitar line, the first high-value, premium priced Japanese-made guitar in the U.S.
In 1980, St. Louis Music ventured into electronics and manufacturing with the introduction of the Crate amplifier line. Crate was a fast success, and in 1989, the company expanded with the acquisition of the Ampeg line. Although Gene Kornblum poured energy and capital into building proprietary product lines, he never lost sight of the original distribution business. Through its “Marketplace” division, St. Louis Music continued to serve more than 2,500 retail accounts with overnight deliveries of a range of accessories.
The second act in the St. Louis Music saga began in 2005, when Gene Kornblum retired and sold the business to Loud Technologies, best known for its Mackie audio division. Loud’s private equity owners looked to achieve cost savings by consolidating St. Louis Music operations at the Mackie facility in Seattle. Unfortunately, in the process, skilled people left, product lines were neglected, and the business struggled. Three years later, Loud’s management concluded that St. Louis Music was a “poor strategic fit” and put it up for sale.
The third act in the story involves Mark Ragin and his turnaround efforts. Ragin got his start in the music industry at age 17, stocking shelves at St. Ann’s Music, then one of the largest school music retailers in Missouri. Later he moved to the sales floor, opened additional branch locations in Kansas City, and eventually became president of the company. When St. Ann’s Music changed hands in 1999, he left and opened the U.S. Band & Orchestra Supplies distribution business. Drawing on his lengthy experience in retail, he adopted an unconventional approach to customer service. “When I was running stores, I had lots of ideas about how to generate business or attract customers,” he relates. “Unfortunately, I never had the time or the staff to put them into practice. With U.S. Band & Orchestra Supplies I developed useful tools that retailers could use to expand their business.”
When St. Louis Music went up for sale, Ragin initially made a bid on just the Knilling business, “because it was a perfect fit with U.S. Band & Orchestra,” he says. “The St. Louis wholesale business represented a much larger financial commitment, a much bigger management challenge, and a much bigger risk. But we also realized that the only way to get Knilling was to bid on the entire package.”
The U.S. Band & Orchestra Supplies warehouse facility was just three miles from St. Louis Music operations in northwest St. Louis. Despite the close proximity, in the course of daily business Ragin and his co-workers were hardly aware of a competitive distributor doing business down the road. As he reflected on this, he began systematically comparing the St. Louis Music and U.S. Band & Orchestra Supplies customer lists. To his surprise he found virtually no overlap. “We had about 1,000 active accounts, they had about 2,500 active accounts, and they were completely different sets of names,” he says. “If we combined the two distribution businesses, there would be no sales cannibalization.”
Eight years later, events have confirmed Ragin’s assessment. The combined distribution businesses, operating under the St. Louis Music banner, now serve more than 3,500 accounts. Ragin has recruited an experienced team to help manage the growth, including Paul Damiano, senior vice president, Robert Lee, vice president of sales. And, with solid systems in place, he is optimistic about the future. “We have the opportunity to expand by adding select product lines,” he says. “We’re confident we can remain relevant in an industry where the environment is continually changing.”
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