CompanyWeek Q&A: Jason Badgley of Phunkshun Wear

CompanyWeek Editor Eric Peterson recently caught up with Phunkshun Wear CEO Jason Badgley to discuss supply chain issues, pivoting from ski gaiters and facemasks to non-medical personal protective equipment (PPE), and investing in technology.

To expand its catalog into increasingly complicated designs, Denver-based Phunkshun has added two camera-guided laser cutters and a new heat press in the past two years. The move has filled the product pipeline going into 2022, as well as allowed for expansion into contract manufacturing.

CompanyWeek: Tell me about the investments Phunkshun has made in new equipment in the last couple of years. What's the strategy?

Jason Badgley: When we first started Phunkshun Wear, it was a very homegrown operation. It was being cut by hand, it was being sewn by hand, everything was very manual. As we've grown, we've continued to tool up incrementally and strategically. We reached a point where the simplicity of the products we were making was fantastic for the processes we had a few years ago. With neck tubes, everything was a rectangle or a square -- very simple. With new products we wanted to make, we said, 'This is more advanced. We can do it, but we're not going to do it the best we can. We need to make an investment in this machinery so that we have incredible consistency, we make sure it is hyper-accurate, and we then really can explore and develop and expand the things that we are doing.'

The concepts we're introducing to our neck gaiter are more ergonomically contoured patterns and fits of the material. These laser cutters allow us to focus on exactly how we want it to cut, and it's perfect every time -- and it helps us expand.

The other thing was capacity: As we see demand shift for different products, they allow us to be more nimble and reactive to market demand, which for us is a huge benefit and something we see value in.

All of this has proved very beneficial over the past year and a half, with supply chain disruptions, staff, everything like that. To have redundancy with our machinery is extremely important, because if something breaks down and needs repair, and a part is delayed or a repair person can't get out here, you're dead in the water. You're stalled.

CW: On that note, has Phunkshun's supply chain been impacted in the last year and a half? Any horror stories?

JB: I don't know anybody who hasn't, us included. Everyone has these horror stories, like you said. Everyone I've talked to, there's been a kink along the way, a worn-out gear somewhere, and we're no exception.

We previously really prided ourselves sourcing our fabric from one or two domestic suppliers, because it worked. The system was good and we got it on time and everything like that, but we've certainly seen disruption there.

It's demonstrated our need to build in redundancy, to be better prepared should there be a disruption, whether it's a labor shortage or raw material or whatever the reason. We're also seeing quality vary due to these things of the raw material we get, so we've sent a significant amount of fabric back to our supplier in the past year because it was not up to snuff.

We are looking at embracing a more diverse network of raw material suppliers, including strategically sourcing fabric that may be imported. It still has to meet our guidelines, it still has to made eco-consciously, it still has to have sustainable characteristics, but we're also realizing we're hitting a limit to the products we can make only sourcing U.S. fabric.

We're seeing timelines of raw material manufacturing in the U.S. increase significantly -- not 10 percent, 20 percent, but double or longer. We're seeing raw material is much harder to get a hold of, and it's an adjustment that we have to make at this point. It certainly won't be the majority of our raw materials, but it will be a percentage of our raw materials that are imported now.

It's going to be: Where does it make sense? Where does it give -- and this is what matters -- where does it give the consumer a better value? When I say that, I don't mean cheaper, I mean better performance, better value.

CW: You mentioned when we last talked that Phunkshun was going into contract manufacturing. Are you still doing that?

JB: You know, we just added a page to our website about that. We are starting to offer services for contract manufacturing. Our approach is maybe a little different than others: We're going to do everything for you. We're going to evaluate your project or your product or what you want to accomplish. If we're a fit and we can do it really well, we're going to tell you that. If there's somebody better in town, we're going to tell you that. It goes in line with how we operate as a company: Make something and make it really well, don't make everything.

When it comes to contract manufacturing, when we can do it best, that's what we're going to offer.

CW: Who's your ideal customer? What is your sweet spot?

