Irvine-based exercise equipment maker Star Trac knows there’s no payoff without the burn.
The 30-year-old company now is the third largest seller of exercise machines, thanks to new products and markets.
“We’ve tripled our business over the last three years,” President Steve Nero said.
Star Trac, the sole business of privately held Unisen Inc., did about $185 million in sales last year, the Business Journal estimates.
Its treadmills, stationary bikes, weight machines and other equipment are sold in more than 70 countries.
Gym operators Irvine-based LA Fitness International LLC and San Ramon-based 24 Hour Fitness Worldwide Inc. are two of its biggest customers. Others are hotels and apartment buildings with fitness facilities.
One of its better known products, Spinning, is a stationary bike it makes under a licensing agreement with Los Angeles-based Mad Dogg Athletics Inc.
Adding other equipment, such as weight training machines, has been a boon for the company, Nero said.
“Four years ago we only sold treadmills and spin bikes,” he said.
Star Trac also found customers in hotels, apartment buildings and corporations that buy gear for their own gyms.
“Fitness has become increasingly popular,” Nero said. “Especially for fighting the obesity epidemic in the country.”
An average gym company spends anywhere from $50,000 to $200,000 a year on equipment, he said.
Star Trac’s treadmills sell for $4,000 to $6,000. Personal treadmills sold at stores can cost just under $1,000.
Last year it sold 130,000 pieces of equipment, including 60,000 spin bikes, 30,000 weight training machines and products, 12,000 treadmills and 8,000 cross trainers.
Some gyms have cut back on opening facilities because of the slower economy, according to Nero. But he said he hasn’t seen business too hurt. Gyms still have to replace old equipment every few years or so, he said.
“People still work out when things are slow,” Nero said. “We haven’t seen any slowdown in our business at all.”
The parts for Star Trac’s products are made at its factories in China, Taiwan and Mexico. All of the assembly, which includes heavy cutting to fit them together, takes place in California.
Its cardiovascular machines, which make up 60% of its revenue and include treadmills, step machines and bikes, are all assembled at its 100,000-square-foot Irvine location. It also has 60,000 square feet of office space there.
All of the company’s weight training machines are put together at two locations in Murrieta, which make up 140,000 square feet.
Rising steel prices, which are up 30% in the past year and account for 30% of Star Trac’s production costs, have caused the company to increase its prices 10%.
But a recent $3 million investment in lasers and other fitting equipment have allowed it to cut labor costs 30% by shedding 30 workers, Nero said.
The buying of the equipment was partly inspired by government tax breaks offered this year, he said.
650 Workers
Star Trac employs about 650 people, with half in Orange County.
The county also once was home to the industry’s largest exercise equipment maker, Life Fitness, which was founded by Augustine “Augie” Nieto in 1977.
Life Fitness, which had $650 million in sales last year, now is part of Lake Forest, Ill.-based Brunswick Corp., which makes a number of sporting goods including boats, motors, bowling balls and air hockey tables.
Seattle-based Precor Inc. is the second biggest maker with $400 million in revenue last year.
After No. 3 Star Trac, Medway, Mass.-based Cybex International Inc. does $150 million in yearly sales.
All four companies likely have taken some market share from Seattle-based Nautilus Inc., which had dominated the market for weight machines in the 1980s.
Nautilus, which sells the Stairmaster and Bowflex machines, has been struggling the past few years. Its publicly traded shares are off more than 80% from its 2002 peak with a recent market value of $165 million.
Large gym operators control the market for exercise equipment, with most using multiple companies so they have a variety of machines and keep the competition on their toes, Nero said.
“Good business is about quality and servicing customers,” said Keith White, director of marketing with Star Trac. “There’s nothing worse than seeing an out of order sign on your machine.”
Exercise equipment makers are in somewhat of a commoditized business with innovation a rarity in the industry.
Star Trac employs about 45 engineers tasked with designing equipment to work with the body’s natural movements, while focusing on keeping costs down.
“No undue stress is what we’re after,” White said.
Combining its treadmills and bikes with entertainment add-ons like TVs, Internet and iPods is a newer trend.
“We’re not going to increase the market until we make it more entertaining,” White said.
In August, the company will team up with Nike Inc. to try and get a million people to race a 10k while having their times and vital signs recorded on specially made bracelets that will be plugged into computers. The data will then be compared with other runners’ stats.
The racers can do their run wherever and whenever they want, White said.
“The idea is to get more people working to become potential customers,” he said.
Star Trac has also been in talks with Virgin Healthmiles Inc., part of London’s Virgin Group Ltd., to give airline miles for working out.
The more you work out, the less you would pay for plane tickets, he said.
CEO Background
Nero joined the company five years ago after working for Milpitas-based Adac Laboratories Inc., a medical equipment maker.
Nero saw Adac grow from $80 million in sales to $500 million in 12 years. He wants to see that kind of growth at Star Trac.
“I was looking for a similar opportunity,” Nero said. “I saw the same energy, talent and passion here that I saw there.”
As president of Star Trac, one of his key decisions was to put 6% of its revenue into developing products.
Star Trac’s holding company Unisen was founded in 1975 by James Doody.
Doody, who is 75 and lives in Marin County, owns half of Unisen, with the rest split among 30 other stakeholders.
Doody previously ran two companies that leased commercial jets, computers and other equipment.
Unisen initially sold circuit boards and had Life Fitness as one of its customers.
But after creating some exercise machines on its own, Unisen began selling under the brand name Star Trac in 1977, which eventually became the company’s name.
