CES 2012: Gibson To Make Onkyo Investments

By Joseph Palenchar -- TWICE, 1/12/2012

Las Vegas - Musical instrument maker Gibson Guitar will bring resources to Onkyo USA to step up marketing, boost customer service, promote the brand more aggressively to consumers, and enter into new audio categories, Gibson and Onkyo executives said.

(From left) Onkyo president/CEO Munenori Otsuki, Gibson chairman/CEO Henry Juszkiewicz, and Onkyo EVP/COO Hiroshi Nakano greeted the press in Gibson’s bus outside the convention center.

The executives outlined their plans in their first meeting with the press since the announcement last week that Gibson would acquire a 51 percent stake in Onkyo USA and become the second-largest shareholder of Onkyo Corp. in Japan.

As part of that deal, Onkyo will also invest in Gibson, and the two companies will form a Hong Kong-based joint venture focusing on design and development of consumer audio products.

The deal is expected to close by the end of the month following regulatory approval in Japan, said Gibson chairman/CEO Henry Juszkiewicz. Onkyo is a public company, and Gibson is privately held.

Gibson's chairman called the Onkyo investment "a unique opportunity" because of the company's "exceptional" technology, "great leadership" and "great people who are on the same wavelength culturally with Gibson."

Gibson had been looking to expand into home audio "for some time," Juszkiewicz said. His company became involved with the Consumer Electronics Association almost seven years ago "in hopes of finding an appropriate means to enter the market," he said.

Juszkiewicz called Onkyo a "healthy company" with a "great brand" that offers "exceptional quality and features," but he pointed out that whereas Onkyo enjoys a leading share in Europe, it "has not done as well in the U.S."

Gibson plans accelerate Onkyo's U.S. share with a greater marketing spend. "A major area of focus will be marketing," he said. "The brands are really great," and the company will get the resources to "tell people how great it is."

Gibson will also use its resources to increase Onkyo's customer service levels, he said. Customer service is a value-add for a premium brand, and Gibson hopes to "slowly transition the brand to a premium brand" that is less price-sensitive, he said.

"The CE business is very price-oriented," but the musical instrument business "is not as aggressive on price," he noted.

For his part, Onkyo Corp. president/CEO Munenori Otsuki said Gibson's investment will enable the company to diversify into other audio-related products. Gibson brings the resources and a "fresh approach" to make that happen, he said.

Gibson will also bring its "extremely creative" sprit to a company that is already very innovative, Juszkiewicz added.

The companies don't plan to combine sales forces because "the channels are very different," Juszkiewicz said, but Gibson will "introduce Onkyo to the MI [musical instruments] channel." MI dealers are open to selling consumer electronics, and "musicians are leading edge consumers" who can influence others, Juszkiewicz said. The sales gain "won't be huge" but will be "a nice adjunct," he said.

Juszkiewicz also foresaw joint calls on major clients common to both Gibson and Onkyo. Those clients include J&R and Best Buy.

Gibson has no plans to create Gibson-branded home audio, Juszkiewicz said. Onkyo USA's headquarters and warehouse will remain in Upper Saddle River, N.J., he said.

Gibson's investment in Onkyo is the company's second acquisition in two months. In December 2011, Gibson acquired the Stanton Group, which included Cerwin Vega! home and pro- audio speakers, KRK Systems pro-audio speakers and studio-control solutions, and Stanton DJ, which markets professional DJ equipment.

At the time, Gibson said the acquisition marked "Gibson's further expansion into the pro audio market with loudspeaker, monitor and electronics technology."

At the time, Juszkiewicz called the MI category "inherently limited because people who purchase instruments also need to know how to play them." The acquisitions, he said, "expands our reach to fellow music lovers and allows us access to 20 in 20 consumers instead of the one in 20 we currently hit."