JB: It really depends on the customer and the project. Everyone has reinvented the wheel in a different way, or has a different idea on how to do it. When it comes to the digital printing and the cutting and the packaging, we've got that down to a science. Sewing is the one place we struggle with capacity, because unlike other contract manufacturers, we have our own brand. Where we have the hardest time finding staff is the sewing side, and we have a sewing floor that's really developed to do one sort of textile. I guess if you're talking sweet spot, it would be performance textiles -- polyester-spandex blends, synthetic textiles, things like that. That's where are machines are set and that's the way the floor is set up.

CW: What was the impact of COVID-19? I know Colorado Governor Jared Polis wore a Phunkshun-made mask when he first announced a mask mandate in Colorado, but what happened next?

JB: In March 2020, non-medical PPE still wasn't recommended by the CDC or any governing body or authority, and ski areas started shutting down at that time across the country. March is historically the biggest month for retail at ski areas, because of spring break. That's when they have families and college kids and everybody coming and skiing, and that's when they do a ton of retail sales. With travel shuttering, with ski areas closing for the season early, the ski industry took a major hit from a retail perspective, so for us at the end of the season retail sales were down. Our industry operates on a pre-order system for the following year.

Thankfully, we had the ability to shift to non-medical PPE, and we're very lucky it was worn by several folks. We were very quick to make the shift once it was recommended by the CDC, and it really did help us. It's not that we would have gone out of business, but it would have been a very big slimming down had we not been able to make that shift.

Most importantly to me, it kept our staff employed. We had to make changes. We had to invest in social distancing, rearranging the machines, sneeze guards, temperature checks. All these things everybody did. But the biggest thing is that people were able to stay employed. For us to keep everybody employed and keep everybody getting a paycheck was huge for us.

CW: How have the outdoor products done in the time since spring 2020?

JB: Skiing and snowboarding have come back. People are outside and purchasing outdoor recreation gear in record numbers or very high numbers. We still do a fair amount of this non-medical PPE, most of it being corporate uniform wear.

Our core products -- our facemasks, neck gaiters, and balaclavas for skiing and snowboarding -- are such a necessity product. If it's cold, you need it. And when do you think about it being cold? When you get out of the car at the ski area and it's cold, or when you're on the skin track with your splitboard and heading up. So we've always seen the vast majority of our product sales happening at the retail level at brick-and-mortar stores. We obviously saw an increase in our website business, our direct-to-consumer, coming off these non-medical PPE masks that we've sold. But a large amount of our customers that were non-medical PPE customers are not necessarily skiers and snowboarders -- two completely different customer bases.

We've definitely seen it come back at the retail level in 2022. Right now, it's getting cold. We're seeing demand come back. We're getting inquiries every day about whether it's custom products for a ski club or a ski shop needs to restock for the upcoming season.

Pre-pandemic, we had a much larger international footprint. We scaled that back significantly and removed underperforming distributors and sales channels internationally, but the U.S. has definitely made up for that for this season.

CW: What's next for Phunkshun? Any news on the horizon?

JB: We recently acquired the exclusive rights to a brand called Mellivora. It's a women's activewear and lifestyle adventurewear product line that we are taking on board. We're going to be releasing a new product line in the spring [of 2022], most likely April or May, and expanding into different styles, introducing tops to the line, and really building out a more robust platform.

With Phunkshun Wear, we are starting to dip our toe into mountain bike apparel with long-sleeved jerseys, short-sleeved jerseys, and some other summer-oriented performance textile gear for other sports or activities. More immediately, what's coming up this winter is new products that we have developed over the past few years are being released as we expand the product line and continue to grow.

CW: Thanks for your time, Jay. Any closing statements?

JB: I've been incredibly impressed how there for each other everyone has been over the last year and a half, whether that's the Denver business community, the outdoor industry manufacturing community, or organizations like the World Trade Center or Manufacturer's Edge.

People reached out, people tried to help each other. We did this for partners of ours we work with, and they did it for us. The most impressive thing over the last year and a half is that people were willing to work together. People cared, and it really showed.

Eric Peterson is editor of CompanyWeek. Email him at epeterson@companyweek.com.