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President & CEO Ric Cabot led Darn Tough Vermont through the lean years caused by low-cost offshore competition -- and back to growth. Here's how.
I took a chance on the idea that people would be willing to pay a bit more for a performance sock that was top of the line and guaranteed for life."
-- Ric Cabot
When the last giant textile mills along the Merrimac River in New England shut down, hosiery was not far behind. The death of brick factories with names like Appleton, Lawrence, Coolidge and Cabot -– remember that name, Cabot -- marked the end of a one-hundred-fifty-year run of seemingly limitless U.S. innovation and profit dominance.
The human cost of lost livelihoods and hollowed-out towns was a pain suffered in city after city as first labor, wage and speed-up conflicts, followed by outsourcing, gouged big holes in the U.S.’ industrial fabric -- and forever changed the formula for success.
Earlier, the 1814 Boston Manufacturing Company’s prototype Waltham, Mass., mill, engineered by Frances Cabot Lowell and Paul Moody, succeeded on the strength of scale -– deeper waterfalls, more Yankee mill girls, then more workers from Ireland and Europe, more machines, bigger factories and, finally, complete process integration. The stockholders at the time were ecstatic as they, like the mill owners, saw cash endlessly pouring off rows of looms.
Small and, later, big brick mills provided local work for small towns and enormous profits for stockholders, but like so many other victims of outsourcing, hosiery manufacturing in the U.S. couldn’t keep up.
Like the textile mills before them, more and faster machines, economies of scale, fewer workers and home-grown innovation were just not enough to stem the outflow of this U.S. high-volume, low-margin business to cheap labor areas, first to the American South, then the Far East.
Like so many other U.S. manufacturers, Vermont’s Cabot Mills fell victim to the outsourcing craze.
Enter Ric Cabot, an ex-Manhattan publishing and advertising worker and a third-generation inheritor of what was -– at least at first -– a unique opportunity. This seemingly unlikely entrepreneur took over an operation that was busy shipping private-label socks to big-name retailers like J Crew, GAP, Banana Republic and Old Navy from an ancient mill in Northfield, Vt.
Most of all, the name 'Darn Tough' came to signify not just the socks themselves – guaranteed for life, knitted with small gauge, smoothly fitted New Zealand merino – but the company’s come-back strategy.
Ric’s grandfather had owned hosiery factories in New Hampshire and North Carolina and, in 1978, his father Marc acquired the Northfield site and switched from textile sales to running a mill.
“Dad decided on the Vermont location -– he had contacts here," Ric Cabot explained. "It was an industry in decline, but there was still manufacturing."
"Nobody ever outsourced anything for quality. Since 1978, still Made in VERMONT, USA."
-- Quote on the wall of the Darn Tough factory.
"We had 20,000 square feet in the old mill in town. We had the old fashioned belt-driven knitting machines, and we were beginning the changeover to computer-controlled machines, but the old mill burned down. In 1995, we completed this current 20,000 square foot factory, enlarged it to 56,000 square feet, and now we’re expanding it again."
The business prospered. In 1989, when Ric had joined his dad at the mill, the “great quality at the right price” formula worked -- that is until, like textiles before them, high-volume U.S. hosiery manufacturers could no longer guarantee endless profits, especially for a small, first-tier supplier like Cabot Mills.
For ten years the Cabots had watched their business grow, until “it” -– outsourcing and extreme price competition –- happened. One by one, they lost their private-label customers. The results were predictably catastrophic for Cabot as the company defaulted on loans and sank deep into debt -– millions of dollars worth -- to Chittenden Bank.
Ric remembers that whole fearful period with great pain. In 2004, the bankers appeared for a meeting. “Anyone you owe money to doesn’t want the debtor to go bankrupt. That day the bankers backed out the door at the end of the meeting," Cabot recalled. "Instead of turning and leaving, they looked back at us and said ‘No surprises.’ If they had just walked straight out, that morning wouldn’t have been seared on my memory."